UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549








FORM
      10-KSB





S ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





FOR
      THE
      FISCAL YEAR ENDED JUNE 30, 2007





OR





£ TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934


FOR
      THE
      TRANSITION PERIOD FROM _____ TO __________








COMMISSION
      FILE NO. 0-29015





NANOVIRICIDES,
      INC.


(Name
      of
      Business Issuer in Its Charter)





NEVADA
            
            76-0674577(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer
                Identification  No.)





135
        WOOD
        STREET, SUITE 205


WEST
        HAVEN, CONNECTICUT 063516





(Address
      of principal executive offices)





203-937-6137





(Issuer's
      telephone number, including area code)





SECURITIES
      REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE





SECURITIES
      REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:





COMMON
                STOCK, PAR VALUE $0.001 PER SHARE
            
            NONE(Title
                of Class)
            
            (Name
                of exchange on which registered)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes £No S





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. Yes £   
      No S





Check
      whether the issuer (1) filed all reports required to be filed by Section13
      or
      15(d) of the Exchange Act during the past 12 months (or for such 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 S No
£





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-KSB or any amendment
      to
      this Form 10-KSB. £





Indicate
      by check mark whether the registrant is an accelerated filer (as described
      in
      Rule 12b-2 of the Exchange Act). Yes £   
      No S





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





The
      aggregate market value of the voting stock held on June 30, 2007 by
      non-affiliates of the registrant was $44,751,729 based on the closing price
      of
      $.90 per share as reported on the OTC Bulletin Board on June 30, 2007, the
      last
      business day of the registrant's most recently completed fiscal year (calculated
      by excluding all shares held by executive officers, directors and holders known
      to the registrant of five percent or more of the voting power of the
      registrant's common stock, without conceding that such persons are "affiliates"
      of the registrant for purposes of the federal securities laws).





At
      October 15,2007, 114,069,144 shares of the registrant Common Stock, $0.001
      par
      value were outstanding.








1


**TABLE
      OF CONTENTS**





**PART
                I**Item
                1.
            
            Description
                of Business
            
            3Item
                1A
            
            Risk
                Factors
            
            25Item
                2.
            
            Description
                of Property
            
            43Item
                3.
            
            Legal
                Proceedings
            
            43Item
                4.
            
            Submission
                of Matters to a Vote of Security
                Holders
            
            43**PART
                II**Item
                5.
            
            Market
                for the Registrant’s Common Equity and Related
                Stockholder Matters
            
            43Item
                6.
            
            Management’s
                Discussion and Analysis of Plan of
                Operation
            
            45Item
                7.
            
            Financial
                Statements
            
            52Item
                8.
            
            Changes
                in and Disagreements with Accountants on Accounting
                and Financial Disclosure
            
            53Item
                8A.
            
            Controls
                and Procedures
            
            53Item
                8B.
            
            Other
                Information
            
            53**PART
                III**Item
                9.
            
            Directors,
                Executive Officers, Promoters and Control Persons,
                Compliance with Section 16(A) of the Exchange Act.
            
            54Item
                10.
            
            Executive
                Compensation
            
            55Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and
                Management
            
            57Item
                12.
            
            Certain
                Relationships and Related
                Transactions
            
            59Item
                13.
            
            Exhibits
            
            60Item
                14.
            
            Principal
                Accountant Fees and Services
            
            60SIGNATURES
            
            61





2
 *Table
          of Contents*


**SPECIAL
      NOTE ON FORWARD-LOOKING STATEMENTS**





The
      information in this report contains forward-looking statements. All statements
      other than statements of historical fact made in report are forward looking.
      In
      particular, the statements herein regarding industry prospects and future
      results of operations or financial position are forward-looking statements.
      These forward-looking statements can be identified by the use of words such
      as
“believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,”
“projects,” “expects,” “may,” “will,” or “should” or other variations or similar
      words. No assurances can be given that the future results anticipated by the
      forward-looking statements will be achieved. Forward-looking statements reflect
      management’s current expectations and are inherently uncertain. Our actual
      results may differ significantly from management’s expectations.





The
      following discussion and analysis should be read in conjunction with our
      financial statements, included herewith. This discussion should not be construed
      to imply that the results discussed herein will necessarily continue into the
      future, or that any conclusion reached herein will necessarily be indicative
      of
      actual operating results in the future. Such discussion represents only the
      best
      present assessment of our management.




**PART
      I**




**ITEM
      I:DESCRIPTION OF BUSINESS**





**Corporate
      History**





NanoViricides,
      Inc. was incorporated under the laws of the State of Colorado on July 25, 2000
      as Edot-com.com, Inc**.**and was organized for the purpose of
      conducting internet retail sales. On April 1, 2005, Edot-com.com,
      Inc.****was incorporated under the laws of the State of
      Nevada for the purpose of re-domiciling the Company as a Nevada corporation,
      Edot-com.com (Nevada). On April 15, 2005, Edot-com.com (Colorado) and
      Edot-com.com (Nevada) were merged and Edot-com.com, Inc.,
      (ECMM)****a Nevada corporation, became the surviving entity.
      On April 15, 2005, the authorized shares of common stock was increased to
      300,000,000 shares at $.001 par value and the Company effected a 3.2 - 1 forward
      stock split effective May 12, 2005.





On
      June
      1, 2005, Edot-com.com, Inc. acquired NanoViricide, Inc., a privately owned
      Florida corporation (“NVI”), pursuant to an Agreement and Plan of Share Exchange
      (the “Exchange”). NVI was incorporated under the laws of the State of Florida on
      May 12, 2005 and its sole asset was comprised of a licensing agreement with
      TheraCour Pharma, Inc. (an approximately 31% shareholder of NVI) for rights
      to
      develop and commercialize novel and specifically targeted drugs based on
      TheraCour's targeting technologies, against a number of human viral diseases.
      (For financial accounting purposes, the acquisition was a reverse acquisition
      of
      the Company by NVI, under the purchase method of accounting, and was treated
      as
      a recapitalization with NVI as the acquirer). Upon consummation of the Exchange,
      ECMM adopted the business plan of NVI.





Pursuant
      to the terms of the Exchange, ECMM acquired NVI in exchange for an aggregate
      of
      80,000,000 newly issued shares of ECMM common stock, resulting in an aggregate
      of 100,000,000 shares of ECMM common stock issued and outstanding. As a result
      of the Exchange, NVI became a wholly-owned subsidiary of ECMM. The ECMM shares
      were issued to the NVI Shareholders on a pro rata basis, on the basis of 4,000
      shares of the Company’s Common Stock for each share of NVI common stock held by
      such NVI Shareholder at the time of the Exchange.





On
      June
      28, 2005, NVI was merged into its parent ECMM and the separate corporate
      existence of NVI ceased. Effective on the same date, Edot-com.com, Inc., Inc.
      changed its name to NanoViricides, Inc. and its stock symbol on the Pink Sheets
      to “NNVC”, respectively.  From   June 29, 2007 the
      Company’s Common Stock has been quoted on the Over The Counter Bulletin Board
      under the symbol NNVC.OB. The Company is considered a development stage company
      at this time.


3
 *Table
          of Contents*


NanoViricides,
      Inc. (the “Company”), is an early developmental stage nano-biopharmaceutical
      company engaged in the discovery, development and commercialization of
      anti-viral therapeutics. The Company has no customers, products or revenues
      to
      date, and may never achieve revenues or profitable operations. Our drugs are
      based on several patents, patent applications, provisional patent applications,
      and other proprietary intellectual property held by TheraCour Pharma, Inc.,
      one
      of the Company’s principal shareholders, to which we have the licenses in
      perpetuity for the treatment of the following human viral diseases: Human
      Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis C Virus
      (HCV), Herpes Simplex Virus (HSV), Rabies, Influenza and Asian Bird Flu Virus.
      We focus our laboratory research and pre-clinical programs on specific
      anti-viral solutions. Additionally, TheraCour has permitted the Company to
      use
      its nanomaterials to develop a treatment for dengue fever until such time as
      the
      Company and TheraCour can negotiate an amendment to the Licensing Agreement
      to
      include dengue fever viruses, West Niles Virus and Japanese Encephalitis Virus
      among the virus types we are permitted to manufacture, use and offer for sale.
      We are seeking to add to our existing portfolio of products through our internal
      discovery pre-clinical development programs and through an in-licensing
      strategy.





The
      Company has incurred significant operating losses since its inception resulting
      in an accumulated deficit of $6,469,400 at June 30, 2007. For the year ended
      June 30, 2007 the Company had a net loss of $ 3,118,963. Such losses are
      expected to continue for the foreseeable future and until such time, if ever,
      as
      the Company is able to attain sales levels sufficient to support its
      operations.





The
      accompanying financial statements on pages of this Form 10-KSB have been
      prepared assuming that the Company will continue as a going concern that
      contemplates the realization of assets and the satisfaction of liabilities
      in
      the normal course of business. Accordingly, they do not include any adjustments
      relating to the realization of the carrying value of assets or the amounts
      and
      classification of liabilities that might be necessary should the company be
      unable to continue as a going concern. These factors raise substantial doubt
      about the Company's ability to continue as a going concern.





**Glossary
      of Terms:**





**Nano**-
      When used as a prefix for something other than a unit of measure, as in
      "nanoscience", nano means relating to nanotechnology, or on a scale of
      nanometers (one billionth of a meter or greater)





**Viricide-**is an agent which reliably deactivates or destroys a
      virus.





**Nanoviricide(tm)**–
      is an agent which is made by attaching ligands against a certain virus or family
      of viruses to a nanomicelle based on the Company's patent-pending and
      proprietary technologies.





**Ligand**-
      is a short peptide or  chemical molecule fragment that has been
      designed to specifically recognize one particular type of virus.





**Micelle**-
      One of the structural units said to make up organized bodies





**Nanomicelle**-
      micelles on the scale of nanometers





**Pendant
      polymeric micelles**- A polymeric micelle forms from a a polymer whose
      chemical constitution is such that even a single chain of the polymer forms
      a
      micelle. A pendant polymer is a polymer that has certain units in its backbone
      that extend short chains branched away from the backbone. Pendant Polymeric
      Micelles therefore are polymeric micelle materials that are a class of pendant
      polymers, and naturally form exceptionally well-defined, self-assembling,
      globular micelles with a core-shell architecture.




**Mutations**- The ability (of the virus) to change its genetic structure to avoid
      the body’s natural defenses. Mutants are viruses created from a parent virus
      strain through a process of natural selection under pressure as it replicates
      in
      a host.




**P-Value**:
      In statistical hypothesis testing, the p-value****is the
      probability of obtaining a result at least as extreme as that obtained,
*assuming* that the null hypothesis is true; wherein the truth of the
      null hypothesis states that the finding was the result of chance alone. The
      fact
      that p-values are based on this assumption is crucial to their correct
      interpretation. The smaller the p-value, the greater is the probability that
      the
      observed study results and the comparison control are distinct, and therefore
      that the study results are not a result of chance alone.


4
 *Table
            of Contents*




More
      technically, the p-value of an observed value *observed* of some random
      variable T used as a test statistic is the probability that, given that the
      null
      hypothesis true, T will assume a value as or more unfavorable to the null
      hypothesis as the observed value *observed*. “More unfavorable to the
      null hypothesis” can in some cases mean greater than, in some cases less than
      and in some cases further away from a specified center value.




**The
      NanoViricide Concept**





The
      Company owns an exclusive worldwide license in perpetuity to technology that
      enables the creation of nanoviricides (tm). A “nanoviricide” is a flexible
      nano-scale material approximately a few billionths of a meter in size, which
      is
      chemically programmed by a “ligand” to specifically target and attack a
      particular type of virus. A nanoviricide also is capable of simultaneously
      delivering a devastating payload of active pharmaceutical ingredients (API)
      into
      the virus particle, to destroy its genome (RNA/DNA).





**Background:
      The NanoViricides Technology and Approach****





*The
      NanoViricides Technology and Approach*





Nanoviricide
      drugs, which are presently in a preclinical stage of development, are designed
      to lead to reduction in viremia by a set of multiple concerted
      mechanisms:





1.
            Each
                nanoviricide drug is designed as a specifically targeted antiviral
                agent
                for a particular type of virus or group of viruses. Often side effects
                of
                a drug may be correlated with non-specific interactions with the
                host
                cells, tissues, and organs. Most existing anti-viral agents are known
                to
                have non-specific effects against both host cells and viral machinery
                at
                the same time.





2.
            A
                nanoviricide is designed to seek and attach to a specific virus particle,
                engulfing the virus particle in the process, thereby rendering it
                incapable of infecting new cells, and disabling it completely. This
                suggested mechanism of action comprises much more than what the current
                entry and fusion inhibitors are expected to do. The fusion and entry
                inhibitors do not completely cover the virus particle and likely
                block
                only a few sites on the virus particle, which means the virus particle
                may
                still be capable of infecting cells using its unblocked attachment
                sites.
                In contrast, a nanoviricide is expected to engulf the virus particle
                completely, because of its larger size and flexible nature, thus
                disabling
                it completely. The action of a nanoviricide, if it works as designed,
                in
                this regard may be expected to be superior to antibody agents that
                attack
                viruses as well. Antibodies, being large, are expected to block relatively
                greater portions of the virus particle surface compared to small
                molecule
                entry inhibitors. However, antibodies depend upon the human immune
                system
                responses for clearing up the virus particle. In contrast, nanoviricides
                are thought to be capable of acting as completely programmed chemical
                robots that finish their task of destroying the virus particle on
                their
                own.





3.
            A
                nanoviricide is designed to be capable of encapsulating an active
                pharmaceutical ingredient (API) in its core, or “belly”. This is expected
                to reduce toxic effects of the API. Such encapsulating methods are
                currently being used in anti-cancer therapy and have shown reduced
                toxicity as well as increased efficacy (see
                http://nihroadmap.nih.gov/nanomedicine/) . Our goal, which can give
                no assurance that we will achieve, is for NanoViricides, Inc. to
                be the
                premier company to develop nanomedicines for anti-viral
                therapy.





4.
            A
                nanoviricide is designed to deliver any encapsulated API directly
                into the
                core of the virus particle. This is proposed to result in maximal
                effect
                against the anti-viral targets, such as the viral genomic materials.
                Our
                goal for this specifically targeted delivery of the API is to minimize
                toxic effects and also improve efficacy of the API. (see
                http://www.nci.nih.gov).





5.
            With
                this concerted targeted set of mechanisms, our objective is for the
                nanoviricide to be programmed to (a) prevent the virus particle from
                being
                able to infect new cells, (b) dismantle the virus particle, and (c)
                destroy the genetic material of the virus particle, thereby completely
                destroying the target. Our complete systems engineered approach to
                anti-viral therapy is in stark contrast with the current piece-meal
                approaches. Current drug therapies often have extensive toxicities,
                limited efficacies, and generation of mutants (mutated viruses) through
                selective incomplete pressure applied by the therapeutic regime onto
                the
                virus.


5
 *Table
          of Contents*


We
      designed the nanoviricides to act by completely novel and distinctly different
      mechanisms compared to most existing anti-viral agents. The self-assembling
      nanoviricide “trojan horses” would be expected to course through the blood
      stream, seek their target, i.e. a specific virus particle, attach themselves
      to
      the virus particle target and fuse with the virus particle. This chain of
      events, if it in fact occurs, is designed to destroy the virus particle's
      ability to infect host cells. In addition, if the nanoviricide contains an
      encapsulated API, such API may be deployed into the virus particle and might
      lead to destruction of the virus genetic material (such as viral DNA, viral
      RNA,
      etc.), and/or key viral components that the virus carries inside its “belly”
(such as the reverse transcriptase, the protease, and the integrase carried
      by
      HIV particles), based on the capabilities of the API. This concept needs to
      be
      extensively tested in future experiments. The concept of targeted delivery
      of an
      API is well known in the cancer therapeutics arena as this quote from the
      National Cancer Institute website above makes clear “Nanoscale devices have the
      potential to radically change cancer therapy for the better and to dramatically
      increase the number of highly effective therapeutic agents. Nanoscale constructs
      can serve as customizable, targeted drug delivery vehicles capable of ferrying
      large doses of chemotherapeutic agents or therapeutic genes into malignant
      cells
      while sparing healthy cells, greatly reducing or eliminating the often
      unpalatable side effects that accompany many current cancer therapies.”
http://nano.cancer.gov/resource_center/nano_critical.asp -
      cancer.





We
      designed the nanoviricides to act by a novel set of multiple,
      concerted*,* mechanisms. However, being so novel, our drugs are not
      directly comparable to existing anti-viral therapies. Thus, the safety and
      efficacy of the nanoviricides needs to be established by experimentation, and
      cannot be anticipated on the basis of any similar information regarding existing
      drugs. **See*****Part I****,****Preclinical
      Safety And Efficacy
      Studies.***





It
      is
      important to realize that the flexible nanoviricides nanomedicines show
      substantial advantages over hard sphere nanoparticles in this antiviral drug
      application. Hard sphere nanomaterials such as dendritic materials, nanogold
      shells, silica, gold or titanium nanospheres, polymeric particles, etc., were
      never designed to be capable of completely enveloping and neutralizing the
      virus
      particle.





The
      Company does not claim to be creating a cure for viral diseases. The Company's
      objectives are to create the best possible anti-viral nanoviricides and then
      subject these compounds to rigorous laboratory and animal testing. Our long-term
      research efforts are aimed at augmenting the nanoviricides that we currently
      have in development with additional therapeutic agents.





The
      Company plans to develop several drugs through the preclinical studies and
      clinical trial phases with the goal of eventually obtaining approval from the
      United States Food and Drug Administration (“FDA”) and International regulatory
      agencies for these drugs. The Company plans, when appropriate, to seek
      regulatory approvals in several international markets, including developed
      markets such as Europe, Japan, Australia, and underdeveloped regions such as
      Southeast Asia, India, China, and the African subcontinent. The seeking of
      these
      regulatory approvals would only come when and if one or more of our drugs,
      now
      in early stage of pre-clinical development, has significantly advanced through
      the US FDA regulatory process. If and as these advances occur, the Company
      may
      attempt to partner with more established pharmaceutical companies to advance
      the
      various drugs through the approval process.





There
      can
      be no assurance that the Company will be able to develop effective
      nanoviricides, or if developed, that we will have sufficient resources to be
      able to successfully manufacture and market these products to commence
      revenue-generating operations.





The
      Company's headquarters are currently in West Haven, Connecticut.




**Our
      Product Focus and Technologies**




The
      Company plans to develop several different nanoviricide drugs against a number
      of human viral diseases. The Company has a license in perpetuity to develop
      drugs based on technologies originally created by TheraCour Pharma, Inc.,
      against the following human viral diseases: H5N1 (Avian Flu), Human Influenza,
      Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV), Hepatitis
      C
      Virus (HCV), Herpes Simplex Virus (HSV), Dengue and Rabies, including all known
      strains of these viruses.


6
 *Table
            of Contents*




We
      currently have, in early, active development, products against H5N1 (Avian
      Flu),
      common Human Influenza (both highly pathogenic and non pathogenic), Rabies,
      Dengue, and Hepatitis C. We plan on undertaking the development of drugs against
      other viruses when adequate financing becomes available. The Company's ability
      to achieve progress in the drugs in development is dependent upon available
      financing and upon the Company's ability to raise capital.




**Background:
      Preclinical Safety And Efficacy Studies**





***The
      discussions in this section and throughout this Form 10-KSB annual report
      describe the tests that have been conducted which have yielded these results.
      These results do not provide sufficient evidence regarding efficacy or safety
      to
      support an Investigational New Drug (IND)  application with the FDA.
      Additional tests will need to be conducted. It must be noted that subsequent
      results often do not corroborate earlier results.***





**Preliminary
      Safety Studies In Vitro**




We
      have
      conducted limited initial animal safety studies on one of the core TheraCourTM
nanomaterials (patent pending). TheraCour technology covers a large range of
      nanomaterials in a class known as pendant polymeric micelles. These materials
      are self-assembling, flexible, non-particulate, and stable at room
      temperature.





We
      rely
      upon TheraCour nanomaterial to form the backbone of our nanoviricide antiviral
      drugs. One of the TheraCour polymers was tested at a 100mg/kgBW (body-weight)
      dose level in mice in a preliminary experiment. In studies involving gross
      tissue examination, microscopic histology studies, and blood pathology, no
      ill-effects or toxic effects were found. These studies showed that the tested
      core nanomaterial did not cause any organic damage in mice at the amounts
      tested. All results were within safe limits.





Several
      additional animal studies have been conducted in which the effect of a
      nanoviricide in the context of a disease was evaluated using histopathological
      techniques. Mice infected with influenza virus (H1N1) in a lethality type of
      study were treated with nanoviricides. The histological effects observed to
      date
      have been mild and explained by the disease state and there do not appear to
      be
      any deleterious effects of any significance that related to the nanoviricides
      drugs.  Systematic studies for evaluating the safety or toxicity
      threshold will be performed in the future.





Higher
      dosage levels and studies on additional materials are planned in order to
      determine the safety thresholds in laboratory animals. The only purpose of
      these
      studies was to give our scientists direction in designing the next set of
      studies. These have no impact on the regulatory (FDA) process.




**Proof-of
      Principle**





We
      have
      conducted studies which demonstrated that when a small chemical molecule
      (ligand) is attached to our nanomicelles covalently, the resulting nanoviricide
      has such a high activity that as little as 1/50th of the
      attached molecule is needed for comparable activity [i.e. A 20mg/kgBW injection
      of free molecule and a 0.04 mg/kgBW injection of the molecule attached to the
      polymer showed equivalent efficacy.]. These results suggest to us that the
      observed antiviral activity of the nanoviricide is due to the proposed mechanism
      of action of the nanoviricide and not to either component of the drug, the
      ligand or the nanomicelle. This is considered "proof of principle" in that
      our
      original theoretical assumptions about the functionality of the nanoviricide
      have scientifically been validated.





We
      have
      also performed studies in vitro in which a murine cytomegalovirus (CMV)
      preparation was subjected to dilute solutions of two different nanoviricides
      and
      the resulting solutions were studied by electron micrography to evaluate
      morphological changes in the virus. The nanoviricide treatments led to complete
      loss of the virus's lipid coat, resulting in the virion capsids spilling out.
      The virion capsids of CMV lack the coat proteins required for attachment to
      cells and are non-infectious.  Electron micrographs depicting this can
      be found on our web site at
http://www.nanoviricides.com/action_small.html.


7
 *Table
            of Contents*




**Preliminary
      Efficacy Study**





The
      preclinical animal testing, done to study the efficacy (effectiveness) of the
      test nanoviricide (anti-human influenza, H1N1) compound, revealed potential
      for
      development for the reasons delineated below. Three separate and distinct
      sets of experiments were performed to address different questions regarding
      efficacy.





Certain
      sets of experiments were conducted to determine the destruction/protection
      of
      the animal organs. There were ten animals per group and positive and negative
      controls were employed. Lethal infectious challenges of H1N1 influenza virus
      were administered, followed by treatment with nanoviricides after a significant
      delay. The active substances appeared to have protected the organs so that
      there were no histological (microscopic tissue) changes to the internal organs
      of the treated animals. Highly significant tissue damage was found in the
      internal organs of the unprotected (no nanoviricide treatment)
      groups.





Another
      set of experiments was performed, again on five separate groups each containing
      ten animals where the viral load was determined in the animals. The findings
      revealed that the viral load (number of viral particles per cubic millimeter)
      in
      the treated animals was significantly lower than that found in the control
      animals.




In
      statistics, a result is called significant if it is unlikely to have occurred
      by
      chance. "A statistically significant difference" simply means there is
      statistical evidence that there is a difference; it does not mean the difference
      is necessarily large, important or significant in the usual sense of the
      word.




In
      traditional frequentist statistical hypothesis testing, the significance level
      of a test is the maximum probability, assuming the null hypothesis, that the
      statistic would be observed. Hence, the significance level is the probability
      that the null hypothesis will be rejected in error when it is true (a decision
      known as a Type I error.  The significance of a result is also called its
      p-value; the smaller the p-value, the more significant the result is said to
      be.




Significance
      is represented by the Greek symbol, α (alpha). Popular levels of significance
      are 5%, 1% and 0.1%. If a test of significance gives a p-value lower than the
      α-level, the null hypothesis is rejected. Such results are informally referred
      to as 'statistically significant'. For example, if someone argues that
      "there's only one chance in a thousand this could have happened by coincidence,"
      they are implying a 0.1% level of statistical significance. The lower the
      significance level, the stronger the evidence for the presence of a true
      therapeutic effect.




A
      very
      small α-level (say 1%) is less likely to be more extreme than the critical value
      and so is more significant than high α-level values (say 5%). However, smaller
α-levels run greater risks of failing to reject a false null hypothesis (a Type
      II error), and so have less statistical power. The selection of an α-level
      inevitably involves a compromise between significance and power, and
      consequently between the Type I error and the Type II error.




Our
      experiments consistently have resulted in a  p value less than 0.003,
      which makes the tests very accurate, that there is no errors statistically
      for
      such an experiment, and all the values obtained from these experiments are
      of
      significance.




These
      initial animal findings suggested that the test nanoviricide compound was an
      effective treatment for human influenza in mice and that the concept of using
      a
      nanoviricide as a treatment for certain viral illnesses was a valid one and
      was
      deserving of further study. In more scientific terms, the statistical test
      was
      met for validity of the findings and these findings could be considered
      statistically significant. Thus, in statistical terms, one could say that the
      null hypothesis, that is the statistical likelihood that the observed results
      was due to chance and not the effect of the drug, was rejected.


8
 *Table
          of Contents*


**Preliminary
      Cell Culture Studies Against H5N1 Avian Influenza**





In
      vitro
      (laboratory) evaluation of 14 substances, including controls, was performed
      to
      evaluate protection of mammalian cells against infection by the H5N1 subtype.
      These assays were conducted in Vietnam under the auspices of the National
      Institute of Hygiene and Epidemiology, Hanoi (NIHE) under the Vietnam Ministry
      of Health. We identified four different nanoviricides as being highly effective
      against H5N1 using two different assays, both involving cell culture, one using
      the plaque reduction method and the other involving microscopic examination,
      to
      determine the extent of cytopathic events (CPE) reduction. All of these
      nanoviricides were effective at extremely low concentrations and many of them
      are considered by us to be drug candidates.




Four
      different nanoviricides were selected on the basis of the statistical test
      called the p-value, (explained below). The p-values for these four compounds
      were p<.003 which meant that there was a high statistical probability that
      these results were due to the effect of the test nanoviricides and not to
      chance. Thus the "null hypothesis" is rejected and the results can be considered
      statistically significant.




The
      most
      successful of these was a nanoviricide based on an antibody fragment as the
      targeting ligand, which led to substantial suppression of CPE at an
      extraordinarily low concentration level. This is being developed as
      AviFluCide-ITM, a drug highly specific to H5N1 that is being developed against
      the Vietnam strain. We currently believe that it is very likely to work against
      the Indonesian strain although further studies will be required to determine
      its
      efficacy against various highly pathogenic stains of influenza. If it fails
      to
      work against the Indonesian 2006 strain, further development may become
      necessary.





Another
      nanoviricide which is based on a ligand that we designed in-house to be specific
      to the group of all or a majority of highly pathogenic avian influenza (HPAI)
      viruses, also showed a very high efficacy. This is being developed as
“FluCide-HPTM”, a drug designed to be group-specific against emergent and
      existing highly pathogenic influenza viruses (including H5N1, H7N3 and others).
      Non-H5N1 HPAI (non-pathogenic avian influenza) strains could also become a
      pandemic threat as can all influenza A viruses since they all have the ability
      to mutate. It is well known that influenza strains drift constantly due to
      mutation, ressortment or recombination events leading to failure of
      vaccines.





A
      third
      nanoviricide is based on a ligand that we designed for attacking all influenza
      A
      viruses (type-level specificity) has shown strong efficacy against H5N1 as
      well.
      This is being developed as “FluCide-ITM”, a drug designed primarily for use
      against serious cases of human influenza.





All
      of
      the above studies have been repeated with the same as well as additional test
      methodologies (for example, evaluation of CPE quantitatively by a cell viability
      soluble dye assay) producing confirmatory results against this rgH5N1 Vietnam
      strain (based on the Vietnam 2004/2005 H5N1 strain).





Additional
      cell culture studies against the wild-type clade 2 H5N1 strain isolated in
      Vietnam in 2006 showed that FluCide-HP caused a 90% reduction in CPE as measured
      by the dye assay, whereas FluCide-I gave a 70% reduction in CPE, indicating
      that
      both of these broad-spectrum drugs are highly effective even against different
      strains and different clades of H5N1.





The
      Indonesia 2006 H5N1 strain also belongs to the clade 2 subgroup within H5N1
      subtype.





**Preliminary
      Efficacy Studies In Vivo - Influenza**





*100%
      of Mice Survived Long After Al Mice Treated With Oseltamivir Had
      Died.*





All
      but
      the antibody-based anti-influenza nanoviricides have been  tested in
      mice in an aggressive study involving extremely high levels of infection with
      a
      common influenza strain called H1N1. This study was conducted by Dr. Krishna
      Menon, the Company’s Chief Regulatory Officer. While a final comprehensive
      report on this study has not yet been issued, the results indicate that most
      of
      the nanoviricide nanotechnology-based drug candidates were substantially more
      efficacious than oseltamivir (Tamiflu(R)). Initial unpublished data suggest
      that
      FluCide-I may be as much as 8 to 10 times (800% to 1,000%) superior to Tamiflu
      in common influenza.


9
 *Table
          of Contents*


Additional
      studies have been performed in the same highly lethal mouse model with H1N1
      infection wherein all the mice treated with oseltamivir died within 151.4±1.0
      hours, at which point 100% of the mice treated with a nanoviricide using an
      improved sialic-acid-based ligand (improved FluCide(tm)-I) as well as 100%
      of
      the mice treated with a nanoviricide made using a ligand designed against the
      high path site of highly poathogenic influenzas including H5N1 (FluCide-HP(tm))
      were still surviving. The mice treated with FluCide-HP survived until 186.0±1.4
      hours, whereas those treated with FluCide-I survived until
      190.0±3.7****hours in this test. (The control, untreated mice
      died within 119.0±0.6 hrs. Oseltamivir is the active ingredient of Tamflu(R)).
      It is estimated that the Tamiflu dose would need to be increased by much more
      than ten times (i.e. 1,000%) to match the efficacy of the improved FluCide-I.
      These estimates are very preliminary in nature.





Considering
      that the preclinical data for oseltamivir and for peramivir are similar in
      terms
      of effect on survival or time course, it is clear that our nanoviricides may
      be
      expected to be far superior to permaivir as well.





From
      this
      unpublished data, we have concluded that the results are statistically
      significant with a p<0.003.





*Virus
      Load in lungs of lethally infected animals was reduced
      significantly.*


In
      the
      above study, the virus load in lungs of infected animals was reduced to
      92±**21** pfu/ml by FluCide-HP, and
      119±18****pfu/ml by the improved FluCide-I in this study.
      These are very low levels of virus load. The control untreated mice had a viral
      load of 946± 115 pfu/ml at this sampling point.





**Preliminary
      Efficacy Studies In Vivo – Rabies**





As
      part
      of our agreement with Vietnam that enabled us to perform studies on various
      H5N1
      strains and gave us access to anti-H5N1 antibodies from multiple host species,
      we have undertaken the development of anti-rabies drug candidates.





We
      performed two separate animal studies using a lethal mouse model in which mice
      were infected intracerebrally with 1,000LD50 of rabies challenge standard virus
      strain. Each group had 10 animals and there were 36 groups all
      together.  In both studies, three different nanoviricides led to
      significant indefinite survival of mice. In the intracerebral
      virus-neutralization mechanism study, two of the tested nanoviricides led to
      30%
      of the mice surviving indefinitely, and one led to 20% of the mice surviving
      indefinitely. In the intraperitoneal nanoviricide administration route study,
      two of these nanoviricides led to 20% of the mice surviving indefinitely. A
      20%
      or greater population survival is considered statistically significant in this
      study. BayRab(R), a commercial antibody used for post-exposure prophylaxis
      of
      rabies, gave 0% population survival rate in both studies. A nanoviricide made
      using antibody-based ligand followed the same course as the antibody itself,
      and
      gave a 0% population survival rate.





These
      studies appears to be the first ever in which a non-vaccine agent led to a
      significant population survival extent in rabies-infected mice in any high
      lethality infection protocol.  Two of the three nanoviricides that led
      to high population survival rates in these studies are being further developed
      under RabiCide-I(tm).





Further
      studies are planned.





**A
      Note on Our Studies to Date**





Current
      pharmaceutical industry work in antiviral therapy generally results in small
      efficacy improvements. Thus, in the case of influenza, peramivirTM, (BioCryst)
      was reported as having approximately equal efficacy to oseltamivir (Tamiflu,
      Roche). However, it was suggested that peramivirTM may have a superior safety
      profile and thus may enable use of large doses. Peramivir recently failed its
      Phase II clinical trials, and BioCryst stated that this may have been due to
      the
      use needles of insufficient length in the Phase II study.





These
      levels of efficacy differences between other product candidates against
      influenzas and bird flu can be easily seen to be insignificantly small compared
      to the ones established in our preliminary studies for the nanoviricides
      tested.


10
 *Table
            of Contents*




However,
      it should be noted that all of our studies to date were preliminary. Thus,
      the
      evidence we have developed is indicative, but not considered confirmative,
      of
      the capabilities of the nanoviricides technology's potential. These results
      merely lead us to the next step in the research process. They have no relevance
      when it comes to the FDA regulatory process. Despite such excellent early
      results, there is a risk that the nanoviricides may not result in drugs suitable
      for commercial production.





It
      must
      be stressed that the results discussed above were very preliminary and similar
      results may not be found on retesting. For a detailed discussion of the
      significance of the p value, please see
http://en.wikipedia.org/wiki/P-value. However, further repeat studies
      will be necessary to substantiate and validate these results.




In
      statistics, a result is called significant if it is unlikely to have occurred
      by
      chance. "A statistically significant difference" simply means there is
      statistical evidence that there is a difference; it does not mean the difference
      is necessarily large, important or significant in the usual sense of the
      word.





In
      traditional frequentist statistical hypothesis testing, the significance level
      of a test is the maximum probability, assuming the null hypothesis, that the
      statistic would be observed. Hence, the significance level is the probability
      that the null hypothesis will be rejected in error when it is true (a decision
      known as a Type I error.  The significance of a result is also called its
      p-value; the smaller the p-value, the more significant the result is said to
      be.





Significance
      is represented by the Greek symbol,
α
(alpha).
      Popular levels of significance are 5%, 1% and 0.1%. If a test of significance
      gives a p-value lower than the α-level, the null hypothesis is rejected. Such
      results are informally referred to as 'statistically significant'. For example,
      if someone argues that "there's only one chance in a thousand this could
      have happened by coincidence," they are implying a 0.1% level of statistical
      significance. The lower the significance level, the stronger the
      evidence.





A
      very
      small α-level (say 1%) is less likely to be more extreme than the critical value
      and so is more significant than high α-level values (say 5%). However, smaller
α-levels run greater risks of failing to reject a false null hypothesis (a Type
      II error), and so have less statistical power. The selection of an α-level
      inevitably involves a compromise between significance and power, and
      consequently between the Type I error and the Type II error.





Our
      experiments have constantly resulted in the p value less than 0.003, which
      makes
      the tests very accurate, that there are no errors statistically for such an
      experiment, and all the values obtained from these experiments are of
      significance.




(**See*****Part I*****, Government
      Regulation)**




**Background:
      Collaborations and Subcontract Arrangements**





**Arrangement
      with KARD Scientific, Inc.**





Owned
      and
      operated by Dr. Krishna Menon, KARD Scientific Inc. of Wilmington,
      Massachusetts, is currently our primary vendor for animal model study design
      and
      performance. KARD operates its own facilities in Wilmington, Massachusetts.
      KARD
      uses the Beth Israel Deaconess Hospital of the Harvard University Medical School
      to conduct these studies on our behalf. NanoViricides, Inc. does not have any
      direct collaborative relationships with Beth Israel Deaconess or Harvard
      University.




NanoViricides
      has a fee for service arrangement with KARD. We do not have an exclusive
      arrangement with KARD; we do not have a contract with KARD; all work performed
      by KARD must have prior approval by the executive officers of NanoViricides;
      and
      we retain all intellectual property resulting from the services by
      KARD.




Dr.
      Krishna Menon is the Company’s Chief Regulatory Officer, a non-executive officer
      position.


11
 *Table
            of Contents*




**Collaboration
      with the Health Ministry of the Government of Vietnam**





On
      December 23, 2005, the Company signed a Memorandum of Understanding with the
      National Institute of Hygiene and Epidemiology in Hanoi (NIHE), a unit of the
      Vietnamese Government’s Ministry of Health. This Memorandum of Understanding
      calls for cooperation in the development and testing of certain nanoviricides.
      The parties agreed that the initial target would be the development of drugs
      against H5N1 (avian influenza). NIHE thereafter requested that we develop a
      drug
      for rabies, a request to which we agreed. The initial phase of this agreement
      called first for laboratory testing, followed by animal testing of several
      drug
      candidates developed by the Company. Preliminary laboratory testing of
      FluCideTM-I, AviFluCide-ITM and FluCide-HPTM were successfully performed at the
      laboratories of the National Institute of Hygiene and Epidemiology in Hanoi
      (NIHE). The second phase of the project, animal testing of the Influenza and
      H5N1 candidates has been delayed until the BSL3+ animal facility in Hanoi is
      ready. The H5N1 testing will utilize the NIHE’s BSL3 (biological safety
      laboratory level 3) laboratory at the NIHE. Rabies testing can safely be done
      at
      their BSL2 facility.





**Other
      Collaborations**





The
      Nanoviricides approach depends upon significant scientific input as well as
      scientific experimentation during various stages of developments. The Company
      currently does not have the facilities to conduct most of the anti-viral
      studies. The Company will need to develop additional collaborations in order
      to
      minimize capital outlays.




We
      have
      made significant efforts in the past year and continue to do so to obtain
      collaborations with various agencies, institutions, and commercial
      enterprises.





The
      Company has signed a Cooperative Research and Development Agreement with the
      Walter Reed Army Institute for Research for a cooperative research project
      to
      test the effectiveness of the Company’s products against the Dengue Fever
      Virus.





These
      meetings have led to the Company having received several cooperative research
      and development agreements (CRADA's) from different government
      agencies,  civilian as well as  military. These CRADA's are
      currently in review by the Company counsel. We have also received requests
      for
      material for testing under Material Testing Agreements (MTAs) from certain
      agencies. However, there can be no assurance that a final agreement may be
      forthcoming.





In
      addition, the Company has had preliminary negotiations and discussions with
      other pharma and non-pharma commercial enterprises regarding commercial projects
      based on the Company’s products.  The Company has received a proposed
      agreement from one of the non-pharma commercial companies. However, there
      is no signed agreement between the Company and this or any other commercial
      entity and no assurance can be given that an agreement will ever be reached
      with
      this or any other entity.





**Mechanism
      of Nanoviricides Action**





It
      should
      be noted that while the nanomaterials and nanomedicines we are developing are
      designed with the  set of ground rules stated earlier as our design
      goals, it is generally not possible to establish whether each of these
      mechanisms is actually active or whether it is truly responsible for the
      efficacy observed.





We
      believe that mechanisms are guidelines rather than endpoints. Our study
      endpoints and development programs are defined for establishing efficacy,
      safety, and chemical manufacturing controls, rather than establishing mechanisms
      of action.




*Escape
      Mutants*


Escape
      mutants are a known risk and challenge to any given anti-viral drug. Our plan
      is
      to develop new drugs with modified ligands that attack the new attachment sites
      of the escape mutants. The rationale for this is based on the concept that
      a
      nanoviricide drug is constructed from several building blocks. One of these
      building blocks is the ligand that attaches specifically to the virus.
      Identifying or creating a new ligand that binds to an escape mutant enables
      creating a new drug, simply by replacing the ligand part of a drug already
      known
      to be reasonably safe and efficacious. The Company's scientists have developed
      strategies for identifying and designing such ligands.


12
 *Table
          of Contents*


*Ligand
      Tuning(tm)*


A
      very
      broad-spectrum nanoviricide can be made by using a ligand that binds to a very
      large number of types and strains of a given virus. Usually, but not always,
      it
      is possible to identify a ligand that will provide such a broad specificity
      against a particular virus.





Usually,
      the broader the spectrum of a ligand, the lower is its efficacy level by itself.
      Thus, it is always beneficial to develop highly efficacious narrow spectrum
      drugs against potentially deadly diseases. Both high efficacy and low efficacy
      ligands can be combined on the same nanomicelle for “tuning” the spectrum of
      activity of the nanoviricide drug.





**Background:
      Bio-Defense - Emergency Preparedness**





*NanoViricides
      Technology May be Well Suited for Bio-Terrorism and Emerging Disease Threat
      Response*





In
      our
      early stages of development, we have designed a building-block based approach
      of
      nanoviricides drug development which may have potential use against
      bio-terrorism, accidental release of infectious agents, or natural outbreaks.
      This building block approach might have the potential to allow us to
      expeditiously develop a new drug to fight new and emerging threats. The Company
      has shown this in multiple presentations to various agencies within the U.
      S.
      Department of Defense.





**Background:
      Bio-Defense “Rapid threat Response”**





One
      of
      the long-term goals of the Company is to develop the ability to assist in the
      response of governments to viral bio-threats, whether due to bio-terrorism
      or
      natural events. Such a response scenario may in fact be possible because of
      the
      building-block nature of the nanoviricides platform technology. In this
      scenario, a base nanoviricide would be stockpiled under strategic national
      and
      international stockpiling programs, and a new drug could be developed against
      a
      threat even prior to identifying the actual pathogen that is the cause of the
      public health crisis event. This capability is seen as extremely valuable
      because it is anticipated that bioterrorism agents of the future as well as
      natural outbreaks may be of novel pathogens and therefore identification and
      diagnosis of the same may take large amounts of time, a time period in which
      an
      epidemic may threaten to become a pandemic. Such was the case with SARS, and
      other smaller outbreaks. A recent coxsackie virus outbreak in Northern India
      resulted in several child fatalities during the pathogen identification time
      frame itself, despite being caused by a previously known pathogen.





**Background:
      Anti-HIV Drugs**





*Importance
      of Reduction in Viremia*





In
      the
      field of HIV treatment, it is well established that keeping the viremia to
      a
      minimum level has significant clinical benefits. Thus, in one clinical study,
      only 8% of HIV infected patients with a viral load of less than 4350 copies
      of
      viral mRNA/uL progressed to full-blown AIDS in 5 years. By contrast, 62% of
      patients with a viral load of greater than 36,270 copies of mRNA/uL had
      developed AIDS in the same period (ref 145 from PATH p254). Viremia is
      significantly controlled with the current state of the art highly active
      antiretroviral therapies (HAART) against HIV, to the extent of almost
      undetectable viral load (i.e. less than 50-75 copies of HIV RNA per ml) in
      many
      patients. However, this is a dynamic condition, in which the rate of creation
      of
      new virus particles is balanced by the rate of their destruction, primarily
      by
      the body's innate defenses. In addition, once an escape mutation occurs, the
      HAART therapy loses its effectiveness and viral load rises sharply. Similarly,
      other precipitative events such as a secondary infection can cause progress
      to
      the AIDS stage. The AIDS stage is characterized by rapidly rising HIV viral
      loads (viremia), and, concomitantly, rapidly declining CD4+ T cells (an
      important component of human immune system). Eventually, the patient dies of
      complications related to the debilitation of immune response, often by a variety
      of secondary infections or even neoplasms (cancers) that grow
      unchecked.





In
      the
      very first stage of HIV infection, i.e. immediately after infection, there
      is a
      rapid rise in HIV viremia in the first few weeks, called the Acute HIV Syndrome
      (or Disease). If the body's immune system then brings the viremia under control,
      into a dynamic state, it called “Asymptomatic HIV Disease”. This stage lasts for
      a median 10 years, and a precipitative event, such as usually a secondary
      infection, leads to the clinical manifestations of AIDS. During the asymptomatic
      stage, it is known that the level of the steady state viremia correlates with
      the future progression of the disease and the life span of the
      patient.


13
 *Table
          of Contents*


While
      HAART therapy, when successful, leads to “undetectable” levels of viremia, the
      virus levels may still be at about 50 copies per ml, or about 1.5 million
      circulating**virions in the blood and probably many magnitudes more
      virions inside cells and other tissues. This is still a very large load of
      virus. Thus, control of viremia is important even in the asymptomatic stage
      of
“latent” HIV infection, even with HAART therapy.





Based
      on
      our early stage in-vitro and in-vivo results on our anti-viral influenza
      nanoviricides, we now have a scientific basis to expect that once we identify
      and attach a suitable ligand to develop an anti-HIV nanoviricide, it may well
      be
      possible to control viremia in all three stages of the HIV disease; viz. the
      early acute HIV infection syndrome, the later clinically latent HIV infection,
      and the late stage of full-blown AIDS. This “system” still needs to be
      extensively tested in the laboratory and in animals before any definitive
      statements can be made about its effectiveness.





*The
      Company's Plan of Attacking HIV/AIDS*





The
      Company has initiated the development process for two drugs against HIV, called
      HivCide-I and HivCide-II respectively. These two drugs together are expected
      to
      encompass the currently known array of HIV types and subtypes in the world.
      These first nanoviricides drugs have been designed to engulf the virus
      particles, and dismantle them. We do not anticipate starting to begin basic
      testing of these initial candidates until late in our  2007 fiscal
      year. This depends on adequate financing for the staff as well as for the
      materials necessary to begin the evaluation process.





HIV
      is an
      extremely difficult, if not impossible virus to eradicate. The HIV genome copies
      itself ("integrates") into the human cellular DNA. This integration process
      makes HIV almost immortal. Our drug development objective is to be able to
      reduce viral load. Whether or not that is possible with this virus is not yet
      known and the concept will have to be extensively tested.




**Background:
      Influenza**





*Seasonal
      Influenza.*


Seasonal
      influenza, commonly known as the flu, is a viral infection characterized by
      symptoms including fever, cough, sore throat, fatigue, headache, and/or chills.
      According to the U.S. Centers for Disease Control and Prevention (“CDC”),
      (www.cdc.gov), an estimated 5% to 20% of the American population suffers
      from influenza annually, more than 200,000 people are hospitalized from flu
      complications, and approximately 36,000 people die from the flu in the US.
      The
      worldwide death toll is estimated at upwards of 200,000 per year. Influenza
      is
      particularly dangerous to the elderly, young children and people with certain
      chronic health conditions. Outbreaks of seasonal flu tend to follow predictable
      patterns usually occurring in the winter. New vaccines are developed annually
      based on known flu strains and are usually available for the annual flu season.
      There are also antiviral treatments available for the treatment of people
      infected with the influenza virus.





*Avian
      Influenza.*


According
      to information taken from the CDC website, avian influenza, or bird flu, is
      an
      infection caused by viruses which occur naturally among birds. This form of
      flu
      is very contagious among birds and can lead to serious illness and sometimes
      death. There are two main forms of disease that infect domestic poultry, one
      a
      low pathogenic form and the other a highly pathogenic form. The latter form
      can
      cause disease that affects multiple internal organs and with a mortality rate
      between 90-100% in these birds within 2 days.





While
      there are many different subtypes of the influenza A viruses, only three
      subtypes are known to be currently circulating among humans. Avian influenza
      A
      viruses are found chiefly in birds, but there have been confirmed cases of
      infection in humans, generally as a result of contact with infected birds.
      These
      infections have led to symptoms of normal flu to more severe and life
      threatening conditions. Influenza A (“H5N1”) is a subtype of an influenza virus
      that is highly contagious among birds and can be very deadly to them. Of the
      avian influenza viruses that have crossed the species barrier to infect humans,
      the H5N1 has caused the largest number of detected cases of severe disease
      and
      death in humans. In 2006, it is suspected that the Indonesia strain of H5N1
      may
      have mutated to result in limited spread from one person to another, only in
      close contact circumstances. It is possible that the substantially high case
      fatality rate may be keeping the human to human spread in check. But as
      influenza A viruses constantly change, they could mutate over time to have
      the
      ability to spread among humans.


14
 *Table
          of Contents*


*Pandemic
      Influenza*.


Pandemic
      flu is a global disease outbreak that occurs when a new influenza virus emerges
      so that people have had no previous exposure. This situation occurs very rarely
      and only occurred three times in the 20th century.





*Flu
      Prevention and Treatment.*


The
      development of effective therapeutics has challenged medical researchers due
      to
      the seasonal variation in viral strains and the highly infectious nature of
      influenza. Patients, therefore, have limited treatment options. AmantadineTM and
      rimantadineTM are used for treatment of influenza A but are ineffective against
      influenza B. In addition, these drugs cause some adverse side effects, and
      the
      virus tends to develop resistance to these drugs. For the 2005-2006 flu season,
      the CDC has recommended against the use of amantadine and rimantadine for the
      treatment or prophylaxis of influenza in the United States due to signs of
      resistance to those drugs.





*Vaccines*
      are available against the disease but have limitations: people require advance
      vaccination; vaccines are limited by their specificity to particular strains
      of
      the virus; and vaccines offer little protection if the vaccine is inaccurate.
      In
      addition, many people decline the required injections because of fear and/or
      discomfort, as well as side effects such as allergies. The ability of the virus
      to change its structure to avoid the body’s natural defenses is a serious
      obstacle to developing an effective vaccine against influenza. Different strains
      can arise when surface antigens on the virus (the portion of the virus that
      causes an immune reaction in humans) undergo minor genetic mutations each year
      as the virus replicates. Because of this mutability, the immunity acquired
      in
      response to infection by a particular strain of the virus does not provide
      adequate protection against viruses that subsequently arise. The production
      of a
      new vaccine each year is not only complex and expensive, but also an inefficient
      method of global disease control. The time lag between threat potential
      assignment and vaccine production implies that a novel influenza mutant can
      develop in the field and may result in very poor vaccine response.





*Inhibiting
      Influenza Neuraminidase*.


Research
      during the past two decades has seen dramatic advances in understanding the
      molecular structure and function of the influenza virus. Considerable attention
      has been focused on the enzyme neuraminidase, which is located on the surface
      of
      the virus particle. Neuraminidase assists in the release and spread of the
      flu
      virus by breaking the chemical strands that hold the new viruses to the cell
      surface, allowing the replicated virus to spread and infect other cells. This
      process progresses until the host’s immune response can produce enough
      antibodies to bring the infection under control. Inhibiting the neuraminidase
      enzyme keeps new viruses attached to the cell surface, thereby preventing the
      spread of the virus and the further infection of other cells. The subsequent
      quantities of virus in the bloodstream are not enough to cause disease but
      are
      sufficient to induce the body to mount an immune response.





Roche,
      in
      collaboration with Gilead Sciences, and GlaxoSmithKline (“GSK”) have currently
      approved neuraminidase inhibitors on the market. Roche’s neuraminidase
      inhibitor, oseltamivir (TamifluTM) is a twice-a-day, orally active neuraminidase
      inhibitor, while GSK’s neuraminidase inhibitor, RelenzaTM is administered by dry
      powder inhaler twice a day. Both drugs are approved for marketing in the United
      States and other countries for treatment of influenza. Roche’s neuraminidase
      inhibitor is also approved for prophylaxis use for prevention of influenza.
      In
      addition to these companies with neuraminidase inhibitors, there are other
      companies working to develop vaccines and other antiviral drugs to be used
      against various strains of influenza.





BioCryst
      is currently developing a neuraminidase inhibitor, peramivir, as an injectable,
      for the treatment of common influenza as well as H5N1. While present
      announcements from BioCryst indicate that injected peramivir is not
      significantly more effective than Tamiflu, it appears that they believe that
      the
      good safety profile of peramivir may allow them to increase dose levels in
      the
      future studies to improve response. Peramivir recently failed its Phase II
      human
      trials, and BioCryst has stated that this may be due to the use of short needles
      in the Phase II study.





Several
      molecular biology oriented studies have described that there are significant
      differences between the neuraminidase of the H5N1 strain and those of the other
      common influenza strains that may be responsible for the poor efficacy of
      neuraminidase inhibitors as a class against H5N1. The New England Journal of
      Medicine reported one study which assessed the results of 17 prior studies
      related to the the effectiveness of neuraminidase inhibitors. de Jong, Memo
      d.,
      Thanh, Trran T., Khanh, Truong H., *et. al*. “Oseltamivir Resistance
      during treatment of Influenza A 9H5n1) Infection, New England Journal of
      Medicine, Volume 353:2667-2672, December 22, 2005, November
      25.


15
 *Table
          of Contents*


1.
            The
                Writing Committee of the World Health Organization (WHO) Consultation
                on
                Human Influenza A/H5. Avian influenza A (H5N1) infection in humans.
                N Engl
                J Med 2005;353:1374-1385.





2.
            Hien
                TT, Liem NT, Dung NT, et al. Avian influenza A (H5N1) in 10 patients
                in
                Vietnam. N Engl J Med
                2004;350:1179-1188.





3.
            Chotpitayasunondh
                T, Ungchusak K, Hanshaoworakul W, et al. Human disease from influenza
                A
                (H5N1), Thailand, 2004. Emerg Infect Dis
                2005;11:201-209.





4.
            Moscona
                A. Neuraminidase inhibitors for influenza. N Engl J Med
                2005;353:1363-1373.





5.
            Identification
                of influenza isolates by hemagglutination inhibition. In: Department
                of
                Communicable Disease Surveillance and Response. WHO manual on animal
                influenza diagnosis and surveillance. Geneva: World Health Organization,
                2002:28-36.
                (WHO/CDS/CSR/NCS/2002.5.)





6.
            de
                Jong MD, Cam BV, Qui PT, et al. Fatal avian influenza A (H5N1) in
                a child
                presenting with diarrhea followed by coma. N Engl J Med
                2005;352:686-691.





7.
            Boom
                R, Sol C, Beld M, Weel J, Goudsmit J, Wertheim-van Dillen P. Improved
                silica-guanidiniumthiocyanate DNA isolation procedure based on selective
                binding of bovine alpha-casein to silica particles. J Clin Microbiol
                1999;37:615-619.





8.
            Boom
                R, Sol CJ, Salimans MM, Jansen CL, Wertheim-van Dillen PM, van der
                Noordaa
                J. Rapid and simple method for purification of nucleic acids. J Clin
                Microbiol 1990;28:495-503.





9.
            Chen
                H, Smith GJ, Zhang SY, et al. Avian flu: H5N1 virus outbreak in migratory
                waterfowl. Nature 2005;436:191-192.





10.
            Gubareva
                LV, Kaiser L, Matrosovich MN, Soo-Hoo Y, Hayden FG. Selection of
                influenza
                virus mutants in experimentally infected volunteers treated with
                oseltamivir. J Infect Dis
                2001;183:523-531.





11.
            Le
                QM, Kiso M, Someya K, et al. Avian flu: isolation of drug-resistant
                H5N1
                virus. Nature 2005;437:1108-1108.





12.
            Whitley
                RJ, Hayden FG, Reisinger KS, et al. Oral oseltamivir treatment of
                influenza in children. Pediatr Infect Dis J 2001;20:127-133. [Erratum,
                Pediatr Infect Dis J 2001;20:421.]





13.
            Kiso
                M, Mitamura K, Sakai-Tagawa Y, et al. Resistant influenza A viruses
                in
                children treated with oseltamivir: descriptive study. Lancet
                2004;364:759-765.





14.
            Ward
                P, Small I, Smith J, Suter P, Dutkowski R. Oseltamivir (Tamiflu)
                and its
                potential for use in the event of an influenza pandemic. J Antimicrob
                Chemother 2005;55:Suppl 1:i5-i21.





15.
            Yen
                HL, Monto AS, Webster RG, Govorkova EA. Virulence may determine the
                necessary duration and dosage of oseltamivir treatment for highly
                pathogenic A/Vietnam/1203/04 influenza virus in mice. J Infect Dis
                2005;192:665-672.





16.
            Maines
                TR, Lu XH, Erb SM, et al. Avian influenza (H5N1) viruses isolated
                from
                humans in Asia in 2004 exhibit increased virulence in mammals. J
                Virol
                2005;79:11788-11800.


16
 *Table
            of Contents*




**Background:
      Rabies**





The
      current protocol for treatment after exposure to Rabies (known as post-exposure
      prophylaxis or "P.E.P.") is highly successful in preventing the disease if
      administered promptly, within fourteen days after infection. The first step
      is
      immediately washing the wound with soap and water, which is very effective
      at
      reducing the number of viral particles. In the United States, patients receive
      one dose of immunoglobulin and five doses of rabies vaccine over a twenty-eight
      day period. One-half the dose of immunoglobulin is injected in the region of
      the
      bite, if possible, with the remainder injected intramuscularly away from the
      bite. The first dose of rabies vaccine is given as soon as possible after
      exposure, with additional doses on days three, seven, fourteen, and twenty-eight
      after the first. Patients that have previously received pre-exposure vaccination
      do not receive the immunoglobulin, only the post-exposure
      vaccinations.





Because
      of the significant expense of the rabies treatment, there is limited
      availability in the rural areas of these underdeveloped countries (The cost
      in
      the U.S. is approximately $1,000 for a course of treatment).





At
      the
      request of the Vietnamese Ministry of Health, we initiated development of an
      anti-rabies drug. Rabies is a serious public health problem in Vietnam,
      Thailand, India, and many other tropical and subtropical countries.





Our
      first
      RabiCide drug candidates were tested at NIHE, Vietnam, in the first quarter
      of
      2007. The Rabies drug, identified as RabiCideTM, salvaged 30% of the animals
      given 1000X the lethal dose of rabies virus directly into the brain. There
      can
      be no assurance that our drug candidate (RabiCide), if developed, can
      successfully be manufactured. Thus there are no guarantees that the drug, even
      if successfully manufactured, can produce revenue for the Company.





The
      United States Center for Disease Control  has recently declared that
      the United States is now free of canine rabies, although dogs and humans may
      still get rabies from other animals such as bats, raccoons, and skunks
      (http://cdc.gov/news/2007/09/canine_rabies.html).****In
      addition**,**the World Health Organization has recently declared
      that the world will be free of canine rabies by the middle of the next decade.
      Thus the commercial potential, for the Company,  of a rabies drug is
      uncertain.





**Background:
      NanoViricides Company Philosophy**





NanoViricides,
      Inc. is a for-profit company. We have identified several diseases as large
      commercially important drug development targets. These include HIV, Hepatitis
      C,
      Herpes Simplex Virus, and Influenzas, among others.





It
      is
      theoretically possible to develop nanoviricide drugs against a large number
      of
      infectious disease agents, primarily viruses. In this regard, there is a
      potential to develop good nanoviricides against these infectious agents,
      including those that are primarily seen in developed countries and well as
      those
      primarily seen in developing and sub-tropical areas.





Significant
      effort and scientific developments will be necessary in order to develop
      nanoviricides against drugs that affect the brain, and the central nervous
      system (CNS). This issue, a result of the blood-brain barrier, which does not
      allow drugs injected in the bloodstream to go into the CNS fluid, is well known.
      This is a major barrier for all drug development against CNS diseases. It will
      be necessary to develop good nanoviricides against Dengue fever, West Nile
      virus, and other diseases that progress only slowly to attack the CNS. This
      may
      well enable a time window for the nanoviricides to attack the virus in the
      circulation before it has an opportunity to move into the central nervous
      system.





It
      is not
      possible for any early-stage pharmaceutical company to expeditiously tackle
      a
      large number of disease targets without significant assistance and
      collaborations, both financial and technical. We have recently initiated
      discussions with various civilian and military agencies as well as with various
      universities and commercial entities regarding various
      collaborations.





**Products**





NanoViricides,
      Inc. currently has no products for sale.


17
 *Table
          of Contents*


**Products
      In Development**





The
      following table summarizes NanoViricides active development projects as of
      September 30, 2007.





**Virus**
            **Development
                Stage**Influenza
                (Common)
            PreclinicalAvian
                Flu (H5N1)
            PreclinicalAvian
                Flu-Highly Pathogenic
            PreclinicalRabies
            PreclinicalHIV/AIDS
            Early
                R&DHCV
            R&D
                to begin in 2007Dengue
            Early
                R&D








**FluCide-I,**
      is currently in preclinical studies against all common influenzas as well as
      avian influenza H5N1. It is a broad-spectrum anti-influenza nanoviricide. It
      is
      based on ligands that we have developed through rational drug design. These
      ligands are based on a well known mechanism by which influenza viruses bind
      to
      cells. One mechanism involves the hemagglutinin coat protein of influenza virus
      binding to sialic acids on cell
      surfaces.  Our  broad-spectrum ligand used in FluCide-I is
      based on the sialic acid expressed by cells. Therefore, it is expected to
      work  well against all of the influenza viruses.  Since all
      influenza viruses, no matter what type (A,B,C), which subtype (e.g. HxNy of
      Influenza A), or clades or strains, must bind to one of two varieties of sialic
      acid, we have designed the ligand such that all of the influenza viruses must
      bind to our ligand.   If an influenza virus escapes FluCide-I,
      this mutant virus would be unable to bind to both types of sialic acids, and
      would be thus unable to infect most animal species, including birds and
      mammals.




**AviFluCide-I**,
      is currently in preclinical studies against H5N1, the avian influenza strain
      that is considered the current pandemic threat. It is a highly specific drug
      that also has extremely high activity against H5N1 in cell culture studies,
      much
      greater than our other two anti-influenza nanoviricides. Animal studies
      utilizing AviFlucide-I against H5N1 are currently planned for the fourth quarter
      of 2008, based on changes in availability of BSL3+ animal facility in
      Vietnam.  However, If we can improve the efficacy of FluCide-HP
      further, it will be unnecessary to develop a specific drug just for
      H5N1.




**FluCide-HP**,
      is currently in preclinical studies against the entire class of highly
      pathogenic avian influenza (HPAI) viruses from which pandemic threats emerge.
      It
      has excellent activity in cell culture studies against H5N1. Its activity
      against common influenza is poorer than that of FluCide-I, yet far better than
      Tamiflu, in mouse studies. Common (low pathogenicity) influenza viruses do
      not
      have the characteristic surface features that HPAI viruses do. The ligand used
      for FluCide-HP was designed and developed by the Company using a rational drug
      design approach.





**RabiCide-I,**
      a nanoviricide against Rabies finished its first set of animal studies in the
      first quarter of 2007 in Vietnam. The candidate ligands for this nanoviricide
      were designed by the Company using publicly available information regarding
      the
      interaction of the rabies virus with cells.




**HCV*****-***A******Hepatitis C nanoviricide is
      planned for research and development to begin in 2008. The Company has not
      yet
      sourced the materials to target this disease. The Company has only begun the
      early stages of a plan to develop nanoviricides against Hepatitis
      C.




**HivCide-I,**
      This is our first announced drug project against HIV-I. Because of the
      world-wide concern about a possible H5N1 pandemic, we moved HivCide-I
      development back. We plan to reinitiate development of this drug late in 2007
      or
      early 2008. Our first HIV drug to be developed will be a targeted nanoviricide
      against HIV   and is engineered with specific recognition ligands
      that allow multiple point binding to inactivate HIV virus in the
      bloodstream.




**HivCide-II**
      will be a targeted nanoviricide against HIV strains that are not attacked by
      HivCide-I, and will have the same mechanism of action as HivCide-I, except
      that
      it will possess a different ligand that specifies attacking a different subset
      of virus strains, types, and subtypes than HivCide-I.


18
 *Table
          of Contents*


All
      of
      these drugs are being developed as injectables.





Our
      goals
      for the second generation of our anti-influenza drugs will be to develop an
      oral/bronchial administration that carries the drug into the bronchial/pulmonary
      space that is the primary site infection by influenza viruses. Moreover, there
      can be no assurance that we will be able to develop a drug that may be
      administered orally or bronchially or that such a drug would be effective
      against influenza.





**Development
      Stage of Products**





All
      of
      above products are in various stages of pre-clinical development. The Company
      believes that the anti-influenza drugs will advance into second stage of
      preclinical studies, known as “Tox Package” studies, as soon as appropriate
      facilities and finances are available. The Company will make a determination
      based on the results of its anti-influenza studies planned during 2007 as to
      how
      it should proceed with further development of its drugs. All of our developments
      are subject to availability of appropriate levels of financing.





**Plan
      of Operations**





The
      Company intends to perform the regulatory filings and own all the regulatory
      licenses for the drugs it is currently developing. The Company will develop
      these drugs in part via subcontracts to TheraCour Pharma, Inc. (“TheraCour”),
      the exclusive source for these nanomaterials. With sourcing of materials from
      TheraCour, the Company prefers to manufacture these drugs in our own facility.
      However, the Company may manufacture these drugs under subcontract arrangements
      with external manufacturers that carry the appropriate regulatory licenses
      and
      have appropriate capabilities. The Company intends to distribute these drugs
      via
      subcontracts with distributor companies or in partnership arrangements. The
      Company plans to market these drugs either on its own or in conjunction with
      marketing partners. The Company also plans to actively pursue co-development,
      as
      well as other licensing agreements with other Pharmaceutical companies. Such
      agreements may entail up-front payments, milestone payments, royalties, and/or
      cost sharing, profit sharing and many other instruments that may bring early
      revenues to the Company. Such licensing and/or co-development agreements may
      shape the manufacturing and development options that the company may pursue.
      None of these distributor or co-development agreements is in place at the
      current time.





**Manufacturing**




*Manufacturing
      of Research Materials*





Nanomaterials
      that form the basis of our nanoviricide drugs are produced for research by
      TheraCour Pharma, Inc. at their research scale production facility in West
      Haven, Connecticut.





*Manufacturing
      of Drugs*





The
      Company is presently looking to acquire, build, or lease manufacturing
      facilities that would enable GMP manufacturing of our drugs. Until such time,
      the Company believes that its current relationship with TheraCour is sufficient
      to meet its current developmental requirements.





The
      Company intends to manufacture FluCide-I, FluCide-HP, AviFluCide-I and
      RabiCide-I as well as other drugs for pre-clinical animal studies and human
      clinical studies, in facilities owned or leased by the Company. In the event
      that we cannot secure funding that allows us to establish the necessary
      facilities to manufacture such drugs, we plan to subcontract with third party
      facilities that have the appropriate capabilities and regulatory licenses to
      manufacture our drugs and materials on a commercial scale.





We
      have
      no commercial-scale manufacturing facilities at present. For our future
      products, we will need to develop additional manufacturing capabilities and
      establish additional third party suppliers to manufacture sufficient quantities
      of our product candidates to undertake clinical trials and to manufacture
      sufficient quantities of any products that are approved for commercial sale.
      If
      we are unable to develop manufacturing capabilities internally or contract
      for
      large scale manufacturing with third parties on acceptable terms for our future
      antiviral products, our ability to conduct large-scale clinical trials and
      meet
      customer demand for commercial products would be adversely
      affected.





19
 *Table
          of Contents*


We
      believe that the technology we use to manufacture our products and compounds
      is
      proprietary. For our products, we may have to disclose all necessary aspects
      of
      this technology to contract manufacturers to enable them to manufacture the
      products and compounds for us. We plan to have discussions with manufacturers
      under non-disclosure and non-compete agreements that are intended to restrict
      them from using or revealing this technology, but we cannot be certain that
      these manufacturers will comply with these restrictions. In addition, these
      manufacturers could develop their own technology related to the work they
      perform for us that we may need to manufacture our products or compounds. We
      could be required to enter into an agreement with that manufacturer if we wanted
      to use that technology ourselves or allow another manufacturer to use that
      technology. The manufacturer could refuse to allow us to use their technology
      or
      could demand terms to use their technology that are not acceptable.





We
      believe that we are in compliance with all material environmental regulations
      related to the manufacture of our products.





**Patents
      and Proprietary Rights**





The
      Company has an exclusive license in perpetuity for technologies developed (with
      materials referenced in Table 1 below) by TheraCour for seven virus types:
      HIV,
      Hepatitis C Virus, Herpes, Asian (bird) flu, Influenza, dengue virus and rabies.
      Nanoviricides, Inc has notified TheraCour Pharma of its interest in acquiring
      licenses for others viruses.




In
      consideration for obtaining this exclusive license, we agreed: (1) that
      TheraCour can charge its costs (direct and indirect) plus a maximum of 30%
      of
      direct costs as a Development Fee payable in periodic installments as billed;
      (2) we will pay $25,000 per month for usage of lab supplies and chemicals from
      existing stock held by TheraCour; (3) we will pay $2,000 or actual costs,
      whichever is higher for other general and administrative expenses incurred
      by
      TheraCour on our behalf (4) to make royalty payments of fifteen percent (15%)
      of
      net sales of the licensed drugs to TheraCour Pharma, Inc.; (5) that TheraCour
      Pharma, Inc. retain the exclusive right to develop and synthesize
      nanomicelle(s), a small (approximately twenty nanometers in size) long chain
      polymer based chemical structure, as component elements of the Licensed
      Products. TheraCour Agreed that it will develop and synthesize such nanomicelle
      exclusively for NanoViricides, and unless such license is terminated, will
      not
      develop or synthesize such nanomicelle for its own sake or for others; and
      (6)
      TheraCour may request and NanoViricides, Inc. will pay an advance payment equal
      to twice the amount of the previous months invoice to be applied as a prepayment
      towards expenses.





TheraCour
      Pharma, Inc., may terminate the license upon a material breach by us as
      specified in the agreement. However, we may avoid such termination if within
      90
      days of receipt of such termination notice we cure the breach.




Development
      costs charged by and paid to TheraCour Pharma, Inc. was $1,340,670 since
      inception through June 30, 2007 and $617,007 and $692,892 for the years ended
      June 30, 2007 and 2006, respectively. No royalties are due or have been paid
      from inception through June 30, 2007.




TheraCour
      Pharma, Inc. owns 35,370,000 shares of the Company’s 114,069,144 outstanding
      shares of common stock as of June 30, 2007. Anil Diwan, the Company’s President
      and Chairman of the Board and Director, owns
      approximately sixty-five percent (65%) of the outstanding
      capitalization of TheraCour Pharma., Inc.





Patents
      and other proprietary rights are essential for our operations. If we have a
      properly designed and enforceable patent, it can be more difficult for our
      competitors to use our technology to create competitive products and more
      difficult for our competitors to obtain a patent that prevents us from using
      technology we create. As part of our business strategy, we actively seek patent
      protection both in the United States and internationally and intend to file
      additional patent applications, when appropriate, to cover improvements in
      our
      compounds, products and technology. We also rely on trade secrets, internal
      know-how, technological innovations and agreements with third parties to
      develop, maintain and protect our competitive position. Our ability to be
      competitive will depend on the success of this strategy.


20
 *Table
            of Contents*




The
      Company believes that the drugs themselves, AviFlucide, FluCide, FluCide-HP,
      RabiCide, HiviCide-I and II, and others, may be eligible for patent protection.
      The Company plans on filing patent applications for protecting these drugs
      when
      we have definitive results from either in-vitro or in-vivo studies that can
      be
      replicated by others.





The
      Company has licensed key patents, patent applications and rights to proprietary
      and patent-pending technologies related to our compounds, products and
      technologies (see Table 1), but we cannot be certain that issued patents will
      be
      enforceable or provide adequate protection or that pending patent applications
      will result in issued patents.





***Table
                1: Intellectual Property, Patents and Pending Patents Licensed by
                The
                Company******Patent
                or Application***
            ***Date
                of Issue/***
              ***Application***
            ***US
                Expiry***
              ***Date***
            ***International***
            ***Owners***US6,521,736
              (Certain
                specific amphiphilic polymers).
            Issued:
              Feb
                18, 2003
            Feb
                18, 2020
            N/A
            TheraCour
                Pharma and Univ. of Massachusetts, Lowell. [Nonexclusive license
                from
                TheraCour Pharma].PCT/US06/01820
              (SOLUBILIZATION
                AND TARGETED DELIVERY OF DRUGS WITH SELF-ASSEMBLING AMPHIPHILIC
                POLYMERS).
            Applied:
              Jan
                19, 2006PCT Application.
            Jan
                18, 2023 (estimated)
            Applications
                to be filed.
            TheraCour
                Pharma, Inc. [Exclusive License].SELF-ASSEMBLING
                AMPHIPHILIC POLYMERS AS ANTIVIRAL AGENTS
            Applied:
              Jan
                22, 2007
            Jan
                21, 2024 (estimated)
            Applications
                to be filed.
            TheraCour
                Pharma, Inc. [Exclusive License].






Of
      the
      patents and technologies licensed, the Company believes that the Company will
      not be using the intellectual property, compositions of matter, or other aspects
      described and secured under the US Patent No. US 6,521,736. This patent, the
      Company believes, discloses prototype materials that served to establish the
      proof of principles of Dr. Anil Diwan, the Company’s President and co-founder
      whether such materials were possible to create and whether such materials would
      indeed be capable of encapsulation of pharmaceutically relevant compounds.
      The
      Company believes that the new and novel compositions disclosed in the new patent
      applicationS, no. PCT/US06/01820, and no. **find-data**provide the
      necessary features that enable the development of nanoviricides. The Company
      believes that no other published literature materials or existing patents are
      capable of providing all of the necessary features for this development, to
      the
      best of our knowledge. However, the Company has no knowledge of the extensive
      active internal developments at a number of companies in the targeted
      therapeutics area.





We
      may
      obtain patents for our compounds many years before we obtain marketing approval
      for them. Because patents have a limited life, which may begin to run prior
      to
      the commercial sale of the related product, the commercial value of the patent
      may be limited. However, we may be able to apply for patent term extensions,
      based on delays experienced in marketing products due to regulatory
      requirements. There is no assurance we would be able to obtain such
      extensions.




The
      Company controls the research and work TheraCour performs on its behalf and
      no
      costs may be incurred without the prior authorization or approval of the
      Company.





Patents
      relating to pharmaceutical, biopharmaceutical and biotechnology products,
      compounds and processes such as those that cover our existing compounds,
      products and processes and those that we will likely file in the future, do
      not
      always provide complete or adequate protection. Future litigation or
      reexamination proceedings regarding the enforcement or validity of our licensor,
      TheraCour Pharma Inc.’s (TheraCour) existing patents or any future patents,
      could invalidate TheraCour’s patents or substantially reduce their protection.
      In addition, the pending patent applications and patent applications filed
      by
      TheraCour, may not result in the issuance of any patents or may result in
      patents that do not provide adequate protection. As a result, we may not be
      able
      to prevent third parties from developing the same compounds and products that
      we
      have developed or are developing. In addition, certain countries do not permit
      enforcement of our patents, and manufacturers are able to sell generic versions
      of our products in those countries.


21
 *Table
            of Contents*




We
      also
      rely on unpatented trade secrets and improvements, unpatented internal know-how
      and technological innovation. In particular, a great deal of our material
      manufacturing expertise, which is a key component of our core material
      technology, is not covered by patents but is instead protected as a trade
      secret. We protect these rights mainly through confidentiality agreements with
      our corporate partners, employees, consultants and vendors. These agreements
      provide that all confidential information developed or made known to an
      individual during the course of their relationship with us will be kept
      confidential and will not be used or disclosed to third parties except in
      specified circumstances. In the case of employees, the agreements provide that
      all inventions made by the individual while employed by us will be our exclusive
      property. We cannot be certain that these parties will comply with these
      confidentiality agreements, that we have adequate remedies for any breach,
      or
      that our trade secrets will not otherwise become known or be independently
      discovered by our competitors.





**Competition**





Our
      products in development target a number of diseases and conditions that include
      several different kinds of viral infections. There are many commercially
      available products for these diseases and a large number of companies and
      institutions are spending considerable amounts of money and other resources
      to
      develop additional products to treat these diseases. Most of these companies
      have substantially greater financial and other resources, larger research and
      development staffs, and extensive marketing and manufacturing organizations.
      If
      we are able to successfully develop products, they would compete with existing
      products based primarily on:





·
            efficacy;


·
            safety;





·
            tolerability;


·
            acceptance
                by doctors;





·
            patient
                compliance;


·
            patent
                protection;





·
            ease
                of use;


·
            price;





·
            insurance
                and other reimbursement coverage;


·
            distribution;





·
            marketing;
                and


·
            adaptability
                to various modes of dosing.





Our
      drugs
      in development for influenza,******Flucide,
      AviFluCide, and FluCide HP would compete with neuraminidase inhibitors Tamiflu
      and Relenza, anti-influenza drugs that are sold by Roche and Glaxo SmithKline
      (GSK) , respectively. Generic competitors include amantadine and rimantadine,
      both oral tablets that only inhibit the replication of the influenza A virus.
      BioCryst Pharmaceuticals, Inc. has developed injectable formulations of
      peramivir, an influenza neuraminidase inhibitor, for the treatment of influenza,
      which recently failed in phase II clinical trials.


22
 *Table
            of Contents*




Our
      HCV
      and HIV drugs are at the earliest stage of development. There are a growing
      number of anti-HIV and HCV drugs being sold or are in advanced stages of
      clinical development. Companies with HCV and HIV products include Bristol-Myers
      Squibb Company (BMS), Roche, Boehringer Ingelheim, Merck & Co., Inc.
      (Merck), Abbott Laboratories, and Schering Plough, in addition to several other
      pharmaceutical and biotechnology firms.




Currently
      there are two accepted methods of rabies prophylaxis: rabies vaccines and rabies
      immune globulin, manufactured by many foreign and multinational manufacturers
      including Aventis Pasteur and Chiron. These accepted methods will be the
      standard against which our new anti-rabies drug in development will be
      judged.




In
      order
      to compete successfully, we must develop proprietary positions in patented
      drugs
      for therapeutic markets. Our products, even if successfully tested and
      developed, may not be adopted by physicians over other products and may not
      offer economically feasible alternatives to other therapies.





**Government
      Regulation**




Our
      operations and activities are subject to extensive regulation by numerous
      government authorities in the United States and other countries. In the United
      States, drugs are subject to rigorous regulation by the United States Food
      and
      Drug Administration (“FDA”). The Federal Food, Drug and Cosmetic Act and other
      federal and state statutes and regulations govern the testing, manufacture,
      safety, effectiveness, labeling, storage, record keeping, approval, advertising
      and promotion of our products. As a result of these regulations, product
      development and the product approval process is very expensive and time
      consuming.





The
      FDA
      must approve a drug before it can be sold in the United States. As of the date
      of this filing, the FDA has approved other nano-particulate drugs including
      Emend® by Merck and Rapamune® by Wyeth, as well as others. The general process
      for FDA approval is as follows:





***Preclinical
      Testing***





Before
      we
      can test a drug candidate in humans, we must study the drug in laboratory
      experiments and in animals to generate data to support the drug’s potential
      safety and benefits. We submit this data to the FDA in an investigational new
      drug application (IND) seeking their approval to test the compound in
      humans.





***Clinical
      Trials***





If
      the
      FDA accepts the investigational new drug application, we study the drug in
      human
      clinical trials to determine if the drug is safe and effective. These clinical
      trials involve three separate phases that often overlap, can take many years
      to
      compile and are very expensive. These three phases, which are themselves subject
      to considerable regulation, are as follows:





sPhase
      1. The drug
      is given to a small number of healthy human subjects or patients to test for
      safety, dose tolerance, pharmacokinetics, metabolism, distribution and
      excretion.





sPhase
      2. The drug
      is given to a limited patient population to determine the effect of the drug
      in
      treating the disease, the best dose of the drug, and the possible side effects
      and safety risks of the drug.





sPhase
      3. If a
      compound appears to be effective and safe in Phase 2 clinical trials, Phase
      3
      clinical trials are commenced to confirm those results. Phase 3 clinical trials
      are long-term, involve a significantly larger population, are conducted at
      numerous sites in different geographic regions and are carefully designed to
      provide reliable and conclusive data regarding the safety and benefits of a
      drug. It is not uncommon for a drug that appears promising in Phase 2 clinical
      trials to fail in the more rigorous and reliable Phase 3 clinical
      trials.





***FDA
      Approval Process***





If
      we
      believe that the data from the Phase 3 clinical trials show an adequate level
      of
      safety and effectiveness, we will file a new drug application (NDA) with the
      FDA
      seeking approval to sell the drug for a particular use. The FDA will review
      the
      NDA and often will hold a public hearing where an independent advisory committee
      of expert advisors asks additional questions regarding the drug. This committee
      makes a recommendation to the FDA that is not binding on the FDA but is
      generally followed. If the FDA agrees that the compound has met the required
      level of safety and effectiveness for a particular use, it will allow us to
      sell
      the drug in the United States for that use. It is not unusual, however, for
      the
      FDA to reject an application because it believes that the drug is not safe
      enough or effective enough or because it does not believe that the data
      submitted is reliable or conclusive.


23
 *Table
            of Contents*




At
      any
      point in this process, the development of a drug could be stopped for a number
      of reasons including safety concerns and lack of treatment benefit. We cannot
      be
      certain that any clinical trials that we are currently conducting, or any that
      we conduct in the future, will be completed successfully or within any specified
      time period. We may choose, or the FDA may require us, to delay or suspend
      our
      clinical trials at any time if it appears that the patients are being exposed
      to
      an unacceptable health risk or if the drug candidate does not appear to have
      sufficient treatment benefit.





The
      FDA
      may also require us to complete additional testing, provide additional data
      or
      information, improve our manufacturing processes, procedures or facilities
      or
      may require extensive post-marketing testing and surveillance to monitor the
      safety or benefits of our product candidates if it determines that our new
      drug
      application does not contain adequate evidence of the safety and benefits of
      the
      drug. In addition, even if the FDA approves a drug, it could limit the uses
      of
      the drug. The FDA can withdraw approvals if it does not believe that we are
      complying with regulatory standards or if problems are uncovered or occur after
      approval.





In
      addition to obtaining FDA approval for each drug, we obtain FDA approval of
      the
      manufacturing facilities for any drug we sell, including those of companies
      who
      manufacture our drugs for us as well as our own and these facilities are subject
      to periodic inspections by the FDA. The FDA must also approve foreign
      establishments that manufacture products to be sold in the United States and
      these facilities are subject to periodic regulatory inspection.





We
      are
      also subject to other federal, state and local regulations regarding workplace
      safety and protection of the environment. We use hazardous materials, chemicals,
      viruses and various radioactive compounds in our research and development
      activities and cannot eliminate the risk of accidental contamination or injury
      from these materials. Any misuse or accidents involving these materials could
      lead to significant litigation, fines and penalties.





Drugs
      are
      also subject to extensive regulation outside of the United States. In the
      European Union, there is a centralized approval procedure that authorizes
      marketing of a product in all countries in the European Union (which includes
      most major countries in Europe). If this procedure is not used, under a
      decentralized system, an approval in one country of the European Union can
      be
      used to obtain approval in another country of the European Union under a
      simplified application process at present. After approval under the centralized
      procedure, pricing and reimbursement approvals are also required in most
      countries. These procedures are undergoing revision and modification at present.
      We have never received approval for a product in the European Union to
      date.





**Employees
      and Service Providers**





As
      of
      June 30, 2007, the Company had two full time employees. In addition, most of
      the
      business activities of the Company including accounting and legal work and
      business development are provided by subcontractors and consultants. Further,
      the Company has subcontracted nanomaterials research and development (“R&D”)
      to TheraCour.  The Company has subcontracted much of its animal
      studies to KARD Scientific to date. Some of the Company's R&D work was
      performed by agencies in Vietnam. In the future, the Company anticipates having
      additional service providers. We believe that we have good relations with our
      employees and subcontractors.





**Reports
      to Security Holders**





As
      a
      result of its filing of Form 10-SB/A and listing on the OTC Bulletin Board,
      the
      Company has become subject to the reporting obligations of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”). These obligations include
      filing an annual report under cover of Form 10-KSB, with audited financial
      statements, unaudited quarterly reports on Form 10-QSB and the requisite proxy
      statements with regard to annual shareholder meetings. The public may read
      and
      copy any materials the Company files with the Securities and Exchange Commission
      (the “Commission”) at the Commission’s Public Reference Room at 100 F Street,
      NE, Washington, DC 20549. The public may obtain information on the operation
      of
      the Public Reference Room by calling the Commission at 1-800-SEC-0030. The
      Commission maintains an Internet site (http://www.sec.gov) that contains
      reports, proxy and information statements and other information regarding
      issuers that file electronically with the Commission. Information about the
      Company is also available on its Web site at www.nanoviricides.com. Information
      included on the Web site is not part of this Form 10-KSB.




24
 *Table
          of Contents*


**Website**




Our
      website address is *www.nanoviricides.com*.





We
      intend
      to make available through our website, all of our filings with the Commission
      and all amendments to these reports as soon as reasonably practicable after
      filing, by providing a hyperlink to the EDGAR website containing our
      reports.




**Our
      Information**




Our
      principal executive offices are currently located at 135 Wood St. West Haven,
      Connecticut 06516 and our telephone number is (203) 937-6137.





**ITEM
      1A.    RISK
      FACTORS**





Our
      business, financial condition, operating results and prospects are subject
      to
      the following risks. Additional risks and uncertainties not presently
      foreseeable to us may also impair our business operations. If any of the
      following risks actually occurs, our business, financial condition or operating
      results could be materially adversely affected. In such case, the trading price
      of our common stock could decline, and our stockholders may lose all or part
      of


their
      investment in the shares of our common stock.





This
      FORM
      10KSB contains forward-looking statements that involve risks and uncertainties.
      These statements can be identified by the use of forward-looking terminology
      such as “believes,” “expects,” “intends,” “plans,” “may,” “will,” “should,” or
“anticipation” or the negative thereof or other variations thereon or comparable
      terminology. Actual results could differ materially from those discussed in
      the
      forward-looking statements as a result of certain factors, including those
      set
      forth below and elsewhere in this Form 10-KSB.




**Risks
      Specific to Us**





***Our
      company is a development stage company that has no products approved for
      commercial sale, never generated any revenues and may never achieve revenues
      or
      profitability.***





We
      are a
      development stage biopharmaceutical company. Currently, we have no products
      approved for commercial sale and, to date, we have not generated any revenues.
      Our ability to generate revenue depends heavily on:





·
            demonstration
                and proof of principle in pre-clinical trials that a viricide is
                safe and
                effective;


·
            successful
                development of our first product candidates FluCide, AviFluCide,
                FluCide
                HP, and RabiCide ;


·
            our
                ability to seek and obtain regulatory approvals, including with respect
                to
                the indications we are seeking;


·
            the
                successful commercialization of our product candidates;
                and


·
            market
                acceptance of our products.





All
      of
      our existing product candidates are in early stages of development. It will
      be
      several years, if ever, until we have a commercial drug product available for
      resale. If we do not successfully develop and commercialize these products,
      we
      will not achieve revenues or profitability in the foreseeable future, if at
      all.
      If we are unable to generate revenues or achieve profitability, we may be unable
      to continue our operations.


25
 *Table
            of Contents*




***We
      are a development stage company with a limited operating history, making it
      difficult for you to evaluate our business and your
      investment.***





We
      are in
      the development stage and our operations and the development of our proposed
      products are subject to all of the risks inherent in the establishment of a
      new
      business enterprise, including but not limited to:





–
            the
                absence of an operating history;


–
            the
                lack of commercialized products;





–
            insufficient
                capital;


–
            expected
                substantial and continual losses for the foreseeable
                future;





–
            limited
                experience in dealing with regulatory
                issues;


–
            the
                lack of manufacturing experience and limited marketing
                experience;





–
            an
                expected reliance on third parties for the development and
                commercialization of our proposed
                products;


–
            a
                competitive environment characterized by numerous, well-established
                and
                well capitalized competitors; and





–
            reliance
                on key personnel.





Because
      we are subject to these risks, you may have a difficult time evaluating our
      business and your investment in our company.




Our
      ability to become profitable depends primarily on the following
      factors:




–
            our
                ability to develop drugs, obtain approval for such drugs, and if
                approved,
                to successfully commercialize our nanoviricide
                drug;





–
            our
                R&D efforts, including the timing and cost of clinical trials;
                and


–
            our
                ability to enter into favorable alliances with third-parties who
                can
                provide substantial capabilities in clinical development, regulatory
                affairs, sales, marketing and
                distribution.





Even
      if
      we successfully develop and market our drug candidates, we may not generate
      sufficient or sustainable revenue to achieve or sustain
      profitability.





***The
      report of our independent registered public accounting firm includes a going
      concern opinion, and we have incurred significant operating losses and may
      not
      be profitable in the future, if ever.***




As
      of
      June 30, 2007 we have a cash balance of approximately $ 967,797 which can
      support operations through January 1, 2008, but not through our fiscal year
      end
      of June 30, 2008. Also, the Company has incurred significant operating losses
      since its inception, resulting in an accumulated deficit of $ 6,469,400 at
      June
      30, 2007. Such losses are expected to continue for the foreseeable
      future.





Our
      history of losses, operating cash needs, cash consumption, and doubt as to
      whether we will ever become profitable, are factors which raise substantial
      doubt as to our ability to continue as a going concern. Consequently, our
      independent registered public accounting firm has included a going
      concern opinion in its report which is included elsewhere in this Form
      10-KSB. In many cases a going concern opinion makes raising capital more
      difficult and often results in terms less favorable than if the Company did
      not
      have a going concern opinion. Therefore it is likely the going
      concern opinion by our independent registered public accounting firm will
      effect our ability to raise capital. If we are unable to achieve revenues or
      obtain financing, then we may not be able to commence revenue-generating
      operations or continue as an on-going concern. In September, 2007, the Company
      had received subscriptions in the aggregate amount of $2,500,000 financing
      through the offering of shares of the Company's common stock.  It is
      anticipated that these funds should enable the Company to support operations
      through the end of its fiscal year ending June 30, 2008.


26
 *Table
          of Contents*




***We
      will need to raise substantial additional capital in the future to fund our
      operations and we may be unable to raise such funds when needed and on
      acceptable terms.***





We
      currently do not have sufficient resources to complete the development and
      commercialization of any of our proposed products. As of June 30, 2007 we have
      a
      cash balance of approximately $ 967,797 which can support operations through
      January 1,2008, but will not be sufficient to fund our operations for the next
      twelve months. We expect to incur costs of approximately $3-5 million dollars
      in
      the upcoming twelve months to operate our business in accordance with our
      business plans.





We
      presently do not have reserves of $5,000,000 and require a minimum financing
      of
      $3 million dollars to operate our business over the upcoming 12 months. We
      may
      not be able to secure this amount of financing on acceptable terms. In the
      event
      that we cannot obtain acceptable financing, we would be unable to complete
      development of our influenza drugs. This will necessitate implementing staff
      reductions and operational adjustments that would include reductions in the
      following business areas:





·
            research
                and development programs;


·
            preclinical
                studies and clinical trials; material characterization studies, regulatory
                processes;





·
            establishment
                of our own laboratory or a search for third party marketing partners
                to
                market our products for us.





The
      amount of capital we may need will depend on many factors, including
      the:





·
            progress,
                timing and scope of our research and development
                programs;


·
            progress,
                timing and scope of our preclinical studies and clinical
                trials;





·
            time
                and cost necessary to obtain regulatory
                approvals;


·
            time
                and cost necessary to establish our own marketing capabilities or
                to seek
                marketing partners;





·
            time
                and cost necessary to respond to technological and market
                developments;


·
            changes
                made or new developments in our existing collaborative, licensing
                and





·
            other
                commercial relationships; and


·
            new
                collaborative, licensing and other commercial relationships that
                we may
                establish.





Our
      fixed
      expenses, such as rent, license payments and other contractual commitments,
      may
      increase in the future, as we may:





·
            enter
                into leases for new facilities and capital
                equipment;


·
            enter
                into additional licenses and collaborative agreements;
                and





·
            incur
                additional expenses associated with being a public
                company.





In
      September, 2007, the Company had received subscriptions in the aggregate
      amount of $2,500,000 financing through the offering of shares of the Company's
      common stock.  It is anticipated that these funds should enable the
      Company to support operations through the end of its fiscal year ending June
      30,
      2008.


27
 *Table
            of Contents*




***We
      have limited experience in drug development and may not be able to successfully
      develop any drugs.***





Until
      the
      formation of NanoViricide, Inc. (the Company's predecessor prior to the
      exchange) our management and key personnel had no experience in pharmaceutical
      drug development and, consequently, may not be able to successfully develop
      any
      drugs. Our ability to achieve revenues and profitability in our business will
      depend, among other things, on our ability to:




•
            develop
                products internally or obtain rights to them from others on favorable
                terms;


•
            complete
                laboratory testing and human
                studies;





•
            obtain
                and maintain necessary intellectual property rights to our
                products;


•
            successfully
                complete regulatory review to obtain requisite governmental agency
                approvals





•
            enter
                into arrangements with third parties to manufacture our products
                on our
                behalf; and


•
            enter
                into arrangements with third parties to provide sales and marketing
                functions.





***Development
      of pharmaceutical products is a time-consuming process, subject to a number
      of
      factors, many of which are outside of our control. Consequently, we can provide
      no assurance of the successful and timely development of new
      drugs.***




Our
      drug
      candidates are in their developmental stage. Further development and extensive
      testing will be required to determine their technical feasibility and commercial
      viability. Our success will depend on our ability to achieve scientific and
      technological advances and to translate such advances into reliable,
      commercially competitive drugs on a timely basis. Drugs that we may develop
      are
      not likely to be commercially available for a few years. The proposed
      development schedules for our drug candidates may be affected by a variety
      of
      factors, including technological difficulties, proprietary technology of others,
      and changes in government regulation, many of which will not be within our
      control. Any delay in the development, introduction or marketing of our drug
      candidates could result either in such drugs being marketed at a time when
      their
      cost and performance characteristics would not be competitive in the marketplace
      or in the shortening of their commercial lives. In light of the long-term nature
      of our projects, the unproven technology involved and the other factors
      described elsewhere in “Risk Factors”, we may not be able to complete
      successfully the development or marketing of any drugs.




We
      may
      fail to successfully develop and commercialize our drug candidates because
      they:





·
            are
                found to be unsafe or ineffective in clinical
                trials;


·
            do
                not receive necessary approval from the FDA or foreign regulatory
                agencies;





·
            fail
                to conform to a changing standard of care for the diseases they seek
                to
                treat; or


·
            are
                less effective or more expensive than current or alternative treatment
                methods.





Drug
      development failure can occur at any stage of clinical trials and as a result
      of
      many factors and there can be no assurance that we or our collaborators will
      reach our anticipated clinical targets. Even if we or our collaborators complete
      our clinical trials, we do not know what the long-term effects of exposure
      to
      our drug candidates will be. Furthermore, our drug candidates may be used in
      combination with other treatments and there can be no assurance that such use
      will not lead to unique safety issues. Failure to complete clinical trials
      or to
      prove that our drug candidates are safe and effective would have a material
      adverse effect on our ability to generate revenue and could require us to reduce
      the scope of or discontinue our operations.




***We
      must comply with significant and complex government regulations, compliance
      with
      which may delay or prevent the commercialization of our drug
      candidates.***





The
      R&D, manufacture and marketing of drug candidates are subject to regulation,
      primarily by the FDA in the United States and by comparable authorities in
      other
      countries. These national agencies and other federal, state, local and foreign
      entities regulate, among other things, R&D activities (including testing in
      primates and in humans) and the testing, manufacturing, handling, labeling,
      storage, record keeping, approval, advertising and promotion of the products
      that we are developing. Noncompliance with applicable requirements can result
      in
      various adverse consequences, including approval delays or refusals to approve
      drug licenses or other applications, suspension or termination of clinical
      investigations, revocation of approvals previously granted, fines, criminal
      prosecution, recalls or seizures of products, injunctions against shipping
      drugs
      and total or partial suspension of production and/or refusal to allow a company
      to enter into governmental supply contracts.





The
      process of obtaining FDA approval has historically been costly and time
      consuming. Current FDA requirements for a new human drug or biological product
      to be marketed in the United States include: (1) the successful conclusion
      of
      pre-clinical laboratory and animal tests, if appropriate, to gain preliminary
      information on the product’s safety; (2) filing with the FDA of an IND
      application to conduct human clinical trials for drugs or biologics; (3) the
      successful completion of adequate and well-controlled human clinical
      investigations to establish the safety and efficacy of the product for its
      recommended use; and (4) filing by a company and acceptance and approval by
      the
      FDA of a New Drug Application, or NDA, for a drug product or a biological
      license application, or BLA, for a biological product to allow commercial
      distribution of the drug or biologic. A delay in one or more of the procedural
      steps outlined above could be harmful to us in terms of getting our drug
      candidates through clinical testing and to market.


28
 *Table
            of Contents*




The
      FDA
      reviews the results of the clinical trials and may order the temporary or
      permanent discontinuation of clinical trials at any time if it believes the
      drug
      candidate exposes clinical subjects to an unacceptable health risk.
      Investigational drugs used in clinical studies must be produced in compliance
      with current good manufacturing practice, or GMP, rules pursuant to FDA
      regulations.




Sales
      outside the United States of products that we develop will also be subject
      to
      regulatory requirements governing human clinical trials and marketing for drugs
      and biological products and devices. The requirements vary widely from country
      to country, but typically the registration and approval process takes several
      years and requires significant resources. In most cases, even if the FDA has
      not
      approved a product for sale in the United States, the product may be exported
      to
      any country if it complies with the laws of that country and has valid marketing
      authorization by the appropriate authority. There are specific FDA regulations
      that govern this process.




We
      also
      are subject to the following risks and obligations, related to the approval
      of
      our products:





·
            The
                FDA or foreign regulators may interpret data from pre-clinical testing
                and
                clinical trials in different ways than we interpret
                them.


·
            If
                regulatory approval of a product is granted, the approval may be
                limited
                to specific indications or limited with respect to its distribution.
                In
                addition, many foreign countries control pricing and coverage under
                their
                respective national social security
                systems.





·
            The
                FDA or foreign regulators may not approve our manufacturing processes
                or
                manufacturing facilities.


·
            The
                FDA or foreign regulators may change their approval policies or adopt
                new
                regulations.





·
            Even
                if regulatory approval for any product is obtained, the marketing
                license
                will be subject to continual review, and newly discovered or developed
                safety or effectiveness data may result in suspension or revocation
                of the
                marketing license.


·
            If
                regulatory approval of the product candidate is granted, the marketing
                of
                that product would be subject to adverse event reporting requirements
                and
                a general prohibition against promoting products for unapproved or
                “off-label” uses.





·
            In
                some foreign countries, we may be subject to official release requirements
                that require each batch of the product we produce to be officially
                released by regulatory authorities prior to its distribution by
                us.


·
            We
                will be subject to continual regulatory review and periodic inspection
                and
                approval of manufacturing modifications, including compliance with
                current
                GMP regulations.





***We
      can provide no assurance that our drug candidates will obtain regulatory
      approval or that the results of clinical studies will be
      favorable.***





The
      work-plan we have developed for the next twelve months is planned to enable
      us
      to file an Investigational New Drug (“IND”)application for our influenza and
      rabies drugs in our 2008-2009 fiscal year. We believe that this work-plan will
      lead us to obtain certain information about the safety and efficacy of our
      influenza and rabies drug which are in the earliest stages of development.
      If
      our studies are successful, then we need to be able to undertake further studies
      in animal models to obtain necessary data regarding the pharmaco-kinetic and
      pharmaco-dynamic profiles of our drug candidates. The data will then be used
      to
      file an IND application, towards the goal of obtaining FDA approval for testing
      the drugs in human patients.


29
 *Table
            of Contents*




The
      testing, marketing and manufacturing of any product for use in the United States
      will require approval from the FDA. We cannot predict with any certainty the
      amount of time necessary to obtain such FDA approval and whether any such
      approval will ultimately be granted Preclinical and clinical trials may reveal
      that one or more products are ineffective or unsafe, in which event further
      development of such products could be seriously delayed or terminated. Moreover,
      obtaining approval for certain products may require testing on human subjects
      of
      substances whose effects on humans are not fully understood or documented.
      Delays in obtaining FDA or any other necessary regulatory approvals of any
      proposed drug and failure to receive such approvals would have an adverse effect
      on the drug’s potential commercial success and on our business, prospects,
      financial condition and results of operations. In addition, it is possible
      that
      a proposed drug may be found to be ineffective or unsafe due to conditions
      or
      facts that arise after development has been completed and regulatory approvals
      have been obtained. In this event, we may be required to withdraw such proposed
      drug from the market. To the extent that our success will depend on any
      regulatory approvals from government authorities outside of the United States
      that perform roles similar to that of the FDA, uncertainties similar to those
      stated above will also exist.





***Even
      if we obtain regulatory approvals, our marketed drug candidates will be subject
      to ongoing regulatory review. If we fail to comply with continuing U.S. and
      foreign regulations, we could lose our approvals to market these drugs and
      our
      business would be seriously harmed.***




Following
      any initial regulatory approval of any drugs we may develop, we will also be
      subject to continuing regulatory review, including the review of adverse
      experiences and clinical results that are reported after our drug candidates
      are
      made commercially available. This would include results from any post-marketing
      tests or vigilance required as a condition of approval. The manufacturer and
      manufacturing facilities we use to make any of our drug candidates will also
      be
      subject to periodic review and inspection by the FDA. The discovery of any
      previously unknown problems with the drug, manufacturer or facility may result
      in restrictions on the drug or manufacturer or facility, including withdrawal
      of
      the drug from the market. If we are required to withdraw all or more of our
      drugs from the market, we may be unable to continue revenue generating
      operations. We do not have, and currently do not intend to develop, the ability
      to manufacture material for our clinical trials or on a commercial scale.
      Reliance on third-party manufacturers entails risks to which we would not be
      subject if we manufactured drugs ourselves, including reliance on the
      third-party manufacturer for regulatory compliance. Our drug promotion and
      advertising is also subject to regulatory requirements and continuing FDA
      review.





***Development
      of our drug candidates requires a significant investment in R&D. Our R&D
      expenses in turn, are subject to variation based on a number of factors, many
      of
      which are outside of our control. A sudden or significant increase in our
      R&D expenses could materially and adversely impact our results of
      operations.***





We
      have
      expended $1,662,470 on research and development from inception through June
      30,
      2007. We have an R&D budget of $1,500,000 for the next 12 months. This
      includes $1,200,000 for multiple drug variations and in-vivo and in-vitro
      studies for FluCideTM, AviFluCideTM, FluCide HPTM, and Rabies. Based on the results
      of these pre-clinical studies, we expect to commence with early stage
      development of a drug for Hepatitis C (HCV) for which we have budgeted $300,000.
      The Company has the available cash on hand to complete the R&D work
      scheduled through January 1, 2008. However should the pre-clinical clinical
      studies of our influenza and rabies drugs meet managements expectations the
      Company has budgeted an additional $1,500,000 for the costs of hiring additional
      scientific staff and consulting firms to assist with FDA compliance, material
      characterization, pharmaco-kinetic, pharmaco-dynamic and toxicology
      studies.





The
      Company will be unable to proceed with its planned R&D beyond the June
      30,2008, year end without obtaining additional financing of approximately
      $5,000,000.




Because
      we expect to expend substantial resources on R&D, our success depends in
      large part on the results as well as the costs of our R&D. A failure in our
      R&D efforts or substantial increase in our R&D expenses would adversely
      affect our results of operations. R&D expenditures are uncertain and subject
      to much fluctuation. Factors affecting our R&D expenses include, but are not
      limited to:





·
            the
                number and outcome of clinical studies we are planning to conduct;
                for
                example, our R&D expenses may increase based on the number of
                late-stage clinical studies that we may be required to
                conduct;


·
            the
                number of drugs entering into pre-clinical development from research;
                for
                example, there is no guarantee that internal research efforts will
                succeed
                in generating sufficient data for us to make a positive development
                decision;





·
            licensing
                activities, including the timing and amount of related development
                funding
                or milestone payments; for example, we may enter into agreements
                requiring
                us to pay a significant up-front fee for the purchase of in-process
                R&D that we may record as R&D
                expense.


30
 *Table
            of Contents*




***We
      have no experience in conducting or supervising clinical trials and must
      outsource all clinical trials.***




We
      have
      no experience in conducting or supervising clinical trials that must be
      performed to obtain data to submit in concert with applications for approval
      by
      the Food and Drug Administration ("FDA"). The regulatory process to obtain
      approval for drugs for commercial sale involves numerous steps. Drugs are
      subjected to clinical trials that allow development of case studies to examine
      safety, efficacy, and other issues to ensure that sale of drugs meets the
      requirements set forth by various governmental agencies, including the FDA.
      In
      the event that our protocols do not meet standards set forth by the FDA, or
      that
      our data is not sufficient to allow such trials to validate our drugs in the
      face of such examination, we might not be able to meet the requirements that
      allow our drugs to be approved for sale.




Because
      we have no experience in conducting or supervising clinical trials, we must
      outsource our clinical trials to third parties. We have no control over their
      compliance with procedures and protocols used to complete clinical trails in
      accordance with standards required by the agencies that approve drugs for sale.
      If these subcontractors fail to meet these standards, the validation of our
      drugs would be adversely affected, causing a delay in our ability to meet
      revenue-generating operations




***We
      are subject to risks inherent in conducting clinical trials. The risk of non
      compliance with FDA-approved good clinical practices by clinical investigators,
      clinical sites, or data management services could delay or prevent us from
      developing or ever commercializing our drug
      candidates.***




Agreements
      with clinical investigators and medical institutions for clinical testing and
      with other third parties for data management services place substantial
      responsibilities on these parties, which could result in delays in, or
      termination of, our clinical trials if these parties fail to perform as
      expected. For example, if any of our clinical trial sites fail to comply with
      FDA-approved good clinical practices, we may be unable to use the data gathered
      at those sites. If these clinical investigators, medical institutions or other
      third parties do not carry out their contractual duties or obligations or fail
      to meet expected deadlines, or if the quality or accuracy of the clinical data
      they obtain is compromised due to their failure to adhere to our clinical
      protocols or for other reasons, our clinical trials may be extended, delayed
      or
      terminated, and we may be unable to obtain regulatory approval for or
      successfully commercialize our drug candidates.





We
      or
      regulators may suspend or terminate our clinical trials for a number of reasons.
      We may voluntarily suspend or terminate our clinical trials if at any time
      we
      believe that they present an unacceptable risk to the patients enrolled in
      our
      clinical trials. In addition, regulatory agencies may order the temporary or
      permanent discontinuation of our clinical trials at any time if they believe
      that the clinical trials are not being conducted in accordance with applicable
      regulatory requirements or that they present an unacceptable safety risk to
      the
      patients enrolled in our clinical trials.




Our
      clinical trial operations will be subject to regulatory inspections at any
      time.
      If regulatory inspectors conclude that we or our clinical trial sites are not
      in
      compliance with applicable regulatory requirements for conducting clinical
      trials, we may receive reports of observations or warning letters detailing
      deficiencies, and we will be required to implement corrective actions. If
      regulatory agencies deem our responses to be inadequate, or are dissatisfied
      with the corrective actions that we or our clinical trial sites have
      implemented, our clinical trials may be temporarily or permanently discontinued,
      we may be fined, we or our investigators may be precluded from conducting any
      ongoing or any future clinical trials, the government may refuse to approve
      our
      marketing applications or allow us to manufacture or market our drug candidates
      or we may be criminally prosecuted. If we are unable to complete clinical trials
      and have our products approved due to our failure to comply with regulatory
      requirements, we will be unable to commence revenue generating
      operations.


31
 *Table
            of Contents*




***Efforts
      of government and third-party payors to contain or reduce the costs of health
      care may adversely affect our revenues even if we were to develop an FDA
      approved drug.***




Our
      ability to earn sufficient returns on our drug candidates may depend in part
      on
      the extent to which government health administration authorities, private health
      coverage insurers and other organizations will provide reimbursement for the
      costs of such drugs and related treatments. Significant uncertainty exists
      as to
      the reimbursement status of newly approved health care drugs, and we do not
      know
      whether adequate third-party coverage will be available for our drug candidates.
      If our current and proposed drugs are not considered cost-effective,
      reimbursement to the consumers may not be available or sufficient to allow
      us to
      sell drugs on a competitive basis. The failure of the government and third-party
      payors to provide adequate coverage and reimbursement rates for our drug
      candidates could adversely affect the market acceptance of our drug candidates,
      our competitive position and our financial performance.




If
      we
      fail to comply with applicable continuing regulatory requirements, we may be
      subject to fines, suspension or withdrawal of regulatory approval, product
      recalls and seizures, operating restrictions and criminal
      prosecutions.




***Confidentiality
      agreements with employees and others may not adequately prevent disclosure
      of
      trade secrets and other proprietary information. Disclosure of our trade secrets
      or proprietary information could compromise any competitive advantage that
      we
      have.***




We
      depend
      upon confidentiality agreements with our officers, employees, consultants,
      and
      subcontractors to maintain the proprietary nature of the technology. These
      measures may not afford us sufficient or complete protection, and may not afford
      an adequate remedy in the event of an unauthorized disclosure of confidential
      information. In addition, others may independently develop technology similar
      to
      ours, otherwise avoiding the confidentiality agreements, or produce patents
      that
      would materially and adversely affect our business, prospects, financial
      condition, and results of operations.




***We
      will rely upon licensed patents to protect our technology. We may be unable
      to
      obtain or protect such intellectual property rights, and we may be liable for
      infringing upon the intellectual property rights of
      others.***





Our
      ability to compete effectively will depend on our ability to maintain the
      proprietary nature of our technologies and the proprietary technology of others
      with which we have entered into licensing agreements. We have exclusively
      licensed patent applications from TheraCour Pharma, Inc and expect to file
      patents of our own in the coming years. There can be no assurance that any
      of
      these patent applications will ultimately result in the issuance of a patent
      with respect to the technology owned by us or licensed to us. The patent
      position of pharmaceutical or biotechnology companies, including ours, is
      generally uncertain and involves complex legal and factual considerations.
      The
      standards that the United States Patent and Trademark Office use to grant
      patents are not always applied predictably or uniformly and can change. There
      is
      also no uniform, worldwide policy regarding the subject matter and scope of
      claims granted or allowable in pharmaceutical or biotechnology patents.
      Accordingly, we do not know the degree of future protection for our proprietary
      rights or the breadth of claims that will be allowed in any patents issued
      to us
      or to others. Further, we rely on a combination of trade secrets, know-how,
      technology and nondisclosure, and other contractual agreements and technical
      measures to protect our rights in the technology. If any trade secret, know-how
      or other technology not protected by a patent were to be disclosed to or
      independently developed by a competitor, our business and financial condition
      could be materially adversely affected.




We
      do not
      believe that any of the drug candidates we are currently developing infringe
      upon the rights of any third parties nor are they infringed upon by third
      parties; however, there can be no assurance that our technology will not be
      found in the future to infringe upon the rights of others or be infringed upon
      by others. In such a case, others may assert infringement claims against us,
      and
      should we be found to infringe upon their patents, or otherwise impermissibly
      utilize their intellectual property, we might be forced to pay damages,
      potentially including treble damages, if we are found to have willfully
      infringed on such parties’ patent rights. In addition to any damages we might
      have to pay, we may be required to obtain licenses from the holders of this
      intellectual property, enter into royalty agreements, or redesign our drug
      candidates so as not to utilize this intellectual property, each of which may
      prove to be uneconomical or otherwise impossible. Conversely, we may not always
      be able to successfully pursue our claims against others that infringe upon
      our
      technology and the technology exclusively licensed from the TheraCour Pharma
      Inc. Thus, the proprietary nature of our technology or technology licensed
      by us
      may not provide adequate protection against competitors.




Moreover,
      the cost to us of any litigation or other proceeding relating to our patents
      and
      other intellectual property rights, even if resolved in our favor, could be
      substantial, and the litigation would divert our management’s efforts.
      Uncertainties resulting from the initiation and continuation of any litigation
      could limit our ability to continue our operations.


32
 *Table
            of Contents*




***Other
      companies or organizations may assert patent rights that prevent us from
      developing and commercializing our drug candidates.***




We
      are in
      a relatively new scientific field that has generated many different patent
      applications from organizations and individuals seeking to obtain important
      patents in the field. Because the field is so new, very few of these patent
      applications have been fully processed by government patent offices around
      the
      world, and there is a great deal of uncertainty about which patents will issue,
      when, to whom, and with what claims. It is likely that there will be significant
      litigation and other proceedings, such as interference proceedings in various
      patent offices, relating to patent rights in the field. Others may attempt
      to
      invalidate our patents or other intellectual property rights. Even if our rights
      are not directly challenged, disputes among third parties could lead to the
      weakening or invalidation of those intellectual property rights.




Thus,
      it
      is possible that one or more organizations will hold patent rights to which
      we
      will need a license. Any license required under any patent may not be made
      available on commercially acceptable terms, if at all. In addition, such
      licenses are likely to be non-exclusive and, therefore, our competitors may
      have
      access to the same technology licensed to us. If we fail to obtain a required
      license and are unable to design around a patent, we may be unable to
      effectively market some of our technology and drug candidates, which could
      limit
      our ability to generate revenues or achieve profitability and possibly prevent
      us from generating revenue sufficient to sustain our operations.





We
      are
      dependent upon TheraCour Pharma Inc. for the rights to develop the products
      we
      intend to sell.





Our
      ability to develop, manufacture and sell the products the Company plans to
      develop is derived from our “Material Licensing Agreement” with TheraCour Pharma
      Inc (“TheraCour”). While we hold the license in perpetuity, the Agreement may be
      terminated by TheraCour as a result of: the insolvency or bankruptcy proceedings
      by or against the Company, a general assignment by the Company to is creditors,
      the dissolution of the Company, cessation by the Company of business operations
      for ninety (90) days or more or the commencement by the Company or an affiliate
      to challenge or invalidate the issued patents.





The
      Company does not hold the rights to any other patents nor does the Company
      conduct its own research and development to develop other products to
      manufacture and sell. If the Company’s Agreement with TheraCour is terminated,
      it is unlikely we will be able to commence revenue-generating operations or
      that
      the Company could continue operating at all





***We
      lack suitable facilities for clinical testing; reliance on third
      parties***





The
      Company does not have facilities that could be used to conduct clinical testing.
      We expect to contract with third parties to conduct all clinical testing
      required to obtain approvals for any drugs that we might develop. We currently
      outsource all clinical testing to KARD scientific, Walter Reed Army Institute
      of
      Research (WRAIR) and the Vietnamese National Institute of Hygiene and
      Epidemiology (NIHE), and are reliant on the services of these third parties
      to
      conduct studies on our behalf. KARD is not under contract to perform studies
      for
      us and NIHE may discontinue their collaboration at any time. If we are unable
      to
      continue with KARD Scientific WRAIR or NIHE, or retain third parties for these
      purposes on acceptable terms, we may be unable to successfully develop our
      proposed products. In addition, any failures by third parties to adequately
      perform their responsibilities may delay the submission of our proposed products
      for regulatory approval, impair our ability to deliver our products on a timely
      basis or otherwise impair our competitive position. (The agreement with NIHE
      and
      WRAIR is filed as an Exhibit to this 10KSB).





***We
      have limited manufacturing experience***





The
      Company has never manufactured products in the highly regulated environment
      of
      pharmaceutical manufacturing. There are numerous regulations and requirements
      that must be maintained to obtain licensure and the permits required to commence
      manufacturing, as well as additional requirements to continue manufacturing
      pharmaceutical products. We do not own or lease facilities currently that could
      be used to manufacture any products that might be developed by the Company,
      nor
      do we have the resources at this time to acquire or lease suitable
      facilities.


33
 *Table
          of Contents*


***We
      have no sales and marketing personnel.***





We
      are an
      early stage development Company with limited resources. We do not currently
      have
      any products available for sale, so have not secured sales and marketing staff
      at this early stage of operations. We cannot generate sales without sales or
      marketing staff and must rely on officers to provide any sales or marketing
      services until such staff are secured, if ever.





***Even
      if we were to successfully develop approvable drugs, we will not be able to
      sell
      these drugs if we or our third party manufacturers fail to comply with
      manufacturing regulations.***





If
      we
      were to successfully develop approvable drugs, before we can begin selling
      these
      drugs, we must obtain regulatory approval of our manufacturing facility and
      process or the manufacturing facility and process of the third party or parties
      with whom we may outsource our manufacturing activities. In addition, the
      manufacture of our products must comply with the FDA's current Good
      Manufacturing Practices regulations, commonly known as GMP regulations. The
      GMP
      regulations govern quality control and documentation policies and procedures.
      Our manufacturing facilities, if any in the future, and the manufacturing
      facilities of our third party manufacturers will be continually subject to
      inspection by the FDA and other state, local and foreign regulatory authorities,
      before and after product approval. We cannot guarantee that we, or any potential
      third party manufacturer of our products, will be able to comply with the GMP
      regulations or other applicable manufacturing regulations.




***With
      our limited resources, we may be unable to effectively manage
      growth.***





As
      of the
      date of this filing, we have 2 employees and several consultants and independent
      contractors. The only consultant/contractor that we consider critical to the
      Company is TheraCour Pharma, discussed in the next risk factor. KARD Scientific,
      another consultant/contractor (See ITEM 1. Background: Collaborations and
      Subcontract Arrangements) is considered by the Company important but not
      critical as they are replaceable with moderate difficulty. All other
      consultant/contractors would be more readily replaceable. While the Company’s
      current operations cause it to be unlikely that we will need to grow and hire
      additional consultants, contractors or employees, if future preclinical studies
      of our nanoviricide drugs and technology show significant improvements in
      efficacy over existing drugs, we intend to expand our operations and staff
      materially. At that time our new employees may include a number of key
      managerial, technical, financial, R&D and operations personnel who will not
      have been fully integrated into our operations. We would expect the expansion
      of
      our business to place a significant strain on our limited managerial,
      operational and financial resources. We have no experience in integrating
      multiple employees. Therefore, there is a substantial risk that we will not
      be
      able to integrate new employees into our operations which would have a material
      adverse effect on our business, prospects, financial condition and results
      of
      operations.





***We
      license our core technology from TheraCour Pharma Inc. and we are dependent
      upon
      them as they have exclusive development rights. If we lose the right to utilize
      any of the proprietary information that is the subject of this license
      agreement, we may incur substantial delays and costs in development of our
      drug
      candidates.***




The
      Company has entered into a Material License Agreement with TheraCour Pharma,
      Inc. (“TheraCour”) (an approximately 31% shareholder of the Company’s common
      stock) whereby TheraCour has exclusive rights to develop exclusively for us,
      the
      materials that comprise the core drugs of our planned business. TheraCour is
      a
      development stage company with limited financial resources and needs the
      Company’s progress payments to further the development of the
      nanoviricides**.**The Company controls the research and work
      TheraCour performs on its behalf and no costs may be incurred without the prior
      authorization or approval of the Company.





Development
      costs charged by and paid to TheraCour Pharma, Inc. was $1,340,670since
      inception through June 30, 2007; No additional royalties are due to TheraCour
      from the Company’s inception through June 30, 2007.




We
      depend
      on TheraCour and other third parties to perform manufacturing activities
      effectively and on a timely basis. If these third parties fail to perform as
      required, this could impair our ability to deliver our products on a timely
      basis or cause delays in our clinical trials and applications for regulatory
      approval, and these events could harm our competitive position and adversely
      affect our ability to commence revenue generating operations. The manufacturing
      process for pharmaceutical products is highly regulated, and regulators may
      shut
      down manufacturing facilities that they believe do not comply with regulations.
      We and our manufacturers are subject to the FDA’s current Good Manufacturing
      Practices, which are extensive regulations governing manufacturing processes,
      stability testing, record-keeping and quality standards and similar regulations
      are in effect in other countries. In addition, our manufacturing operations
      are
      subject to routine inspections by regulatory agencies.


34
 *Table
            of Contents*




***Our
      collaborative relationships with third parties could cause us to expend
      significant resources and incur substantial business risk with no assurance
      of
      financial return.***





We
      anticipate substantial reliance upon strategic collaborations for marketing
      and
      the commercialization of our drug candidates and we may rely even more on
      strategic collaborations for R&D of our other drug candidates. Our business
      depends on our ability to sell drugs to both government agencies and to the
      general pharmaceutical market. Offering our drug candidates for non-medical
      applications to government agencies does not require us to develop new sales,
      marketing or distribution capabilities beyond those already existing in the
      company. Selling antiviral drugs, however, does require such development. We
      plan to sell antiviral drugs through strategic partnerships with pharmaceutical
      companies. If we are unable to establish or manage such strategic collaborations
      on terms favorable to us in the future, our revenue and drug development may
      be
      limited. To date, we have not entered into any strategic collaborations with
      third parties capable of providing these services. In addition, we have not
      yet
      marketed or sold any of our drug candidates or entered into successful
      collaborations for these services in order to ultimately commercialize our
      drug
      candidates.





If
      we
      determine to enter into R&D collaborations during the early phases of drug
      development, our success will in part depend on the performance of our research
      collaborators. We will not directly control the amount or timing of resources
      devoted by our research collaborators to activities related to our drug
      candidates. Our research collaborators may not commit sufficient resources
      to
      our programs. If any research collaborator fails to commit sufficient resources,
      our preclinical or clinical development programs related to this collaboration
      could be delayed or terminated. Also, our collaborators may pursue existing
      or
      other development-stage products or alternative technologies in preference
      to
      those being developed in collaboration with us. Finally, if we fail to make
      required milestone or royalty payments to our collaborators or to observe other
      obligations in our agreements with them, our collaborators may have the right
      to
      terminate those agreements.





Manufacturers
      producing our drug candidates must follow current GMP regulations enforced
      by
      the FDA and foreign equivalents. If a manufacturer of our drug candidates does
      not conform to the current GMP regulations and cannot be brought up to such
      a
      standard, we will be required to find alternative manufacturers that do conform.
      This may be a long and difficult process, and may delay our ability to receive
      FDA or foreign regulatory approval of our drug candidates and cause us to fall
      behind on our business objectives.





Establishing
      strategic collaborations is difficult and time-consuming. Our discussion with
      potential collaborators may not lead to the establishment of collaborations
      on
      favorable terms, if at all. Potential collaborators may reject collaborations
      based upon their assessment of our financial, regulatory or intellectual
      property position. Even if we successfully establish new collaborations, these
      relationships may never result in the successful development or
      commercialization of our drug candidates or the generation of sales revenue.
      To
      the extent that we enter into collaborative arrangements, our drug revenues
      are
      likely to be lower than if we directly marketed and sold any drugs that we
      may
      develop.





Management
      of our relationships with our collaborators will require:





·
            significant
                time and effort from our management
                team;


·
            coordination
                of our marketing and R&D programs with the marketing and R&D
                priorities of our collaborators;
                and





·
            effective
                allocation of our resources to multiple
                projects.


35
 *Table
            of Contents*




***We
      employ the use of certain chemical and biological agents and compounds that
      may
      be deemed hazardous and we are therefore subject to various environmental laws
      and regulations. Compliance with these laws and regulations may result in
      significant costs, which could materially reduce our ability to become
      profitable.***




We
      use
      hazardous materials, including chemicals and biological agents and compounds
      that could be dangerous to human health and safety or the environment. As
      appropriate, we safely store these materials and wastes resulting from their
      use
      at our laboratory facility pending their ultimate use or disposal. We contract
      with a third party to properly dispose of these materials and wastes. We are
      subject to a variety of federal, state and local laws and regulations governing
      the use, generation, manufacture, storage, handling and disposal of these
      materials and wastes. We may incur significant costs complying with
      environmental laws and regulations adopted in the future.




***If
      we use biological and hazardous materials in a manner that causes injury, we
      may
      be liable for damages.***




Our
      R&D and manufacturing activities will involve the use of biological and
      hazardous materials. Although we believe our safety procedures for handling
      and
      disposing of these materials comply with federal, state and local laws and
      regulations, we cannot entirely eliminate the risk of accidental injury or
      contamination from the use, storage, handling or disposal of these materials.
      We
      carry $1,000,000 casualty and general liability insurance policies. Accordingly,
      in the event of contamination or injury, we could be held liable for damages
      or
      penalized with fines in an amount exceeding our resources and insurance
      coverage, and our clinical trials or regulatory approvals could be
      suspended.




***We
      may not be able to attract and retain highly skilled
      personnel.***




Our
      ability to attract and retain highly skilled personnel is critical to our
      operations and expansion. We face competition for these types of personnel
      from
      other pharmaceutical companies and more established organizations, many of
      which
      have significantly larger operations and greater financial, technical, human
      and
      other resources than us. We may not be successful in attracting and retaining
      qualified personnel on a timely basis, on competitive terms, or at all. If
      we
      are not successful in attracting and retaining these personnel, our business,
      prospects, financial condition and results of operations will be materially
      and
      adversely affected.




***We
      depend upon our senior management and their loss or unavailability could put
      us
      at a competitive disadvantage.***





We
      currently depend upon the efforts and abilities of our management team. The
      loss
      or unavailability of the services of any of these individuals for any
      significant period of time could have a material adverse effect on our business,
      prospects, financial condition and results of operations. We have not obtained,
      do not own, nor are we the beneficiary of key-person life
      insurance.





The
      Company believes the following persons are critical to the success of the
      Company as well as the terms of the employment agreements between them and
      the
      Company:





On
      September 23, 2005, the Company entered into employment agreements with its
      three executive officers, Eugene Seymour, Chief Executive Officer, Anil Diwan,
      President and Chairman of the Board of Directors, and Leo Ehrlich, Chief
      Financial Officer. All three agreements provide a minimum annual base salary
      of
      $200,000 for a term of three years. This base salary will increase to $250,000
      per year upon closing of a financing to the Company with minimum gross proceeds
      of $5,000,000. The Company is also obligated to pay health and life insurance
      benefits and reimburse expenses incurred by the officers on behalf of the
      company. Each executive, if terminated by the Company without cause, would
      be
      entitled to six months severance pay in the amount of $100,000. Mr Ehrlich
      resigned as CFO in May 2007.





***There
      are conflicts of interest among our officers, directors and
      stockholders.***




Certain
      of our executive officers and directors and their affiliates are engaged in
      other activities and have interests in other entities on their own behalf or
      on
      behalf of other persons. Neither we nor our stockholders will have any rights
      in
      these ventures or their income or profits. Specifically.
      Additionally,  Anil Diwan owns 65% of the capital stock of TheraCour
      Pharma, Inc. which owns approximately thirty-one percent (31%) of our Common
      Stock, provides the Company the nanomaterials with which it intends to develop
      its products and is the holder of the intellectual property rights the Company
      uses to conduct its operations. While the Company is not aware of any conflict
      that has arisen or any transaction which has not been conducted on an arm’s
      length basis to date, Dr. Diwan may have conflicting fiduciary duties between
      the Company and TheraCour.




36
 *Table
          of Contents*


Currently,
      the Company does not have any policy in place to deal with such should such
      a
      conflict arise.  In particular:




·
            Our
                executive officers or directors or their affiliates may have an economic
                interest in, or other business relationship with, partner companies
                that
                invest in us.





·
            Our
                executive officers or directors or their affiliates have interests
                in
                entities that provide products or services to
                us.




In
      any of
      these cases:




·
            Our
                executive officers or directors may have a conflict between our current
                interests and their personal financial and other interests in another
                business venture.




·
            Our
                executive officers or directors may have conflicting fiduciary duties
                to
                us and the other entity.




·
            The
                terms of transactions with the other entity may not be subject to
                arm’s
                length negotiations and therefore may be on terms less favorable
                to us
                than those that could be procured through arm’s length
                negotiations.




***We
      may enter into contracts with various U.S. government agencies which have
      special contracting requirements that give the government agency various rights
      or impose on the other party various obligations that can make the contracts
      less favorable to the non-government party. Consequently, if a large portion
      of
      our revenue is attributable to these contracts, our business may be adversely
      affected should the governmental parties exercise any of these additional rights
      or impose any of these additional obligations.***




We anticipate
      entering into contracts with various U.S. government agencies. In
      contracting with government agencies, we will be subject to various federal
      contract requirements. Future sales to U.S. government agencies will depend,
      in
      part, on our ability to meet these requirements, certain of which we may not
      be
      able to satisfy.




U.S.
      government contracts typically contain unfavorable termination provisions and
      are subject to audit and modification by the government at its sole discretion,
      which subjects us to additional risks. These risks include the ability of the
      U.S. government to unilaterally:


·
            suspend
                or prevent us for a set period of time from receiving new contracts
                or
                extending existing contracts based on violations or suspected violations
                of laws or regulations;


·
            terminate
                our existing contracts;





·
            reduce
                the scope and value of our existing
                contracts;


·
            audit
                and object to our contract-related costs and fees, including allocated
                indirect costs;





·
            control
                and potentially prohibit the export of our drug candidates;
                and


·
            change
                certain terms and conditions in our
                contracts.




The
      U.S.
      government may terminate any of its contracts with us either for its convenience
      or if we default by failing to perform in accordance with the contract schedule
      and terms. Termination for convenience provisions generally enable us to recover
      only our costs incurred or committed, and settlement expenses and profit on
      the
      work completed prior to termination. Termination for default provisions do
      not
      permit these recoveries and make us liable for excess costs incurred by the
      U.S.
      government in procuring undelivered items from another source.


37
 *Table
            of Contents*




As
      a U.S.
      government contractor, we may become subject to periodic audits and reviews.
      Based on the results of these audits, the U.S. government may adjust our
      contract-related costs and fees, including allocated indirect costs. As part
      of
      any such audit or review, the U.S. government may review the adequacy of, and
      our compliance with, our internal control systems and policies, including those
      relating to our purchasing, property, compensation and/or management information
      systems. In addition, if an audit or review uncovers any improper or illegal
      activity, we may be subject to civil and criminal penalties and administrative
      sanctions, including termination of our contracts, forfeiture of profits,
      suspension of payments, fines and suspension or prohibition from doing business
      with the U.S. government. We could also suffer serious harm to our reputation
      if
      allegations of impropriety were made against us. In addition, under U.S.
      government purchasing regulations, some of our costs, including most financing
      costs, amortization of intangible assets, portions of our R&D costs and some
      marketing expenses, may not be reimbursable or allowed under our contracts.
      Further, as a U.S. government contractor, we may become subject to an increased
      risk of investigations, criminal prosecution, civil fraud, whistleblower
      lawsuits and other legal actions and liabilities to which purely private sector
      companies are not.




***We
      may fail to obtain contracts to supply the U.S. government, and we may be unable
      to commercialize our drug candidates.***




The
      U.S.
      government has undertaken commitments to help secure improved countermeasures
      against bio-terrorism. The process of obtaining government contracts is lengthy
      and uncertain, and we must compete for each contract. Moreover, the award of
      one
      government contract does not necessarily secure the award of future contracts
      covering the same drug. If the U.S. government makes significant future contract
      awards for the supply of its emergency stockpile to our competitors, our
      business will be harmed and it is unlikely that we will be able to ultimately
      commercialize our competitive drug candidate.




In
      addition, the determination of when and whether a drug is ready for large scale
      purchase and potential use will be made by the government through consultation
      with a number of government agencies, including the FDA, the NIH, the CDC and
      the Department of Homeland Security. Congress has approved measures to
      accelerate the development of bio-defense drugs through NIH funding, the review
      process by the FDA and the final government procurement contracting authority.
      While this may help speed the approval of our drug candidates, it may also
      encourage competitors to develop their own drug candidates.




***The
      market for government stockpiling of H5N1 medicines is fairly new and
      uncertain.***




At
      the
      present many governments have already stockpiled influenza medicines for H5N1.
      We cannot predict with certainty the size of the market, if any. Consequently,
      we cannot predict whether sales, if any, to governments will be sufficient
      to
      fund our business plan and commence revenue generating operations.




***If
      the U.S. government fails to continue funding bio-defense drug candidate
      development efforts or fails to purchase sufficient quantities of any future
      bio-defense drug candidate, we may be unable to generate sufficient revenues
      to
      continue operations.***




We
      hope
      to receive funding from the U.S. government for the development of our
      bio-defense drug candidates. Changes in government budgets and agendas, however,
      may result in future funding being decreased and de-prioritized, and government
      contracts typically contain provisions that permit cancellation in the event
      that funds are unavailable to the government agency. Furthermore, we cannot
      be
      certain of the timing of any future funding, and substantial delays or
      cancellations of funding could result from protests or challenges from third
      parties. If the U.S. government fails to continue to adequately fund R&D
      programs, we may be unable to generate sufficient revenues to continue
      operations. Similarly, if we develop a drug candidate that is approved by the
      FDA, but the U.S. government does not place sufficient orders for this drug,
      our
      future business may be harmed.




**Risks
      Related to the Biotechnology/Biopharmaceutical Industry**


***The
        biotechnology and biopharmaceutical industries are characterized by rapid
        technological developments and a high degree of competition. We may be unable
        to
        compete with enterprises equipped with more substantial resources than
        us.***
  The
        biotechnology and biopharmaceutical industries are characterized by rapid
        technological developments and a high degree of competition based primarily
        on
        scientific and technological factors. These factors include the availability
        of
        patent and other protection for technology and products, the ability to
        commercialize technological developments and the ability to obtain government
        approval for testing, manufacturing and marketing.


38
 *Table
            of Contents*




Our
      drugs
      in development for influenza,******Flucide, AviFluCide
      and FluCide HP would compete with neuraminidase inhibitors Tamiflu and Relenza,
      anti-influenza drugs that are sold by Roche and Glaxo SmithKline (GSK),
      respectively. Generic competitors include amantadine and rimantadine, both
      oral
      tablets that only inhibit the replication of the influenza A virus. BioCryst
      Pharmaceuticals, Inc. is developing injectable formulations of peramivir, an
      influenza neuraminidase inhibitor, for the treatment of influenza, which
      recently failed in Phase II human trials.




Our
      HCV
      and HIV drugs are at the earliest stage of development. There are a growing
      number of anti-HIV and HVC drugs being sold or are in advanced stages of
      clinical development. Companies with HCV and HIV products include Bristol-Myers
      Squibb Company (BMS), Roche, Boehringer Ingelheim, Merck & Co., Inc.
      (Merck), Abbott Laboratories, and Schering Plough, in addition to several other
      pharmaceutical and biotechnology firms.




We
      compete with specialized biopharmaceutical firms in the United States, Europe
      and elsewhere, as well as a growing number of large pharmaceutical companies
      that are applying biotechnology to their operations. Many biopharmaceutical
      companies have focused their development efforts in the human therapeutics
      area,
      including cancer. Many major pharmaceutical companies have developed or acquired
      internal biotechnology capabilities or made commercial arrangements with other
      biopharmaceutical companies. These companies, as well as academic institutions,
      government agencies and private research organizations, also compete with us
      in
      recruiting and retaining highly qualified scientific personnel and consultants.
      Our ability to compete successfully with other companies in the pharmaceutical
      field will also depend to a considerable degree on the continuing availability
      of capital to us.




We
      are
      aware of numerous products under development or manufactured by competitors
      that
      are used for the prevention or treatment of certain diseases we have targeted
      for drug development. Various companies are developing biopharmaceutical
      products that potentially directly compete with our drug candidates even though
      their approach to such treatment is different.




We
      expect
      that our drug candidates under development and in clinical trials will address
      major markets within the anti-viral sector. Our competition will be determined
      in part by the potential indications for which drugs are developed and
      ultimately approved by regulatory authorities. Additionally, the timing of
      the
      market introduction of some of our potential drugs or of competitors’ products
      may be an important competitive factor. Accordingly, the relative speed with
      which we can develop drugs, complete pre-clinical testing, clinical trials,
      approval processes and supply commercial quantities to market are important
      competitive factors. We expect that competition among drugs approved for sale
      will be based on various factors, including product efficacy, safety,
      reliability, availability, price and patent protection.




***The
      successful development of biopharmaceuticals is highly uncertain. A variety
      of
      factors including, pre-clinical study results or regulatory approvals, could
      cause us to abandon development of our drug
      candidates.***




Successful
      development of biopharmaceuticals is highly uncertain and is dependent on
      numerous factors, many of which are beyond our control. Products that appear
      promising in the early phases of development may fail to reach the market for
      several reasons including:




·
            pre-clinical
                study results that may show the product to be less effective than
                desired
                (e.g., the study failed to meet its primary objectives) or to have
                harmful
                or problematic side effects;




·
            failure
                to receive the necessary regulatory approvals or a delay in receiving
                such
                approvals. Among other things, such delays may be caused by slow
                enrollment in clinical studies, length of time to achieve study endpoints,
                additional time requirements for data analysis or a IND and later
                NDA,
                preparation, discussions with the FDA, an FDA request for additional
                pre-clinical or clinical data or unexpected safety or manufacturing
                issues;




·
            manufacturing
                costs, pricing or reimbursement issues, or other factors that make
                the
                product not economical; and




·
            the
                proprietary rights of others and their competing products and technologies
                that may prevent the product from being
                commercialized.


39
 *Table
            of Contents*




Success
      in pre-clinical and early clinical studies does not ensure that large-scale
      clinical studies will be successful. Clinical results are frequently susceptible
      to varying interpretations that may delay, limit or prevent regulatory
      approvals. The length of time necessary to complete clinical studies and to
      submit an application for marketing approval for a final decision by a
      regulatory authority varies significantly from one product to the next, and
      may
      be difficult to predict.





**Risks
      Related to the Securities Markets and Investments in Our Common
      Stock**




***Because
      our common stock is quoted on the "OTC Bulletin Board," your ability to sell
      your shares in the secondary trading market may be
      limited.***





Our
      common stock is currently quoted on the OTC Bulletin Board. Consequently, the
      liquidity of our common stock is impaired, not only in the number of shares
      that
      are bought and sold, but also through delays in the timing of transactions,
      and
      coverage by security analysts and the news media, if any, of our company. As
      a
      result, prices for shares of our common stock may be lower than might otherwise
      prevail if our common stock was quoted and traded on Nasdaq or a national
      securities exchange.





***Because
      our shares are "penny stocks," you may have difficulty selling them in the
      secondary trading market.***




Federal
      regulations under the Securities Exchange Act of 1934 regulate the trading
      of
      so-called "penny stocks," which are generally defined as any security not listed
      on a national securities exchange or Nasdaq, priced at less than $5.00 per
      share
      and offered by an issuer with limited net tangible assets and revenues. Since
      our common stock currently is quoted on the OTC Bulletin Board at less than
      $5.00 per share, our shares are "penny stocks" and may not be quoted unless
      a
      disclosure schedule explaining the penny stock market and the risks associated
      therewith is delivered to a potential purchaser prior to any trade.





In
      addition, because our common stock is not listed on Nasdaq or any national
      securities exchange and currently is quoted at and trades at less than $5.00
      per
      share, trading in our common stock is subject to Rule 15g-9 under the Securities
      Exchange Act. Under this rule, broker-dealers must take certain steps prior
      to
      selling a "penny stock," which steps include:





·
            obtaining
                financial and investment information from the
                investor;


·
            obtaining
                a written suitability questionnaire and purchase agreement signed
                by the
                investor; and





·
            providing
                the investor a written identification of the shares being offered
                and the
                quantity of the shares.





If
      these
      penny stock rules are not followed by the broker-dealer, the investor has no
      obligation to purchase the shares. The application of these comprehensive rules
      will make it more difficult for broker-dealers to sell our common stock and
      our
      shareholders, therefore, may have difficulty in selling their shares in the
      secondary trading market.





***Our
      stock price may be volatile and your investment in our common stock could suffer
      a decline in value.***





As
      of
      June 30, 2007, the last trade price of our common stock, as quoted on the OTC
      Bulletin Board, was $.92. The price may fluctuate significantly in response
      to a
      number of factors, many of which are beyond our control. These factors
      include:





·
            progress
                of our products through the regulatory
                process;


·
            results
                of preclinical studies and clinical
                trials;




40
 *Table
            of Contents*




·
              announcements
                  of technological innovations or new products by us or our
                  competitors;
 ·
              government
                  regulatory action affecting our products or our competitors' products
                  in
                  both the United States and foreign
                  countries;
 
 ·
              developments
                  or disputes concerning patent or proprietary
                  rights;
 ·
              general
                  market conditions for emerging growth and pharmaceutical
                  companies;
  ·
              economic
                  conditions in the United States or
                  abroad;
 ·
              actual
                  or anticipated fluctuations in our operating
                  results;
 
 ·
              broad
                  market fluctuations; and
 ·
              changes
                  in financial estimates by securities
                  analysts.


***A
      registration of a significant amount of our outstanding restricted stock may
      have a negative effect on the trading price of our
      stock.***





At
      June
      30, 2007, shareholders of the Company had 83,168,152 shares of restricted stock,
      or 72.9% of the outstanding common stock. If we were to file a registration
      statement including all of these shares, and the registration is allowed by
      the
      SEC, these shares would be freely tradable upon the effectiveness of the planned
      registration statement. If investors holding a significant number of freely
      tradable shares decide to sell them in a short period of time following the
      effectiveness of a registration statement, such sales could contribute to
      significant downward pressure on the price of our stock.





***We
      do not intend to pay any cash dividends in the foreseeable future and,
      therefore, any return on your investment in our capital stock must come from
      increases in the fair market value and trading price of the capital
      stock.***





We
      have
      not paid any cash dividends on our common stock and do not intend to pay cash
      dividends on our common stock in the foreseeable future. We intend to retain
      future earnings, if any, for reinvestment in the development and expansion
      of
      our business. Any credit agreements, which we may enter into with institutional
      lenders, may restrict our ability to pay dividends. Whether we pay cash
      dividends in the future will be at the discretion of our board of directors
      and
      will be dependent upon our financial condition, results of operations, capital
      requirements and any other factors that the board of directors decides is
      relevant. Therefore, any return on your investment in our capital stock must
      come from increases in the fair market value and trading price of the capital
      stock.





***We
      may issue additional equity shares to fund the Company’s operational
      requirements which would dilute your share ownership.***





The
      Company's continued viability depends on its ability to raise capital. Changes
      in economic, regulatory or competitive conditions may lead to cost increases.
      Management may also determine that it is in the best interest of the Company
      to
      develop new services or products. In any such case additional financing is
      required for the Company to meet its operational requirements. There can be
      no
      assurances that the Company will be able to obtain such financing on terms
      acceptable to the Company and at times required by the Company, if at all.
      In
      such event, the Company may be required to materially alter its business plan
      or
      curtail all or a part of its operational plans as detailed further in
      Management’s Discussion and Analysis in this Form 10-KSB. The sale or proposed
      sale of substantial amounts of our common stock in the public markets may
      adversely affect the market price of our common stock and our stock price may
      decline substantially. In the event that the Company is unable to raise or
      borrow additional funds, the Company may be required to curtail significantly
      its operational plans as further detailed in Requirements for Additional Capital
      in the Management Discussion and Analysis of this Form 10-KSB.





The
      Company is authorized to issue up to 300,000,000 total shares of Common Stock
      without additional approval by shareholders. As of June 30, 2007, we had
      114,069,144 of common stock outstanding, and warrants and options convertible
      to
      4,570,000 shares of common stock outstanding.


41
 *Table
            of Contents*




***Large
      amounts of our common stock will be eligible for resale under Rule
      144.***





As
      of
      June 30, 2007, 83,168,152 of 114,069,144 issued and outstanding shares of the
      Company’s common stock are restricted securities as defined under Rule 144 of
      the Securities Act of 1933, as amended (the “Act”) and under certain
      circumstances may be resold without registration pursuant to Rule
      144.





Approximately
      18,823,152 shares of our restricted shares of common stock are held by
      non-affiliates who may avail themselves of the public information requirements
      and sell their shares in accordance with Rule 144. As a result, some or all
      of
      these shares may be sold in accordance with Rule 144 potentially causing the
      price of the Company’s shares to decline.





In
      general, under Rule 144, a person (or persons whose shares are aggregated)
      who
      has satisfied a one-year holding period may, under certain circumstances, sell
      within any three-month period a number of securities which does not exceed
      the
      greater of 1% of the then outstanding shares of common stock or the average
      weekly trading volume of the class during the four calendar weeks prior to
      such
      sale. Rule 144 also permits, under certain circumstances, the sale of
      securities, without any limitation, by a person who is not an Affiliate, as
      such
      term is defined in Rule 144(a)(1), of the Company and who has satisfied a
      two-year holding period. Any substantial sale of the Company's common stock
      pursuant to Rule 144 may have an adverse effect on the market price of the
      Company’s shares. This filing will satisfy certain public information
      requirements necessary for such shares to be sold under Rule 144.





***The
      requirements of complying with the Sarbanes-Oxley act may strain our resources
      and distract management***





We
      are
      subject to the reporting requirements of the Securities Exchange Act of 1934,
      as
      amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002. The costs
      associated with these requirements may place a strain on our systems and
      resources. The Exchange Act requires that we file annual, quarterly and current
      reports with respect to our business and financial condition. The Sarbanes-Oxley
      Act requires that we maintain effective disclosure controls and procedures
      and
      internal controls over financial reporting. Historically, as a private company
      we have maintained a small accounting staff, but in order to maintain and
      improve the effectiveness of our disclosure controls and procedures and internal
      control over financial reporting, significant additional resources and
      management oversight will be required. This includes, among other things,
      retaining independent public accountants. This effort may divert management’s
      attention from other business concerns, which could have a material adverse
      effect on our business, financial condition, results of operations and cash
      flows. In addition, we may need to hire additional accounting and financial
      persons with appropriate public company experience and technical accounting
      knowledge, and we cannot assure you that we will be able to do so in a timely
      fashion.





***Sales
      of additional equity securities may adversely affect the market price of our
      common stock and your rights in the Company may be
      reduced.***





We
      expect
      to continue to incur drug development and selling, general and administrative
      costs, and in order to satisfy our funding requirements, we may need to sell
      additional equity securities. Our stockholders may experience substantial
      dilution and a reduction in the price that they are able to obtain upon sale
      of
      their shares. Also, any new securities issued may have greater rights,
      preferences or privileges than our existing common stock that may adversely
      affect the market price of our common stock and our stock price may decline
      substantially.


42
 *Table
          of Contents*


**ITEM
      2. DESCRIPTION OF PROPERTY.**





**Description
      of Property**




The
      Company’s principal executive offices are located at 135 Wood Street, West
      Haven, Connecticut, and include approximately 1,500 square feet of office space
      at a base monthly rent of $1,875. The lease expired February 2007.  On
      February 27, 2007, the Company subleased a 5,000 square foot  research
      laboratory at 4 Research Drive, Woodbridge, CT., at a base monthly rent of
      $11,167. The sublease expires January 30, 2009.





We
      subcontract the laboratory research and development work to TheraCour Pharma,
      Inc. which has a 2,500 square foot laboratory in the same building. Management
      believes that the space is sufficient for the Company to monitor the
      developmental progress at its subcontractors.





The
      company is currently engaged in a national search for an R&D as well as
      manufacturing facility. The manufacturing portion of the facility will
      eventually have to be certified by the FDA in order for the Company to produce
      experimental materials that can be sent to outside scientists for
      pharmaco-kinetic, pharmaco-dynamic and toxicology studies. These three sets
      of
      studies must be completed prior to the Company filing an IND with the FDA to
      begin the human safety and efficacy trials (Phase I and Phase II).





**ITEM
      3: Legal Proceedings.**





There
      are
      no other legal proceedings against the Company to the best of the Company’s
      knowledge as of the date hereof and to the Company’s knowledge, no action, suit
      or proceeding has been threatened against the Company





**ITEM
      4: Submission of Matters to Vote of Security
      Holders.**


**NONE**




**PART
      II**




**Item
      5. Market Price of and Dividends on the Registrant's Common
      Equity and Other Shareholder Matters**





**Market
      for Common Equity and Related Stockholder Matters**





The
      Company’s Common Stock was initially traded on the Pink Sheets under the symbol
      NNVC. From   June 29, 2007 the Company’s Common Stock has been
      quoted on the Over The Counter Bulletin Board. The table below sets forth the
      high and low prices for the Company’s Common Stock for the quarters included
      within 2005, 2006, and 2007. Quotations reflect inter-dealer prices, without
      retail mark-up, mark-down commission, and may not represent actual transactions.
      Since the Company's common stock trades sporadically, there is not an
      established active public market for its common stock. No assurance can be
      given
      that an active market will exist for the Company's common stock and the Company
      does not expect to declare dividends in the foreseeable future since the Company
      intends to utilize its earnings, if any, to finance its future growth, including
      possible acquisitions.




**Quarter
                ended**
            
            **Low
                price**
            
            
            **High
                price**June
                30, 2007
            
            $
            .80
            
            
            $
            .99March
                31, 2007
            
            $
            1.10
            
            
            $
            1.79December
                31, 2006
            
            $
            .60
            
            
            $
            1.22September
                30, 2006
            
            $
            .99
            
            
            $
            1.68June
                30, 2006
            
            $
            1.06
            
            
            $
            3.05March,
                31, 2006
            
            $
            .83
            
            
            $
            3.75December
                31, 2005
            
            $
            .03
            
            
            $
            1.27September
                30, 2005
            
            $
            .05
            
            
            $
            .30June
                1, 2005 to June 30, 2005 (1)
            
            $
            .04
            
            
            $
            .33





(1)
            Effective
                date of reverse merger, June 1,
                2005


43
 *Table
          of Contents*


**Number
      of Shareholders**.





As
      of
      June 30, 2007, a total of 114,069,144 the Company’s common stock (shares) are
      outstanding and held by approximately 225 shareholders of record. Of this
      amount, 30,495,346 shares are unrestricted. Approximately 18,823,152 shares
      are
      restricted securities held by non-affiliates, and the remaining 64,345,000
      shares are restricted securities held by affiliates. These shares may only
      be
      sold in accordance with Rule 144. As of June 30, 2007, there were
      2,695,000 warrants and 1,875,000 stock options to purchase the Company’s
      Common Stock outstanding.





**Dividends**.





The
      Company has not paid any cash dividends since its inception. The Company
      currently intends to retain any earnings for use in its business, and therefore
      does not anticipate paying dividends in the foreseeable future.




**LONG-TERM
      INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR**





None





**Recent
      sales of Unregistered Securities.**





During
      the fiscal year ended June 30, 2007, the Company issued the following securities
      exempt from the registration requirements of the Securities Act pursuant to
      Section 4(2) of the Securities Act. No underwriting or other compensation was
      paid in connection with these transactions:




In
      July
      2006, the Company's Board of Directors authorized the issuance of 5,744 shares
      of its common stock with a restrictive legend, to debenture holders in lieu
      of
      interest on debentures as set forth in the contract. The Company recorded an
      interest expense of $7,644 for the month of July 2006.




In
      July
      2006, warrants to purchase 200,000 shares of common stock exercisable at a
      price
      per common share of $.25 were exercised, and proceeds of $50,000 were
      received.




In
      July
      2006, convertible debentures in the amount of $1,000,000 were converted into
      common stock, resulting in the issuance of 3,333,333 common shares.




In
      August
      2006, the Scientific Advisory Board (SAB) was granted warrants to purchase
      40,000 shares of common stock at $1.36 per share. These warrants, if not
      exercised will expire in August 2010. The fair value of these warrants, by
      using
      the Black-Scholes option pricing model, were valued at $30,184 and recorded
      as
      consulting expense.





In
      November 2006, the Scientific Advisory Board (SAB) was granted warrants to
      purchase 40,000 shares of common stock common stock at $1.19 per
      share.   These warrants, if not exercised will expire in November
      2010.  The fair value of these warrants, by using the Black-Scholes
      option pricing model, were valued at $25,888, and recorded as consulting
      expense.





On
      January 2, 2007, the Company entered into consulting agreements for future
      services with Dr. Randall Barton for scientific consulting, and Mr. Harry
      Schochat, Esq. for legal consulting.  The company issued Dr. Randall
      Barton 114,000 shares of its common stock and Mr. Harry Schochat, Esq. 102,000
      shares of its common stock, for a total of 216,000 shares as upfront payments
      (non-refundable) to these consultants. Based upon the fair market value of
      the
      common stock on the commitment date, the Company recorded a consulting expense
      of $164,160.





In
      February 2007, the Scientific Advisory Board (SAB) was granted warrants to
      purchase 40,000 shares of common stock at $1.54 per share. These warrants,
      if
      not exercised will expire in February 2011.The fair value of these
      warrants, by using the Black-Scholes option pricing model,  were
      valued at $32,668 and recorded as consulting expense.


44
 *Table
            of Contents*




In
      May
      2007, the Scientific Advisory Board (SAB) was granted warrants to purchase
      40,000 shares of common stock at $1.30 per share. These warrants, if not
      exercised will expire in May 2011.The fair value of these warrants, by
      using the Black-Scholes option pricing model,  were valued at $25,664
      and recorded as consulting expense.




In
      June
      2007, the Company's Board of Directors authorized the issuance of 752 shares
      of
      its common stock with a restrictive legend to an outside consultant advising
      the
      Company on government procurements. Based upon the fair market value of the
      common stock on the commitment date, the Company recorded a consulting expense
      of $775.




In
      June
      2007, the Company's Board of Directors authorized the issuance of 100,000 shares
      of its common stock with a restrictive legend to an outside consultant advising
      the Company on government procurements. Based upon the fair market value of
      the
      common stock on the commitment date, the Company recorded a consulting expense
      of $115,000.




In
      June
      2007, the Company's Board of Directors authorized the issuance of 15,791 shares
      of its common stock with a restrictive legend to Dr. Randall Barton for
      scientific consulting, the Company on government procurements. Based upon the
      fair market value of the common stock on the commitment date, the Company
      recorded a consulting expense of $16,800.




In
      June
      2007, the Company's Board of Directors authorized the issuance of 14,099 shares
      of its common stock with a restrictive legend to Mr. Harry Schochat, Esq. for
      legal consulting, the Company on government procurements. Based upon the fair
      market value of the common stock on the commitment date, the Company recorded
      a
      consulting expense of $15,000.




In
      June
      2007, holders of 870,000 warrants exercised their warrants to purchase 1,305,000
      shares of common stock. The Company received $870,000 upon this conversion
      in
      July, 2007. All holders of the Class A $2.50 warrants  and $1.00
      warrants were provided an option to exercise their warrants during a 30 day
      period at a price of $1.00 and to receive an additional one half (1/2) share
      of
      Common Stock for each Warrant exercised.




All
      of
      the securities set forth above were issued by the Company pursuant to Section
      4(2) of the Securities Act of 1933, as amended, or the provisions of Rule 504
      of
      Regulation D promulgated under the Securities Act. All such shares issued
      contained a restrictive legend and the holders confirmed that they were
      acquiring the shares for investment and without intent to distribute the shares.
      All of the purchasers were friends or business associates of the Company’s
      management and all were experienced in making speculative investments,
      understood the risks associated with investments, and could afford a loss of
      the
      entire investment. The Company has never utilized an underwriter for an offering
      of its securities.




**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
      OF  OPERATIONS**





The
      following discussion should be read in conjunction with the information
      contained in the consolidated financial statements of the Company and the notes
      thereto appearing elsewhere herein and in conjunction with the Management's
      Discussion and Analysis of Financial Condition and Results of Operations set
      forth in (1) the Company's Annual Report on Form 10-KSB for the year ended
      June
      30, 2007. Readers should carefully review the risk factors disclosed in this
      Form 10-KSB and other documents filed by the Company with the SEC.





As
      used
      in this report, the terms "Company", "we", "our", "us" and "NNVC" refer to
      Nanoviricides, Inc., a Nevada corporation.





**PRELIMINARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**








This
      Annual Report contains forward-looking statements within the meaning of the
      federal securities laws. These include statements about our expectations,
      beliefs, intentions or strategies for the future, which we indicate by words
      or
      phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe,"
      "NNVC believes," "management believes" and similar language. The forward-looking
      statements are based on the current expectations of NNVC and are subject to
      certain risks, uncertainties and assumptions, including those set forth in
      the
      discussion under "Management's Discussion and Analysis of Financial Condition
      and Results of Operations" in this report. Actual results may differ materially
      from results anticipated in these forward-looking statements. We base the
      forward-looking statements on information currently available to us, and we
      assume no obligation to update them.


45
 *Table
            of Contents*




Investors
      are also advised to refer to the information in our previous filings with the
      Securities and Exchange Commission (SEC), especially on Forms 10-KSB,10-Q and
      8-K, in which we discuss in more detail various important factors that could
      cause actual results to differ from expected or historic results. It is not
      possible to foresee or identify all such factors. As such, investors should
      not
      consider any list of such factors to be an exhaustive statement of all risks
      and
      uncertainties or potentially inaccurate assumptions.





**Management’s
      Plan of Operation**





The
      Company’s drug development business model was formed in May 2005 with a license
      to the patents and intellectual property held by Theracour Pharma, Inc., that
      enabled creation of drugs engineered specifically to combat viral diseases
      in
      humans. This exclusive license from Theracour Pharma serves as a foundation
      for
      our intellectual property. The Company was granted a worldwide exclusive
      perpetual license to this technology for several drugs with specific targeting
      mechanisms in perpetuity for the treatment of the following human viral
      diseases: Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV),
      Hepatitis C Virus (HCV), Rabies, Herpes Simplex Virus (HSV), Influenza and
      Asian
      Bird Flu Virus.





To
      date,
      we have engaged in organizational activities; sourcing compounds and preparing
      nano-materials; and experimentation with preclinical studies using cell cultures
      and animals. We have generated funding through the issuances of debt and private
      placement of common stock(see Item 5 Recent Sales of Unregistered Securities).
      We have not generated any revenues and we do not expect to generate revenues
      in
      the near future. We may not be successful in developing our drugs and start
      selling our products when planned, or that we will become profitable in the
      future. We have incurred net losses in each fiscal period since inception of
      our
      operations.





On
      December 23, 2005, the Company signed a Memorandum of Understanding (MOU) with
      the National Institute of Hygiene and Epidemiology in Hanoi (NIHE), a unit
      of
      the Vietnamese Government’s Ministry of Health. This Memorandum of Understanding
      calls for cooperation in the development and testing of certain nanoviricides.
      The parties agreed that NanoViricides will retain all intellectual property
      rights with respect to any resulting product and that the initial target would
      be the development of drugs against H5N1 (avian influenza). NIHE thereafter
      requested that we develop a drug for rabies, a request to which we agreed.
      The
      initial phase of this agreement called first for laboratory testing, followed
      by
      animal testing of several drug candidates developed by the Company. Preliminary
      laboratory testing of FluCideTM-I, AviFluCide-ITM and AviFluCide-HPTM were
      successfully performed at the laboratories of the National Institute of Hygiene
      and Epidemiology in Hanoi (NIHE). Successful  animal testing
      of  RabiCide-ITM, the company’s rabies drug, was performed in Vietnam
      during the first half of 2007. The H5N1 animal testing will utilize the NIHE’s
      BSL3 (biological safety laboratory level 3) laboratory. Rabies testing can
      safely be done at their BSL2 facility.





The
      work
      with NIHE will likely continue through calendar year 2008. While the MOU
      provides for a final agreement between the Company and NIHE, we have not yet
      discussed a “final agreement” with NIHE and continue to work under the existing
      MOU. There are no financial obligations or responsibilities for either the
      Company or NIHE pursuant to the provisions of the MOU.




Management
      believes that it has achieved significant milestones in the development of
      anti-influenza drugs for human influenza (H1N1) and bird flu (H5N1), as well
      as,
      rabies. Management’s beliefs are based on results of pre-clinical cell culture
      studies and in vivo animal studies using mice.





**Preclinical
      Safety And Efficacy Studies**





We
      have
      performed initial safety studies on the major constituent of our anti-viral
      drug, FluCide-ITM. The polymer, which is unique and proprietary to NanoViricides,
      was tested for any toxic symptoms or for any ill effects in laboratory animals.
      The preliminary results were successful. Additional laboratory data from the
      safety studies on the base polymer material were performed. This data included
      blood test results, as well as histological (microscopic) examinations of
      various organs. These studies showed that the polymer used to construct the
      nanomicelle caused no organic damage to the test animals. All results were
      within safe limits.


46
 *Table
          of Contents*


We
      have
      developed and evaluated nanoviricides against influenza and H5N1 (one of the
      highly pathogenic avian influenza subtypes for safety and efficacy. In vitro
      (laboratory) evaluation of 14 substances, including controls, for protection
      of
      mammalian cells against infection by the H5N1 subtype was performed. These
      assays were conducted in Vietnam under the auspices of the National Institute
      of
      Hygiene and Epidemiology, Hanoi (NIHE) under the VietNam Ministry of Health.
      We
      identified four different nanoviricides as being highly effective against H5N1
      using two different assays (both involving cell culture, one using the plaque
      reduction method and the other involving microscopic examination to determine
      the extent of cytopathic events (CPE) reduction. All of these were effective
      at
      extremely low concentrations and thus are expected to be drug
      candidates.





The
      best
      of these was a nanoviricide based on an antibody fragment as the targeting
      ligand, which led to near complete suppression of cytopathic effects (CPE)
      at an
      extraordinarily low concentration level. This is being developed as
      AviFluCide-ITM, a drug highly specific to H5N1 that is being developed against
      the Vietnam strains .





Another
      nanoviricide which is based on a ligand that we designed in-house to be specific
      to the group of all or a majority of highly pathogenic avian influenza viruses,
      also showed a very high efficacy (group-level specificity). This is being
      developed as “FluCide-HPTM”, a drug that is group-specific against emergent and
      existing highly pathogenic influenza viruses (including H5N1, H7Nx and
      others).





A
      third
      nanoviricide based on a ligand that we designed for attacking all influenza
      A
      viruses (type-level specificity) showed strong efficacy against H5N1 as well.
      This is being developed as “FluCide-ITM”, a drug designed primarily for use
      against serious cases of human influenza.





Animal
      testing of  multiple nanoviricides against rabies was highly
      successful, resulting in a 20% - 30% population survival rate in mice using
      a
      high lethality protocol.





It
      should
      be noted that all of our studies to date were preliminary. Thus, the evidence
      we
      have developed is indicative, but not considered confirmative, of the
      capabilities of the nanoviricides technology's potential. With the success
      of
      these preliminary studies, the Company has decided to perform further
      pre-clinical studies that validate safety and efficacy of its materials and
      its
      anti-viral drugs FluCideTM and AviFluCideTM. Management intends to use capital and
      debt financing to enable the completion of these goals.





**Requirement
      for Additional Capital**





We
      currently do not have sufficient cash reserves to meet all of our anticipated
      obligations for the next twelve months and we may not be able to obtain the
      necessary financing. As of June 30, 2007 we have a cash balance of $
      967,797which can support operations through January 1,2008, but
      will not be sufficient to fund our operations for the next twelve months. We
      expect to incur costs of approximately $3-5 million dollars in the upcoming
      twelve months to operate our business in accordance with our business
      plans.





In
      September, 2007, the Company had received subscriptions in the aggregate amount
      of $2.5 million financing through the offering of shares of the Company's common
      stock.  It is anticipated that these funds should enable the Company
      to support operations through the end of its fiscal year ending June 30,
      2008.  However, the Company has not yet accepted these
      subscriptions.  If the Company does not accept these subscriptions, or
      if a significant number of subscribers request the return of their subscriptions
      before they are accepted by the Company, the Company may not be able to support
      its operations through the end of its fiscal year.





We
      expect
      we will require in excess of $5,000,000 to execute the first part of our
      business plan which covers twelve months of operations. Assuming that we are
      successful in raising additional financing, we anticipate that we will incur
      the
      following expenses over the next twelve months:


47
 *Table
            of Contents*




1
            Research
                and Development of
                $1,500,000: Includes planned costs of $1,200,000 for multiple drug
                variations and in-vivo and in-vitro studies for FluCide-1TM, AviFluCideTM,
                FluCide HPTM, and Rabies planned for the year ended June 30, 2008. The
                Company has allocated the planned costs of $1,200,000 evenly over
                the four
                drugs ($300,000 each). Depending on the results of these clinical
                trials,
                we expect to commence with early stage development of a drug for
                HIV for
                which we have budgeted
                $300,000.





2
            Corporate
                overhead of $750,000:
                This amount includes budgeted office salaries, legal, accounting
                and other
                costs expected to be incurred by being a public reporting
                company.





3
            Capital
                costs of $1,250,000: This
                is the estimated cost for equipment and laboratory improvements.
                The
                Company plans to incur these costs if the planned trials in the third
                calendar quarter of 2007 show improvement over present
                treatments.





4
            Staffing
                costs of $1,500,000:
                This is the estimated cost of hiring additional scientific staff
                and
                consulting firms to assist with FDA compliance, material characterization,
                pharmaco-kinetic, pharmaco-dynamic and toxicology studies, as required
                for
                development of necessary data for filing an Investigational New Drug
                Application (IND) with the United States Food and Drug
                Administration.





The
      Company will be unable to proceed with its planned drug development, meet its
      administrative expense requirements, capital costs, and staffing costs without
      obtaining additional financing of approximately $3,000,000 to meet its
      $5,000,000 budget. The Company does not have any arrangements at this time
      for
      equity or other financings. If we are unable to obtain additional financing,
      our
      business plan will be significantly delayed.





**Research
      and Development Costs**





The
      Company does not maintain separate accounting line items for each project in
      development. The Company maintains aggregate expense records for all research
      and development conducted. Because at this time all the Company’s projects share
      a common core material, the Company allocates expenses across all projects
      at
      each period-end for purposes of providing accounting basis for each project.
      Project costs are allocated based upon labor hours performed for each
      project.




The
      Company has signed a cooperative research and development agreements (CRADA
      )
      with the Walter Reed Army Institute of Research (WRAIR) for development of
      treatments against Dengue Fever Viruses.





The
      Company expects to enter into additional CRADA’s  with other
      governmental agencies. There can be no assurance that a final agreement may
      be
      achieved and that the Company will execute any of these agreements. However,
      should any of these agreements materialize, the Company will implement a system
      to track these costs by project and account for these projects as
      customer-sponsored activities and show these project costs
      separately.





The
      following table summarizes the primary components of our research and
      development expenses as allocated, during the periods presented in this Form
      10KSB.


48
 *Table
            of Contents*




**Year
                Ended**
              **June 30, 2007**
            
            
            **Year
                Ended**
              **June 30,** **2006**
            
            
            **For
                the Cumulative**
              **Period**
              **From
                May 12, 2005**
              **(Inception)
                through**
              **June 30, 2007**FluCideTM
            
            
            292,723
            
            
            
            424,182
            
            
            
            711,521AviFluCideTM
            
            
            182,952
            
            
            
            ,222,666
            
            
            
            415,618FluCideHPTM
            
            
            131,725
            
            
            
            74,453
            
            
            
            206,178RabiCideTM
            
            
            65,863
            
            
            
            120,986
            
            
            
            186,849Other
            
            
            58,545
            
            
            
            57,604
            
            
            
            142,304Total
                Research and development
            
            
            731,808
            
            
            
            899,891
            
            
            
            1,662,470





**Time
      Schedules, Milestones and Development Costs**





In
      the
      event that funding can be achieved, we shall endeavor to achieve completion
      of
      the following events within the next twelve months:





The
      status of each of our major research and development projects is as
      follows:





**Project**
            **Drug
                Development of FluCideTM for Common Influenza**Current
                status
            FluCide-I,
                is currently in preclinical studies against all common influenzas
                as well
                as avian influenza H5N1. It is a broad-spectrum anti-influenza
                nanoviricide. It is based on a well known ligand mechanism by which
                influenza viruses bind to cells. This mechanism involves the hemagglutinin
                coat protein of influenza virus binding to sialic acids on cell surfaces.
                FluCide-I has been tested in cell cultures and in mice and has
                demonstrated better results than oseltamivir. The Company is planning
                in-vivo and in-vitro studies with FluCide-I at the Vietnam National
                Institute of Hygiene and Epidemiology (NIHE) during the year ended
                June
                30, 2008.Nature,
                timing and estimated costs
            We
                expect to know by the end of 2007 whether we will continue with FluCide-I
                as a drug candidate. The Company has budgeted approximately $500,000
                for
                the material development, production and testing of this drug during
                the
                first calendar quarter of 2008 . These costs will be paid from our
                available cash balances. Should management determine the results
                to be
                satisfactory, we will need to obtain additional financing to perform
                material characterization, pharmaco-kinetic, pharmaco-dynamic and
                toxicology studies which we have presently budgeted at
                $1,000,000.Anticipated
                completion date
            Not
                knownRisks
                and uncertainties associated with completing development on schedule,
                and
                the consequences to operations, financial position and liquidity
                if not
                completed timely
            The
                outcome of clinical testing can not be known at this time, and this
                poses
                substantial risk and uncertainty as to whether or when if ever, this
                drug
                will become marketable.Timing
                of commencement of expected material net cash inflows
            It
                is not known or estimable when net cash inflows from this project
                will
                commence if ever, due to the uncertainties associated with the completion
                of the product, regulatory submissions, approvals and market purchases
                of
                this product.










**Project**
            **Drug
                Development of AviFluCideTM for Avian Influenza**Current
                status
            AviFluCide,
                is currently in preclinical studies against avian influenza H5N1.
                It is a
                specific H5N1 anti-influenza nanoviricide. It is based on an antibody
                provided tous by the NIHE, Vietnam by which influenza viruses bind
                to
                cells. AviFluCide has been tested in cell cultures and has demonstrated
                better results than oseltamivir. The Company is planning in-vivo
                and
                in-vitro studies with AviFluCide at the Vietnam National Institute
                of
                Hygiene and Epidemiology (NIHE) during the year ended June 30,
                2008Nature,
                timing and estimated costs
            We
                expect to know by the end of December, 2008 whether we will continue
                with
                AviFluCide as a drug candidate. The Company has budgeted approximately
                $500,000 for the material development, production and testing of
                this drug
                during Q1 2007 at NIHE. These costs will be paid from our available
                cash
                balances. Should management determine the results to be satisfactory,
                we
                will need to obtain additional financing to perform material
                characterization, pharmaco-kinetic, pharmaco-dynamic and toxicology
                studies which we have presently budgeted at $1,000,000.Anticipated
                completion date
            Not
                knownRisks
                and uncertainties associated with completing development on schedule,
                and
                the consequences to operations, financial position and liquidity
                if not
                completed timely
            The
                outcome of clinical testing can not be known at this time, and this
                poses
                substantial risk and uncertainty as to whether or when if ever, this
                drug
                will become marketable.Timing
                of commencement of expected material net cash inflows
            It
                is not known or estimable when net cash inflows from this project
                will
                commence if ever, due to the uncertainties associated with the completion
                of the product, regulatory submissions, approvals and market purchases
                of
                this product.


49
 *Table
            of Contents*




**Project**
            **Drug
                Development of FluCideHPTM for High Pathogenic
                Influenza**Current
                status
            FluCideHP,
                is currently in preclinical studies against all common influenzas
                as well
                as avian influenza H5N1. It is a broad-spectrum anti-influenza
                nanoviricide. It is based on a well known ligand mechanism by which
                influenza viruses become highly pathogenic cells. This mechanism
                involves
                the hemagglutinin coat protein of influenza virus protein called
                the
                polybasic site. FluCideHP has been tested in cell cultures and in
                mice and
                has demonstrated better results than oseltamivir. The Company is
                planning
                in-vivo and in-vitro studies with FluCideHP at the Vietnam National
                Institute of Hygiene and Epidemiology (NIHE) and other facilities,
                including KARD Scientific, during the year ended June 30,
                2008Nature,
                timing and estimated costs
            The
                Company has budgeted approximately $500,000 for the material development,
                production and testing of this drug during the year ending June 30,
                2008.
                These costs will be paid from our available cash balances. Should
                management determine the results to be satisfactory, we will need
                to
                obtain additional financing to perform material characterization,
                pharmaco-kinetic, pharmaco-dynamic and toxicology studies which we
                have
                presently budgeted at $1,000,000.










Anticipated
                completion date
            Not
                knownRisks
                and uncertainties associated with completing development on schedule,
                and
                the consequences to operations, financial position and liquidity
                if not
                completed timely
            The
                outcome of clinical testing can not be known at this time, and this
                poses
                substantial risk and uncertainty as to whether or when if ever, this
                drug
                will become marketable.Timing
                of commencement of expected material net cash inflows
            It
                is not known or estimable when net cash inflows from this project
                will
                commence if ever, due to the uncertainties associated with the completion
                of the product, regulatory submissions, approvals and market purchases
                of
                this product.





**Project**
            **Drug
                Development of RabiCideTM for Rabies**Current
                status
            RabiCide**,**
                is currently in preclinical studies against rabies. It is a broad-spectrum
                anti-influenza nanoviricide. It is based on a well known ligand mechanism
                by which rabies viruses bind to cells. Rabicide has been successfully
                tested in mice. The Company is planning the first in-vivo and in-vitro
                studies with RabiCide at the Vietnam National Institute of Hygiene
                and
                Epidemiology (NIHE) during 2008.Nature,
                timing and estimated costs
            The
                Company has budgeted approximately $300,000 for the material development,
                production and testing of this drug at NIHE. These costs will be
                paid from
                our available cash balances. Should management determine the results
                to be
                satisfactory, we will need to obtain additional financing to perform
                material characterization, pharmaco-kinetic, pharmaco-dynamic and
                toxicology studies which we have presently budgeted at
                $375,000.Anticipated
                completion date
            Not
                knownRisks
                and uncertainties associated with completing development on schedule,
                and
                the consequences to operations, financial position and liquidity
                if not
                completed timely
            The
                outcome of clinical testing can not be known at this time, and this
                poses
                substantial risk and uncertainty as to whether or when if ever, this
                drug
                will become marketable.Timing
                of commencement of expected material net cash inflows
            It
                is not known or estimable when net cash inflows from this project
                will
                commence if ever, due to the uncertainties associated with the completion
                of the product, regulatory submissions, approvals and market purchases
                of
                this product.


50
 *Table
            of Contents*




Other
      drug nanoviricides for HCV and HIV diseases are at a very early stage of
      research and development and involve a substantial amount of uncertainty as
      to
      the development of these drugs. At this time, very little resources have been
      allocated to these drugs. However should the clinical trials at NIHE in the
      first calendar quarter of 2007 of our influenza and rabies drugs meet
      managements expectations, HCV and HIV will become a major priority for
      development in the following year.





The
      Company has limited experience with pharmaceutical drug development. Thus,
      our
      budget estimates are not based on experience, but rather based on advice given
      by our associates and consultants. As such these budget estimates may not be
      accurate. In addition, the actual work to be performed is not known at this
      time, other than a broad outline, as is normal with any scientific work. As
      further work is performed, additional work may become necessary or change in
      plans or workload may occur. Such changes may have an adverse impact on our
      estimated budget. Such changes may also have an adverse impact on our projected
      timeline of drug development.





The
      Company is currently engaged in a national search for an R&D as well as
      manufacturing facility. The manufacturing portion of the facility will
      eventually need to be certified by the FDA in order for the Company to produce
      experimental materials that can be sent to outside scientists for
      pharmaco-kinetic, pharmaco-dynamic and toxicology studies. These three sets
      of
      studies must be completed prior to the Company filing an IND with the FDA to
      begin the human safety and efficacy trials (Phase I , II and III ).





The
      work-plan we have developed for the next twelve months is expected to enable
      us
      to file an investigational new drug application in our 2008-2009 fiscal year,
      subject to available research and development funds. This work-plan is expected
      to reduce certain risks of drug development. We believe that this coming year's
      work-plan will lead us to obtain certain information about the safety and
      efficacy of some of the drugs under development in animal models. If our studies
      are not successful, we will have to develop additional drug candidates and
      perform further studies. If our studies are successful, then we expect to be
      able to undertake further studies in animal models to obtain necessary data
      regarding the pharmaco-kinetic and pharmaco-dynamic profiles of our drug
      candidates. We believe these data will then enable us to file an Investigational
      New Drug (IND) application, towards the goal of obtaining FDA approval for
      testing the drugs in human patients.





Most
      pharmaceutical companies expect 4 to 10 years of study to be needed before
      a
      drug candidate reaches the IND stage. We believe that because we are working
      in
      the infectious agents area, our studies will have objective response end points,
      and will be of relatively short durations. Our business plan is based on these
      assumptions. If we find that we have underestimated the time duration of our
      studies, or we have to undertake additional studies, due to various reasons
      within or outside of our control, this will grossly and adversely impact both
      our timelines and our financing needs.





Management
      intends to use capital and debt financing, as required, to fund the Company’s
      operations. There can be no assurance that the Company will be able to obtain
      the additional capital resources necessary to fund its anticipated obligations
      for the next twelve months.





The
      Company is considered to be a development stage company and will continue in
      the
      development stage until generating revenues from the sales of its products
      or
      services. As a result, the report of the independent registered public
      accounting firm on our financial statements as of June 30, 2007, contains an
      explanatory paragraph regarding a substantial doubt about our ability to
      continue as a going concern.


51
 *Table
          of Contents*


**Off
      Balance Sheet Arrangements**





We
      have
      not entered into any off-balance sheet arrangements during the year ended June
      30, 2007.





CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES





Please
      refer to the Summary of Significant Accounting Policies included as Note 3
      to
      the financial statements included in our Annual Report on Form 10-KSB for the
      fiscal year ended June 30, 2007.





**POLICY
      AFFECTING RECOGNITION OF REVENUE**





The
      Company is a development stage company and does not have revenue arising from
      operations





**RECENT
      ACCOUNTING PRONOUNCEMENTS**




**Recent
      Accounting Pronouncements**


In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No.
      157”). SFAS No.157 defines fair value, establishes a framework for measuring
      fair value and expands disclosures about fair value measurements. SFAS No.
      157
      is effective for the Company beginning with fiscal year ending June 30,2008.
      The
      Company is in the process of assessing the effect SFAS No. 157 may have on
      its
      financial statements.





On
      July
      13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
      in
      Income Taxes—an interpretation of FASB Statement No. 109. Interpretation 48
      clarifies the accounting for uncertainty in income taxes recognized in an
      entity’s financial statements in accordance with Statement 109 and prescribes a
      recognition threshold and measurement attribute for financial statement
      disclosure of tax positions taken or expected to be taken on a tax return.
      Additionally, Interpretation 48 provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition. Interpretation 48 is effective for fiscal years
      beginning after December 15, 2006, with early adoption permitted. We are
      currently evaluating whether the adoption of Interpretation 48 will have a
      material effect on our consolidated financial position, results of operations
      or
      cash flows.




In
      September 2006, the SEC issued Staff Accounting Bulletin
      (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements
      when Quantifying Misstatements in Current Year Financial Statements.” SAB
      No. 108 addresses how the effects of prior year uncorrected misstatements
      should be considered when quantifying misstatements in current year financial
      statements. SAB No. 108 requires companies to quantify misstatements using
      a balance sheet and income statement approach and to evaluate whether either
      approach results in quantifying an error that is material in light of relevant
      quantitative and qualitative factors. SAB No. 108 is effective for periods
      ending after November 15, 2006.  The adoption of SAB No. 108 had no
      impact on our financial position and results of operations.




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, "The Fair Value Option for Financial Assets and Financial Liabilities,"
      ("FASB 159"). This statement permits entities to choose to measure many
      financial instruments and certain other items at fair value. An entity shall
      report unrealized gains and losses on items for which the fair value option
      has
      been elected in earnings at each subsequent reporting date. The statement is
      effective as of the beginning of an entity's first fiscal year that begins
      after
      November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
      year that begins on or after November 15, 2007, provided the entity also elects
      to apply the provisions of FASB 157. The Company is continuing to evaluate
      the
      impact of this statement.




**ITEM
      7. FINANCIAL STATEMENTS AND SUPPLEMENTARY
      DATA**





The
      information required by Item 8 appears after the signature page to this
      report.


52
 *Table
            of Contents*




**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING AND FINANCIAL DISCLOSURES**





None





**ITEM
      8A. CONTROLS AND PROCEDURES**





NNVC
      maintains disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in reports filed by NNVC under the
      Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
      and reported within the time periods specified in the Securities and Exchange
      Commission's rules and regulations and that such information is accumulated
      and
      communicated to NNVC’s management, including its Chief Executive Officer and
      Interim Chief Financial Officer, as appropriate, to allow for timely decisions
      regarding required disclosure. Our Chief Executive Officer and
      Interim Chief Financial Officer evaluated, with the participation of other
      members of management, the effectiveness of NNVC’s disclosure controls and
      procedures (as defined in Exchange Act Rule 15d-15(e)), as of the end of the
      period covered by this Annual Report on Form 10-KSB. Based on this evaluation,
      our Chief Executive Officer and our Interim Chief Financial Officer concluded
      that the Company's controls were ineffective as of the end of the fiscal year
      due to inherent weaknesses present in the preparation of financial statements
      as
      a result of the departure of its Chief Financial Officer on May 16, 2007. The
      Company believes that it has taken steps for remediation of these weaknesses.
      The Company intends to remediate this weakness by its active search for a
      permanent Chief Financial Officer and the institution of additional internal
      reporting provisions and controls.





Although
      the management of our Company, including the Chief Executive Officer and the
      Interim Chief Financial Officer, believes that our disclosure controls and
      internal controls currently provide reasonable assurance that our desired
      control objectives have been met, management does not expect that our disclosure
      controls or internal controls will prevent all error and all fraud. A control
      system, no matter how well conceived and operated, can provide only reasonable,
      not absolute, assurance that the objectives of the control system are met.
      Further, the design of a control system must reflect the fact that there are
      resource constraints, and the benefits of controls must be considered relative
      to their costs. Because of the inherent limitations in all control systems,
      no
      evaluation of controls can provide absolute assurance that all control issues
      and instances of fraud, if any, within our Company have been detected. These
      inherent limitations include the realities that judgments in decision-making
      can
      be faulty, and that breakdowns can occur because of simple error or mistake.
      Additionally, controls can be circumvented by the individual acts of some
      persons, by collusion of two or more people, or by management override of the
      controls. The design of any system of controls is also based in part upon
      certain assumptions about the likelihood of future events, and there can be
      no
      assurance that any design will succeed in achieving its stated goals under
      all potential
      future conditions.





Except
      for the items disclosed herein, there were no significant changes in our
      internal controls over financial reporting identified in connection with this
      evaluation that occurred during our last fiscal quarter that have materially
      affected, or are reasonably likely to materially affect, NNVC's internal
      controls over financial reporting.




**ITEM
      8B.  Other Information**





Not
        applicable.


53
 *Table
          of Contents*




**PART
      III**





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
      PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT**





The
      following table sets forth the names and ages of our current directors and
      executive officers, their principal offices and positions and the date each
      such
      person became a director or executive officer. Executive officers are elected
      annually by our Board of Directors. Each executive officer holds his office
      until he resigns, is removed by the Board or his successor is elected and
      qualified. Directors are elected annually by our stockholders at the annual
      meeting. Each director holds his office until his successor is elected and
      qualified or his earlier resignation or removal.





The
      following persons are the directors and executive officers of our
      company:





*Name*
            *Age*
            *Title*Anil
                Diwan, PhD.
            49
            President;
                Chairman of the BoardEugene
                Seymour, MD, MPH
            66
            Chief
                Executive Officer; Acting CFO; DirectorLeo
                Ehrlich
            47
            Chief
                Financial Officer, Director -Resigned May 16,
                2007





The
      Company’s executive officers and directors are elected annually and serve until
      the next annual meeting of stockholders.





**Eugene
      Seymour, MD, MPH,** age 66, has been Chief Executive Officer (CEO) and a
      director of the Company since consummation of the merger on June 1, 2005. From
      1996 until May 2005 he has been a private investor and has held no corporate
      positions. During this period he formed a non-profit foundation which funded
      both testing and training programs for health workers in Asia and Africa. He
      was
      a consultant to the UN Global Program on AIDS and was sent to several countries,
      (Lithuania, Latvia, Estonia and Russia) to interact with local physicians and
      assist them in setting up testing programs. Dr. Seymour obtained a Master's
      degree in the Epidemiology of Infectious Diseases at UCLA in addition to his
      medical degree. He began clinical practice in Internal Medicine and joined
      the
      UCLA Medical School faculty. He left UCLA after two years and joined the USC
      faculty as Associate Professor. Dr. Seymour served in the Medical Corps of
      US
      Army Reserve during the Vietnam era and attained the rank of Major. In 1986,
      he
      was requested by the US government to establish a testing laboratory and run
      a
      large-scale surveillance program for HIV prevalence in the Hispanic population
      in Los Angeles. His laboratory ended up testing over 50,000 people. In 1989,
      he
      founded StatSure Diagnostic Systems, Inc. (SDS) (formerly Saliva Diagnostic
      Systems, Inc.), raised capital and developed the rapid HIV antibody blood test
      (Hema-Strip). He took the company public in 1993 as CEO and President. He left
      SDS in 1996. Dr. Seymour holds 8 issued patents, and is married with three
      children, two of whom are physicians.





**Anil
      Diwan, PhD,** age 49, has been President and the Chairman of the Board of
      Directors of the Company since consummation of the merger on June 1, 2005.
      Dr.
      Diwan simultaneously therewith and since its formation, has also served as
      the
      Chief Executive Officer and Director of All Excel, Inc. (from 1995 to the
      present) and TheraCour Pharma, Inc. (from 2004 to the present) and is the
      original inventor of the technologies licensed to NanoViricides Inc, as well
      as
      the TheraCour polymeric micelle technologies and products based on them. Since
      1992, he has researched and developed TheraCour nanomaterials. Dr. Diwan was
      the
      first to propose the development of novel pendant polymers for drug delivery
      that led to an explosion of research in pharmacological applications of
      polymeric micelles. Anil has won over 12 NIH SBIR grants. Dr. Diwan holds two
      patents, one issued and one applied for, and has made intellectual property
      depositions of four additional patentable discoveries with the patent attorney.
      Dr. Diwan has held several scholastic distinctions, including an All-India
      9th
      rank on the Joint Entrance Examination of all IIT’s. He holds a Ph.D. in
      Biochemical Engineering from Rice University (1986) and B.S. in Chemical
      Engineering from Indian Institute of Technology (IIT) Bombay
      (1980).


54
 *Table
            of Contents*




**AUDIT
      COMMITTEE**





Although
      its By-laws provide for the appointment of one, the Company is not yet required
      to have an Audit Committee as a result of the fact that our common stock is
      not
      considered a “listed security” as defined in Rule 10A-3 of the Exchange Act.
      There are currently no audit committee members that meet the criteria of
“Financial Expert”, however the Company is actively working to appoint a
“Financial Expert” in the current year.




**CODE
      OF ETHICS**




We
      have
      adopted a code of ethics meeting the requirements of Section 406 of the
      Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed
      to deter wrongdoing and promote honest and ethical conduct; provide full, fair,
      accurate, timely and understandable disclosure in public reports; comply with
      applicable laws; ensure prompt internal reporting of violations; and provide
      accountability for adherence to the provisions of the code of ethic. Our code
      of
      ethics is filed as an exhibit to this Form 10-KSB.





**ITEM
      10.EXECUTIVE COMPENSATION**





The
      Company's executive compensation program for is administered by the Board of
      Directors.





COMPENSATION
      OBJECTIVES





We
      believe that the compensation programs for the Company's NEOs should reflect
      the
      Company's performance and the value created for the Company's stockholders.
      In
      addition, the compensation programs should support the short-term and long-term
      strategic goals and values of the Company, and should reward individual
      contributions to the Company's success. Our compensation plans are consequently
      designed to link individual rewards with Company's performance by applying
      objective, quantitative factors including the Company's own business performance
      and general economic factors. We also rely upon subjective, qualitative factors
      such as technical expertise, leadership and management skills, when structuring
      executive compensation in a manner consistent with our compensation
      philosophy.





ELEMENTS
      OF COMPENSATION





BASE
      SALARY. All full time executives are paid a base salary. Base salaries for
      our
      executives are established based on the scope of their responsibilities,
      professional qualifications, academic background, and the other elements of
      the
      executive's compensation, including stock-based compensation. However, at this
      time current total annual compensation is not in line with comparable companies,
      because our philosophy was to pay modest salaries with no bonus to conserve
      capital resources for future company growth. Our intent is to set executives'
      base salaries near the median of the range of salaries for executives in similar
      positions with similar responsibilities at comparable companies, in line with
      our compensation philosophy. Base salaries are reviewed annually, and may be
      increased to align salaries with market levels after taking into account the
      subjective evaluation described previously.





EQUITY
      INCENTIVE COMPENSATION. We believe that long-term performance is achieved
      through an ownership culture participated in by our executive officers through
      the use of stock-based awards. Currently, we do not maintain any incentive
      compensation plans based on pre-defined performance criteria. The Board of
      Directors has the general authority, however, to award equity incentive
      compensation, i.e. stock options, to our executive officers in such amounts
      and
      on such terms as the committee determines in its sole discretion. The Board
      of
      Directors does not have a determined formula for determining the number of
      options available to be granted. The Board of Direcors will review each
      executive's individual performance and his or her contribution to our strategic
      goals periodically. With the exception of stock options automatically granted
      in
      accordance with the terms of the employment agreement with our executive
      officers, our Board of Directors grants equity incentive compensation at times
      when we do not have material non-public information to avoid timing issues
      and
      the appearance that such awards are made


based
      on
      any such information.


55
 *Table
          of Contents*




DETERMINATION
      OF COMPENSATION





The
      Board
      of Directors makes decisions about all aspects of compensation, and takes into
      account compensation data and benchmarks for comparable positions and companies
      in different applicable geographical areas.





The
      Company's current executives compensation program as of the date of this report
      has been at the same level since 2005. The program is simplistic and is less
      structured than a more mature corporation. Two of our NEOs are founders
      or co-founders of the Company and their ownership in the Company has driven
      their philosophy to provide modest salaries and no annual bonus. The
      compensation structure was set to retain capital resources in the Company to
      further growth.





The
      following table reflects all forms of compensation for the years ended June
      30,
      2006 and 2007 and for the period from May 12, 2005 (date of inception) through
      June 30, 2007. No other person received salary or bonus in excess of $100,000
      for any of these fiscal years.




**Summary
      Compensation Table**





Name
                andPrincipalPosition
            
            Year
            
            
            Salary
              ($)
            
            
            Bonus
              ($)
            
            
            StockAwards
              ($)
                *
            
            
            OptionAwards
              ($)
                *
            
            
            Non-EquityIncentive
                PlanCompensation
              ($)
            
            
            NonqualifiedDeferredCompensation
              ($)
            
            
            All
                OtherCompensation
              ($)
            
            Total
              ($)Anil
                Diwan, President, Chairman of the Board
            
            
            2007
              2006
              2005
            
            
            
            200,000
              150,000
            
            
            
            -0-
              211,000
            
            
            
            -0-
            
            
            
            17,197
              41,144
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-Eugene
                Seymour, Chief  Executive and Financial, Officer,
                Director
            
            
            2007
              2006
              2005
            
            
            
            200,000
              150,000
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            6,208
              23,087
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-Leo
                Ehrlich, Chief
              Financial
                Officer, Director
            
            
            2007
              2006
              2005
            
            
            
            250,000
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            3,657
              23,087
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-


56
 *Table
            of Contents*




**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT.**





The
      following table sets forth information relating to the beneficial ownership
      of
      the Company's common stock by those persons beneficia1ly holding more than
      5% of
      the Company's common stock, by the Company's directors and executive officers,
      and by all of the Company's directors and executive officers as a group as
      of
      June 30, 2006.








**Name
                and Address of Beneficial Owner**
            
            **Amount
                and Nature of Beneficial Owner (1)**
            
            
            **Percent
                of Class (2)**Theracour
                Pharma, Inc.(3) (4)
              135
                Wood Street
              West
                Haven, CT 06516
            
            
            35,370,000
            
            
            
            31.00
            %Anil
                Diwan (3) (4)
              135
                Wood Street
              West
                Haven, CT 06516
            
            
            10,750,00
            
            
            
            9.42
            %Eugene
                Seymour (5)
              135
                Wood Street
              West
                Haven, Connecticut 06516
            
            
            8,875,000
            
            
            
            7.78
            %Leo
                Ehrlich (4) (6)
              135
                Wood Street
              West
                Haven, Connecticut 06516
            
            
            9,725,000
            
            
            
            8.52
            %Total
                Business Services, Inc. (7)
              c/o
                Levy & Boonshoft, P.C.
              477
                Madison Avenue
              New
                York, New York 10022
            
            
            6,025,000
            
            
            
            5.28
            %All
                Directors and Executive
              Officers
                as a Group (3 persons) (8)
            
            
            64,345,000
            
            
            
            56.41
            %





(1)
            "Beneficial
                Owner" means having or sharing, directly or indirectly (i) voting
                power,
                which includes the power to vote or to direct the voting, or (ii)
                investment power, which includes the power to dispose or to direct
                the
                disposition, of shares of the common stock of an issuer. The definition
                of
                beneficial ownership includes shares, underlying options or warrants
                to
                purchase common stock, or other securities convertible into common
                stock,
                that currently are exercisable or convertible or that will become
                exercisable or convertible within 60 days. Unless otherwise indicated,
                the
                beneficial owner has sole voting and investment
                power.





(2)
            For
                each shareholder, the calculation of percentage of beneficial ownership
                is
                based upon 114,069,144 shares of Common Stock outstanding as of June
                30
                2007, and shares of Common Stock subject to options, warrants and/or
                conversion rights held by the shareholder that are currently exercisable
                or exercisable within 60 days, which are deemed to be outstanding
                and to
                be beneficially owned by the shareholder holding such options, warrants,
                or conversion rights. The percentage ownership of any shareholder
                is
                determined by assuming that the shareholder has exercised all options,
                warrants and conversion rights to obtain additional securities and
                that no
                other shareholder has exercised such
                rights.





(3)
            Anil
                Diwan, President and Chairman of the Board of Directors. Includes
                10,000,000 shares of NanoViricides common stock held by Mr. Diwan
                and
                750,000 shares of NanoViricides common stock issuable upon exercise
                of
                options held by Mr. Diwan that are currently exercisable or will
                become
                exercisable within 60 days.


57
 *Table
          of Contents*


(4)
            Anil
                Diwan, the Company’s President and Chairman, also serves as the CEO and
                Director of TheraCour Pharma Inc. and owns approximately 65% of the
                outstanding capital stock of TheraCour. Leo Ehrlich, the Company’s Chief
                Financial Officer, serves as TheraCour’s Director and owns 10% of the
                outstanding capital stock of TheraCour. Anil Diwan has both investment
                and
                dispositive power over the Nanoviricides shares held by TheraCour
                Pharma,
                Inc.





(5)
            Eugene
                Seymour, Chief Executive Officer and Director. Includes 8,500,000
                shares of NanoViricides common stock held by Dr. Seymour and 375,000
                shares of NanoViricides common stock issuable upon exercise of options
                held by Dr. Seymour that are currently exercisable or will become
                exercisable within 60 days.





(6)
            Leo
                Ehrlich, formerly Chief Financial Officer and Director. Includes
                5,850,000
                shares of NanoViricides common stock held by Mr. Ehrlich and includes
                3,500,000 shares of NanoViricides common stock held by the wife and
                children of Leo Ehrlich, and 375,000 shares of NanoViricides common
                stock
                issuable upon exercise of options held by Mr. Ehrlich that are currently
                exercisable or will become exercisable within 60
                days.




(7)
            Includes
                1,475,000 shares of Common Stock owned by the children of John Flynn,
                the
                sole officer and director of Total Businesses Services, Inc. and
                has
                dispositive power over the shares held by Total Business Services,
                Inc.





(8)
            Includes
                35,370,000 shares of Common Stock indirectly owned by certain of
                the
                Executive Officers (including Leo Ehrlich) and Directors as a group
                but
                excludes non vested options to acquire an additional 375,000 shares
                of
                Common Stock by Executive Officers and Directors, as a
                group.





**EMPLOYMENT
      AGREEMENTS**




On
      September 26, 2005, the Company entered into employment agreements with its
      three executive officers, Eugene Seymour, Chief Executive Officer, Anil Diwan,
      President and Chairman of Board, and Leo Ehrlich, Chief Financial Officer.
      All
      three agreements provide a minimum annual base salary of $200,000 for a term
      of
      three years. This base salary will increase to $250,000 per year upon closing
      of
      a financing to the Company with minimum gross proceeds of $5,000,000. The
      Company is also obligated to pay health and life insurance benefits and
      reimburse expenses incurred by the officers on behalf of the company. Each
      executive, if terminated by the Company without cause, would be entitled to
      six
      months severance pay in the amount of $100,000. Additionally the agreements
      provided the following stock options exercisable into the Company’s common stock
      at $0.10 per share:





**·**
            Dr.
                Anil Diwan received 1,000,000 options, 333,333 options vested upon
                execution of the employment agreement. The remaining options vest
                in equal
                amounts on January 1, 2007 (333,333 options) and January 1, 2008
                (333,333
                options). The options expire September 26,
                2015.





**·**
            Dr.
                Eugene Seymour received 500,000 options, 250,000 options vested upon
                execution of the employment agreement. The remaining options vest
                in equal
                amounts on January 1, 2007 (125,000 options) and January 1, 2008
                (125,000
                options). The options expire September 26,
                2015.





**·**
            Leo
                Ehrlich received 500,000 options, 250,000 options vested upon execution
                of
                the employment agreement. 125,000 options vested on January 1, 2007
                . The
                remaining options (125,000 options)were cancelled upon Mr. Ehrlich’s
                resignation from the Company on May 16, 2007. The options expire
                September
                26, 2015.


58
 *Table
            of Contents*




**COMPENSATION
      OF DIRECTORS**





At
      this
      time, directors receive no remuneration for their services as directors of
      the
      Company, nor does the Company reimburse directors for expenses incurred in
      their
      service to the Board of Directors. The Company does not expect to pay any fees
      to its directors for the 2007 fiscal year.




**COMPENSATION
      OF SCIENTIFIC ADVISORY BOARD**





The
      Company anticipates holding four Scientific Advisory Board meetings per annum.
      As compensation, each member of the Scientific Advisory Board (SAB) will be
      granted each quarter 10,000 warrants to purchase the Company’s common stock at
      120% of the Company’s closing stock quote on the day following the meeting.
      Should the Company not call a quarterly meeting, quarterly options will be
      granted on May 15, August 15, November 15, and February 15. The warrants will
      have a four year expiration date. In addition the Company will reimburse each
      SAB member for travel and other out-of-pocket expenses incurred in the course
      of
      performing their services. Through June 30, 2007, the SAB was granted a total
      of
      160,000 stock warrants exercisable into common shares at prices from $0.18
      to
      $2.20 per share.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS**




Currently,
      we have no independent directors on our Board of Directors, and therefore have
      no formal procedures in effect for reviewing and pre-approving any transactions
      between us, our directors, officers and other affiliates. We will use our best
      efforts to insure that all transactions are on terms at least as favorable
      to
      the Company as we would negotiate with unrelated third parties.





***TheraCour
      Pharma, Inc.***





On
      May
      12, 2005, the Company entered into an Material License Agreement, amended as
      of
      January 8, 2007 (the “License”) we entered into with TheraCour Pharma, Inc.,
      (“TheraCour”), our largest shareholder. As of the present, TheraCour granted the
      Company an exclusive license in perpetuity for technologies developed by
      TheraCour for six virus types: HIV, HCV, Herpes, Rabies, Asian (bird) flu and
      Influenza. In consideration for obtaining this exclusive license, we agreed:
      (1)
      that TheraCour can charge its costs (direct and indirect) plus no more than
      30%
      of direct costs as a development fee and such development fees shall be due
      and
      payable in periodic installments as billed, (2) to pay $25,000 per month for
      usage of lab supplies and chemicals from existing stock held by TheraCour;
      (3)
      to pay the greater of $2,000 or actual costs, for other general and
      administrative expenses incurred by TheraCour on our behalf (4) to make royalty
      payments of 15% (calculated as a percentage of net sales of the licensed drugs)
      to TheraCour; (5) that TheraCour Pharma, Inc. shall retain the exclusive right
      to develop and synthesize nanomicelle(s), a small (approximately twenty
      nanometers in size) long chain polymer based chemical structure, as component
      elements of the Licensed Products. TheraCour agreed that it will develop and
      synthesize such nanomicelle exclusively for NanoViricides, and unless such
      license is terminated, will not develop or synthesize such nanomicelle for
      its
      own sake or for others; and (6) to pay an advance payment equal to twice the
      amount of the previous months invoice to be applied as a prepayment towards
      expenses.




Development
      costs charged by and paid to TheraCour Pharma, Inc. was $1,340,670 since
      inception through June 30, 2007; and $617,007 and $693,892 for the years ended
      June 30, 2007 and 2006, respectively. No royalties are due or have been paid
      from inception through June 30, 2007.




TheraCour
      may terminate the License upon a material breach by us as specified in the
      agreement. However, the Company has the opportunity to cure the breach within
      90
      days of receipt of notice to terminate the License.




As
      of
      June 30, 2007, TheraCour owns 35,370,000 shares of the Company’s outstanding
      common stock.





Anil
      Diwan, the Company’s President and Chairman, also serves as the CEO and Director
      of TheraCour and owns approximately 65% of the outstanding capital stock of
      TheraCour. Leo Ehrlich, the Company’s Chief Financial Officer, serves as
      TheraCour’s Director and owns approximately 10% of the outstanding capital stock
      of TheraCour.


59
 *Table
            of Contents*




***KARD
      Scientific, Inc.***





In
      June
      2005, the Company engaged KARD Scientific to conduct pre clinical human
      influenza animal (mouse) studies and provide the Company with a full history
      of
      the study and final report with the data collected. This project is on-going.
      NanoViricides has a fee for service arrangement with KARD. We do not have an
      exclusive arrangement with KARD; we do not have a contract with KARD; all work
      performed by KARD must have prior approval of the executive officers of
      NanoViricides; and we retain all intellectual property resulting from the
      services by KARD. Dr. Krishna Menon, the Company’s Chief Regulatory Officer, a
      non-executive officer position, is also an officer and principal owner of KARD
      Scientific. Lab fees charged by KARD Scientific for services for the years
      ended
      June 30, 2007 and 2006, were $114,801 and $206,419 respectively, and 321,220
      since inception..





**ITEM
      13.  EXHIBITS**





**Exhibit No.**
            
            **Description**3.1*
            
            
            Articles
                of Incorporation, as amended, of the Registrant3.2*
            
            
            By-laws
                of the Registrant4.1*
            
            
            Specimen
                Stock Certificate of the Registrant4.2*
            
            
            Series
                A Convertible Debenture4.3*
            
            
            Form
                of Warrant10.1*
            
            
            Share
                Exchange Agreement between NanoViricide, Inc. and the
                Registrant10.2*
            
            
            Employment
                agreement ES10.3*
            
            
            Employment
                agreement AD10.4*
            
            
            Employment
                agreement LE10.5*
            
            
            Form
                of Scientific Advisory Board Agreement10.6*
            
            
            Amended
                License Agreement with TheraCour Pharma, Inc.10.7*
            
            
            Lease
                with landlord10.8*
            
            
            Form
                of First Subscription Agreement10.9*
            
            
            Form
                of Second Subscription Agreement10.10*
            
            
            Code
                of Ethics10.11*
            
            
            Amended
                Agreement #2 with TheraCour Pharma, Inc.10.12*
            
            
            Memorandum
                of Understanding with Vietnam’s National Institute of Hygiene and
                Epidemiology (NIHE) dated December 23, 200531.1
            
            
            Rule
              13a-14(a)/15d-14(a) Certifications of Chief Executive Officer31.2
            
            
            Rule
              13a-14(a)/15d-14(a) Certifications of Chief Financial Officer32.1
            
            
            Section
              1350 Certifications of Chief Executive Officer32.2
            
            
            Section
              1350 Certiications of Chief Financial
              Officer





*
      Incorporated by reference to the Company’s registration statement on Form 10-SB,
      filed with the Securities Commission on November 14, 2006, as
      amended.




**ITEM
      14. PRINCIPAL ACCOUNTING FEES AND
      SERVICES**





Audit
      Fees





The
      aggregate fees for each of the last two years for professional services rendered
      by the principal accountant for our audits of our annual financial statements
      and interim reviews of our financial statements included in


our
      fillings with Securities and Exchange Commission on Form 10-KSBs and 10-Qs
      or
      services that are normally provided by the accountant in connection with
      statutory and regulatory filings or engagements for those years
      were


approximately:





June
                30, 2007:
            
            $120,000
                Holtz Rubinstein Reminick LLPJune
                30, 2006:
            
            $
                0
                Holtz Rubinstein Reminick LLP





Audit
      Related Fees


60
 *Table
          of Contents*


The
      aggregate fees in each of the last two years for the assurance and related
      services provided by the principal accountant that are not reasonably related
      to
      the performance of the audit or review of the Company's financial statements
      and are not reported in paragraph (1) were approximately:





June
                30, 2007:
            
            $34,000  Holtz
                Rubinstein Reminick LLPJune
                30, 2006:
            
            $
                80,000 Holtz Rubinstein Reminick
                LLP





We
      incurred these fees in connection with registration statements and financing
      transactions.





Tax
      Fees





The
      aggregate fees in each of the last two years for the professional services
      rendered by the principal accountant for tax compliance, tax advice and tax
      planning were approximately:





June
                30,  2007:
            
            $
                0
                Holtz Rubinstein Reminick LLPJune
                30, 2006:
            
            $
                0
                Holtz Rubinstein Reminick LLP







All
      Other
      Fees





The
      aggregate fees in each of the last two years for the products and services
      provided by the principal accountant, other than the services reported in
      paragraph (1) were approximately:





June
                30, 2007:
            
            $
                0
                Holtz Rubinstein Reminick LLPJune
                30, 2006:
            
            $
                0
                Holtz Rubinstein Reminick LLP








**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.





Dated:
      October 15, 2007





NANOVIRICIDES,
                INC./s/
                Eugene Seymour, MDEugene
                Seymour, M.D.Chief
                Executive and Interim Chief Financial Officer and
                Director/s/
                Anil DiwanAnil
                DiwanPresident
                and Chairman of the Board of
                Directors


61
 *Table
          of Contents*


**NANOVIRICIDES,
      INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**




**Index
      to Financial Statements**




Report
                of Independent Registered Public Accounting Firm
            F-2Financial
                StatementsBalance
                Sheets – June 30, 2007 and 2006
            F-3Statements
                of Operations – For the Years Ended June 30, 2007 and 2006 and For the
                Cumulative Period May 12, 2005 (Inception) through June 30,
                2007.
            F-4Statements
                of Changes in Stockholders’ Equity (Deficit) – For the Cumulative Period
                May 12, 2005 (Inception) through June 30, 2007.
            F-5Statements
                of Cash Flows – For the Years Ended June 30, 2007 and 2006 and For the
                Cumulative Period May 12, 2005 (Inception) through June 30,
                2007.
            F-9Notes
                to Financial Statements
            F-12




*Table
          of Contents*


**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
   To
        the
        Board of Directors and
 Stockholders
        of NanoViricides, Inc.
  We
        have
        audited the accompanying balance sheets of NanoViricides, Inc. (a development
        stage company) as of June 30, 2007 and 2006, and the related statements of
        operations, stockholders’ equity, and cash flows for the years ended June 30,
        2007 and 2006 and the cumulative period from May 12, 2005 (date of inception)
        through June 30, 2007. 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 audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit also includes examining,
        on a test basis, evidence supporting the amounts and disclosures in the
        financial statements, and 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 financial statements referred to above present fairly, in all
        material respects, the financial position of NanoViricides, Inc. as of June
        30,
        2007 and 2006, and the results of its operations and its cash flows for the
        years ended June 30, 2007 and 2006 and the cumulative period from May 12,
        2005
        (date of inception) through June 30, 2007, 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 2 to the financial
        statements, the Company has no viable operations, has suffered significant
        operating losses, and is dependent upon its stockholders to provide sufficient
        working capital to meet its obligations and sustain its operations. These
        circumstances raise substantial doubt about the Company’s ability to continue as
        a going concern. Management’s plans regarding those matters are also described
        in Note 2. The accompanying financial statements do not contain any adjustments
        that might result from the outcome of these uncertainties.
   /s/
        Holtz
        Rubenstein Reminick LLP
  New
        York,
        New York
 October
        4, 2007


F-2
 *Table
          of Contents*




**NANOVIRICIDES,
      INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**BALANCE
      SHEETS**




**June 30, 2007**
            
            
            **June 30, 2006**
              as
              (Restated)**ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            967,797
            
            
            $
            2,507,102Prepaids-
                related parties
            
            
            236,722
            
            
            
            213,728Other
                current assets
            
            
            20,000
            
            
            
            -Total
                current assets
            
            
            1,224,519
            
            
            
            2,720,830Property
                and equipment, net
            
            
            18,487
            
            
            
            2,054OTHER
                ASSETS:Deferred
                expenses, net
            
            
            -
            
            
            
            6,714Security
                deposit
            
            
            100,000
            
            
            
            -Trademark,
                net
            
            
            7,215
            
            
            
            -Total
                other assets
            
            
            107,215
            
            
            
            6,714TOTAL
                ASSETS
            
            $
            1,350,221
            
            
            $
            2,729,598**LIABILITIES
                AND SHAREHOLDERS’ EQUITY (DEFICIT)**CURRENT
                LIABILITIES:Accounts
                payable
            
            $
            72,845
            
            
            $
            44,076Accounts
                payable – related parties
            
            
            262,038
            
            
            
            203,045Accrued
                expenses
            
            
            65,000
            
            
            
            90,831Accrued
                payroll  to officers and related payroll  tax
                expense
            
            
            450,000
            
            
            
            232,282Other
                payroll  taxes payable
            
            
            -
            
            
            
            3,826TOTAL
                CURRENT LIABILITIES
            
            
            849,883
            
            
            
            574,060LONG
                TERM DEBT:Debentures,
                net
            
            
            -
            
            
            
            917,082TOTAL
                LONG TERM DEBT
            
            
            -
            
            
            
            917,082TOTAL
                LIABILITIES
            
            
            849,883
            
            
            
            1,491,142COMMITMENTS
                AND CONTINGENCIESSHAREHOLDERS’
                EQUITY (DEFICIT)Common
                stock, $0.001 par value; 300,000,000 shares authorized at June 30,
                2007
                and 2006; issued and outstanding: 114,069,144 (2007) and 108,878,425
                (2006)
            
            
            114,069
            
            
            
            108,878Additional
                paid-in capital
            
            
            6,855,689
            
            
            
            4,480,035Stock
                subscription receivable
            
            
            (20
            )
            
            
            (20
            )Deficit
                accumulated during the development stage
            
            
            (6,469,400
            )
            
            
            (3,350,437
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            500,338
            
            
            
            1,238,456TOTAL
                LIABILITIES
                AND SHAREHOLDERS’ EQUITY
            
            $
            1,350,221
            
            
            $
            2,729,598




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




F-3
 *Table
          of Contents*




**NANOVIRICIDES,
      INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**STATEMENT
      OF OPERATIONS**




**Year
                Ended**
              **June 30, 2007**
            
            
            **Year Ended**
              **June 30, 2006**
            
            
            **For
                the Cumulative Period**
              **From**
              **May 12, 2005
                (Inception)**
              **Through**
              **June 30, 2007**Revenues
            
            $
            -
            
            
            $
            -
            
            
            $
            -Operating
                expenses:Research
                and development
            
            
            731,808
            
            
            
            899,891
            
            
            
            1,662,470General
                and administrative (of this amount $453,201, $427,703  and
                $880,904 was for stock and option based compensation to consultants
                and
                officers)
            
            
            2,351,104
            
            
            
            1,695,957
            
            
            
            4,082,295Total
                operating expenses
            
            
            3,082,912
            
            
            
            2,595,848
            
            
            
            5,744,765Loss
                from operations
            
            
            (3,082,912
            )
            
            
            (2,595,848
            )
            
            
            (5,744,765
            )Other
                income (expenses)Interest
                income
            
            
            54,511
            
            
            
            7,863
            
            
            
            62,374Non
                cash interest on convertible debentures
            
            
            (7,644
            )
            
            
            (66,286
            )
            
            
            (73,930
            )Non
                cash interest expense on beneficial conversion feature of
                convertible  debentures
            
            
            (82,918
            )
            
            
            (630,161
            )
            
            
            (713,079
            )Total
                other expenses
            
            
            (36,051
            )
            
            
            (688,584
            )
            
            
            (724,635
            )Net
                loss to common stockholders
            
            $
            (3,118,963
            )
            
            $
            (3,284,432
            )
            
            $
            (6,469,400
            )Net
                loss per share: basic and diluted
            
            $
            (0.03
            )
            
            $
            (0.03
            )Weighted
                average shares outstanding: basic and diluted
            
            
            112,255,669
            
            
            
            103,591,691




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





F-4
 *Table
          of Contents*




**NANOVIRICIDES,
      INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**STATEMENTS
      OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)**


**FOR
      THE CUMULATIVE PERIOD MAY 12, 2005 (INCEPTION) THROUGH JUNE 30,
      2007**





Common
                  StockAdditional
              
              
              Stock
              
              
              
              
              
              TotalNumber
              
              
              Par
              
              
              Paid-in
              
              
              Subscription
              
              
              Accumulated
              
              
              Shareholders'of
                  Shares
              
              
              Value
              
              
              Capital
              
              
              Receivable
              
              
              Deficit
              
              
              EquityShares
                  issued May 12, 2005 (Inception)
              
              
              20,000
              
              
              $
              20
              
              
              $
              -
              
              
              $
              (20
              )
              
              $
              -
              
              
              $
              -Share
                  exchange with Edot-com.com Inc., June  1, 2005
              
              
              (20,000
              )
              
              
              (20
              )
              
              
              -
              
              
              
              20
              
              
              
              -
              
              
              
              -Shares
                  exchanged in reverse acquisition of Edot-com.com Inc., June 1,
                  2005
              
              
              80,000,000
              
              
              
              80,000
              
              
              
              (79,980
              )
              
              
              (20
              )
              
              
              -
              
              
              
              -Shares
                  outstandingEdot-com.com
                  Inc.,June 1,
                  2005
              
              
              20,000,000
              
              
              
              20,000
              
              
              
              (20,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -Net
                  loss period ended June 30, 2005
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (66,005
              )
              
              
              (66,005
              )Balance
                  at June 30, 2005(as
                  restated)
              
              
              100,000,000
              
              
              
              100,000
              
              
              
              (99,980
              )
              
              
              (20
              )
              
              
              (66,005
              )
              
              
              (66,005
              )Discount
                  related to beneficial conversion feature of Convertible debentures,
                  July 13, 2005
              
              
              -
              
              
              
              -
              
              
              
              5,277
              
              
              
              -
              
              
              
              -
              
              
              
              5,277Legal
                  expenses related private placement of common stock, July 31,
                  2006
              
              
              -
              
              
              
              -
              
              
              
              (2,175
              )
              
              
              
              
              
              
              
              
              
              
              (2,175
              )Discount
                  related to beneficial conversion feature of Convertible debentures,
                  July 31, 2005
              
              
              -
              
              
              
              -
              
              
              
              5,302
              
              
              
              -
              
              
              
              -
              
              
              
              5,302Warrants
                  issued to Scientific Advisory Board, August 15, 2005
              
              
              -
              
              
              
              -
              
              
              
              4,094
              
              
              
              -
              
              
              
              -
              
              
              
              4,094Options
                  issued to officers, September 23, 2005
              
              
              -
              
              
              
              -
              
              
              
              87,318
              
              
              
              -
              
              
              
              -
              
              
              
              87,318Shares
                  issued for consulting services rendered at $.081 per share,
                  September 30, 2005
              
              
              2,300,000
              
              
              
              2,300
              
              
              
              184,000
              
              
              
              -
              
              
              
              -
              
              
              
              186,300Shares
                  issued for interest on debentures, September 30, 2005
              
              
              48,177
              
              
              
              48
              
              
              
              4,267
              
              
              
              -
              
              
              
              -
              
              
              
              4,315Discount
                  related to beneficial conversion feature of Convertible debentures,
                  October 28, 2005
              
              
              -
              
              
              
              -
              
              
              
              166,666
              
              
              
              -
              
              
              
              -
              
              
              
              166,666Discount
                  related to beneficial conversion feature of Convertible debentures,
                  November 9, 2005
              
              
              -
              
              
              
              -
              
              
              
              166,667
              
              
              
              -
              
              
              
              -
              
              
              
              166,667
  F-5
 *Table
            of Contents*
  Common
                      StockAdditional
                  
                  
                  Stock
                  
                  
                  
                  
                  
                  TotalNumber
                  
                  
                  Par
                  
                  
                  Paid-in
                  
                  
                  Subscription
                  
                  
                  Accumulated
                  
                  
                  Stockholders'of
                      Shares
                  
                  
                  Value
                  
                  
                  Capital
                  
                  
                  Receivable
                  
                  
                  Deficit
                  
                  
                  EquityDiscount
                      related to beneficial conversion feature of Convertible debentures,
                      November 10, 2005
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  45,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  45,000Discount
                      related to beneficial conversion feature of Convertible debentures,
                      November 11, 2005
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  275,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  275,000Discount
                      related to beneficial conversion feature of Convertible debentures,
                      November 15, 2005
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  49,167
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  49,167Warrants
                      issued to Scientific Advisory Board, November 15,
                      2005
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,876
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,876Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      November 28, 2005
                  
                  
                  340,000
                  
                  
                  
                  340
                  
                  
                  
                  169,660
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  170,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      November 29, 2005
                  
                  
                  300,000
                  
                  
                  
                  300
                  
                  
                  
                  149,700
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  150,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      November 30, 2005
                  
                  
                  150,000
                  
                  
                  
                  150
                  
                  
                  
                  74,850
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  75,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      December 2, 2005
                  
                  
                  100,000
                  
                  
                  
                  100
                  
                  
                  
                  49,900
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      December 6, 2005
                  
                  
                  850,000
                  
                  
                  
                  850
                  
                  
                  
                  424,150
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  425,000Shares
                      issued for legal services rendered at $.95 per share, December 6,
                      2005
                  
                  
                  20,000
                  
                  
                  
                  20
                  
                  
                  
                  18,980
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  19,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      December 12, 2005
                  
                  
                  750,000
                  
                  
                  
                  750
                  
                  
                  
                  374,250
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  375,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      December 13, 2005
                  
                  
                  50,000
                  
                  
                  
                  50
                  
                  
                  
                  24,950
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      December 14, 2005
                  
                  
                  50,000
                  
                  
                  
                  50
                  
                  
                  
                  24,950
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,000Shares
                      issued in connection with debenture offering, December 15,
                      2005
                  
                  
                  50,000
                  
                  
                  
                  50
                  
                  
                  
                  48,950
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  49,000
  F-6
 *Table
              of Contents*
   Common
                      StockAdditional
                  
                  
                  Stock
                  
                  
                  
                  
                  
                  TotalNumber
                  
                  
                  Par
                  
                  
                  Paid-in
                  
                  
                  Subscription
                  
                  
                  Accumulated
                  
                  
                  Stockholders'Of
                      Shares
                  
                  
                  Value
                  
                  
                  Capital
                  
                  
                  Receivable
                  
                  
                  Deficit
                  
                  
                  EquityShares
                      and warrants issued in connection with private placement of
                      common stock,
                      December 20, 2005
                  
                  
                  50,000
                  
                  
                  
                  50
                  
                  
                  
                  24,950
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      December 29, 2005
                  
                  
                  50,000
                  
                  
                  
                  50
                  
                  
                  
                  24,950
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      December 30, 2005.
                  
                  
                  50,000
                  
                  
                  
                  50
                  
                  
                  
                  24,950
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,000Shares
                      issued for interest on debentures, December 31, 2005
                  
                  
                  19,476
                  
                  
                  
                  19
                  
                  
                  
                  17,321
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  17,340Shares
                      issued for consulting services rendered at $1.46 per share,
                      January 9, 2006
                  
                  
                  3,425
                  
                  
                  
                  4
                  
                  
                  
                  4,997
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5,001Warrants
                      issued to Scientific Advisory Board on February 15,
                      2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  49,067
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  49,067Warrants
                      issued to Scientific Advisory Board on May 15, 2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  51,048
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  51,048Shares
                      issued for interest on debentures, March 31, 2005
                  
                  
                  7,921
                  
                  
                  
                  8
                  
                  
                  
                  22,184
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  22,192Options
                      exercised, May 31, 2006
                  
                  
                  1,800,000
                  
                  
                  
                  1,800
                  
                  
                  
                  88,200
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  90,000Shares
                      and warrants issued in connection with private placement of
                      common stock,
                      June 15, 2006
                  
                  
                  1,875,000
                  
                  
                  
                  1,875
                  
                  
                  
                  1,873,125
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,875,000-Shares
                      issued for interest on debentures, June 30, 2006
                  
                  
                  14,426
                  
                  
                  
                  14
                  
                  
                  
                  22,424
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  22,438Net
                      loss year ended June 30, 2006.
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (3,284,432
                  )
                  
                  
                  (3,284,432
                  )Balance
                      at June 30, 2006(
                      as restated )
                  
                  
                  108,878,425
                  
                  
                  $
                  108,878
                  
                  
                  $
                  4,480,035
                  
                  
                  $
                  (20
                  )
                  
                  $
                  (3,350,437
                  )
                  
                  $
                  1,238,456Shares
                      issued for interest on debentures, July 31, 2006
                  
                  
                  5,744
                  
                  
                  
                  6
                  
                  
                  
                  7,638
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,644Shares
                      issued in connection with conversion of convertible debentures,
                      July 31, 2006
                  
                  
                  3,333,333
                  
                  
                  
                  3,333
                  
                  
                  
                  996,667
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,000,000Exercise
                      of stock warrants, July 31, 2006
                  
                  
                  200,000
                  
                  
                  
                  200
                  
                  
                  
                  49,800
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50,000Warrants
                      issued to Scientific Advisory Board on August 15,
                      2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  30,184
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  30,184
 F-7
 *Table
              of Contents*


Common
                  StockAdditional
              
              
              Stock
              
              
              
              
              
              TotalNumber
              
              
              Par
              
              
              Paid-in
              
              
              Subscription
              
              
              Accumulated
              
              
              Stockholders'Of
                  Shares
              
              
              Value
              
              
              Capital
              
              
              Receivable
              
              
              Deficit
              
              
              EquityWarrants
                  issued to Scientific Advisory Board on November 15,
                  2006
              
              
              -
              
              
              
              -
              
              
              
              25,888
              
              
              
              -
              
              
              
              -
              
              
              
              25,888Shares
                  issued for consulting and legal services rendered at $.76 per share,
                  January 2, 2007
              
              
              216,000
              
              
              
              216
              
              
              
              163,944
              
              
              
              -
              
              
              
              -
              
              
              
              164,160Warrants
                  s issued to Scientific Advisory Board on February 15,
                  2007
              
              
              -
              
              
              
              -
              
              
              
              32,668
              
              
              
              -
              
              
              
              -
              
              
              
              32,668Warrants
                  issued to Scientific Advisory Board on May 15, 2007
              
              
              -
              
              
              
              -
              
              
              
              25,664
              
              
              
              -
              
              
              
              -
              
              
              
              25,664Shares
                  issued for consulting services rendered at $1.03 per share, June 12,
                  2007
              
              
              752
              
              
              
              1
              
              
              
              774
              
              
              
              -
              
              
              
              -
              
              
              
              775Shares
                  issued for consulting services rendered at $1.15 per share, June 20,
                  2007
              
              
              100,000
              
              
              
              100
              
              
              
              114,900
              
              
              
              -
              
              
              
              -
              
              
              
              115,000Shares
                  issued upon conversion of convertible warrants  at $1.00 per
                  share, June 20, 2007
              
              
              930,000
              
              
              
              930
              
              
              
              619,070
              
              
              
              -
              
              
              
              -
              
              
              
              620,000Shares
                  issued upon conversion of convertible warrants  at $1.00 per
                  share, June 25, 2007
              
              
              75,000
              
              
              
              75
              
              
              
              49,925
              
              
              
              -
              
              
              
              -
              
              
              
              50,000Shares
                  issued upon conversion of convertible warrants  at $1.00 per
                  share, June 30, 2007
              
              
              300,000
              
              
              
              300
              
              
              
              199,700
              
              
              
              -
              
              
              
              -
              
              
              
              200,000Shares
                  issued for consulting and legal services rendered at $1.06 per
                  share,
                  June 30, 2007
              
              
              29,890
              
              
              
              30
              
              
              
              31,770
              
              
              
              -
              
              
              
              -
              
              
              
              31,800Options
                  issued to officers June 30, 2007
              
              
              -
              
              
              
              -
              
              
              
              27,062
              
              
              
              -
              
              
              
              -
              
              
              
              27,062Net
                  loss year ended June 30, 2007.
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (3,118,963
              )
              
              
              (3,118,963
              )Balance
                  at June 30, 2007
              
              
              114,069,144
              
              
              $
              114,069
              
              
              $
              6,855,689
              
              
              $
              (20
              )
              
              $
              (6,469,400
              )
              
              $
              500,338




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




F-8
 *Table
          of Contents*




**NANOVIRICIDES,
      INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**




**Year
                  Ended**
                **June 30, 2007**
              
              
              **Year
                  Ended**
                **June 30, 2006**
              
              
              **For
                  the Cumulative Period**
                **From
                  May 12, 2005 (Inception) through**
                **June 30, 2007**OPERATING
                  ACTIVITIES:Net
                  loss
              
              $
              (3,118,963
              )
              
              $
              (3,284,432
              )
              
              $
              (6,469,400
              )Adjustments
                  to reconcile net loss to net cash usedby
                  operating activities:Shares
                  issued for services rendered
              
              
              311,735
              
              
              
              210,301
              
              
              
              522,036Options
                  granted to scientific advisory board
              
              
              114,404
              
              
              
              130,084
              
              
              
              244,488Amortization
                  of deferred compensation
              
              
              27,062
              
              
              
              87,318
              
              
              
              114,380Depreciation
                  and amortization
              
              
              2,525
              
              
              
              94
              
              
              
              2,619Amortization
                  of deferred financing expenses
              
              
              6,714
              
              
              
              44,461
              
              
              
              51,175Non
                  cash interest on convertible debentures
              
              
              7,644
              
              
              
              66,286
              
              
              
              73,930Non
                    cash interest expense on beneficial conversion feature of convertible
                    debentures
              
              
              82,918
              
              
              
              630,161
              
              
              
              713,079Changes
                  in assets and liabilities:Prepaids
                  – related parties
              
              
              (22,994
              )
              
              
              (213,728
              )
              
              
              (236,722
              )Other
                  current assets
              
              
              (20,000
              )
              
              
              -
              
              
              
              (20,000
              )Deferred
                  expenses
              
              
              -
              
              
              
              (2,175
              )
              
              
              (2,175
              )Accounts
                  payable
              
              
              28,769
              
              
              
              33,902
              
              
              
              72,845Accounts
                  payable –related parties
              
              
              58,993
              
              
              
              164,738
              
              
              
              262,038Accrued
                  expenses
              
              
              (25,831
              )
              
              
              73,307
              
              
              
              65,000Accrued
                  payroll  to officers and related payroll  tax
                  expense
              
              
              217,718
              
              
              
              232,282
              
              
              
              450,000Other
                  payroll taxes payable
              
              
              (3,826
              )
              
              
              3,826
              
              
              
              -Net
                  cash used in operating activities
              
              
              (2,333,132
              )
              
              
              (1,823,575
              )
              
              
              (4,156,707
              )INVESTING
                  ACTIVITIES:Secuity
                  deposit
              
              
              (100,000
              )
              
              
              -
              
              
              
              (100,000
              )Purchases
                  of property and equipment
              
              
              (18,586
              )
              
              
              (2,148
              )
              
              
              (20,734
              )Purchase
                  of  Trademark
              
              
              (7,587
              )
              
              
              -
              
              
              
              (7,587
              )


F-9
 *Table
          of Contents*


**NANOVIRICIDES,
        INC.**
 **(A
        DEVELOPMENT STAGE COMPANY)**


STATEMENTS
      OF CASH FLOWS


SUPPLEMENTAL
      DISCLOSURE OF NON-CASH
      ACTIVITY




**Year
                  Ended**
                **June
                  30, 2007**
              
              
              **Year
                  Ended**
                **June
                  30, 2006**
              
              
              **For
                  the Cumulative Period From May 12, 2005 (Inception) through**
                **June 30, 2007**Net
                  cash used in investing activities
              
              
              (126,173
              )
              
              
              (2,148
              )
              
              
              (128,321FINANCING
                  ACTIVITIES:Proceeds
                  from issuance of convertible debentures
              
              
              -
              
              
              
              1,000,000
              
              
              
              1,000,000Proceeds
                  from issuance of common stock and warrants in connection with private
                  placements of common stock
              
              
              -
              
              
              
              3,245,000
              
              
              
              3,245,000Proceeds
                  from stock option exercise
              
              
              -
              
              
              
              90,000
              
              
              
              90,000Payment
                  of legal expenses related to private placement
              
              
              -
              
              
              
              (2,175
              )
              
              
              (2,175Proceeds
                  from exercise of warrants
              
              
              920,0000
              
              
              
              -
              
              
              
              920,000Net
                  cash provided by financing activities
              
              
              920,000
              
              
              
              4,332,825
              
              
              
              5,252,825NET
                  INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              (1,539,305
              )
              
              
              2,507,102
              
              
              
              967,797CASH
                  AND CASH EQUIVALENTS, BEGINNING
              
              
              2,507,102
              
              
              
              -
              
              
              
              -CASH
                  AND CASH EQUIVALENTS, ENDING
              
              $
              967,797
              
              
              $
              2,507,102
              
              
              $
              967,797CASH
                  PAID DURING THE YEAR FOR:INTEREST
              
              $
              -
              
              
              $
              -
              
              
              $
              -INCOME
                  TAXES
              
              $
              2,067
              
              
              $
              --
              
              
              $
              2,067CASH
                  AND CASH EQUIVALENTS, ENDING




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




F-10
 *Table
          of Contents*




**NANOVIRICIDES,
      INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**STATEMENTS
      OF CASH FLOWS (CONTINUED)**


**SUPPLEMENTAL
      DISCLOSURE OF NON-CASH ACTIVITY**





During
      the periods indicated below, the Company had the following non-cash
      activity:




**Year Ended June 30,****2007**
            
            
            **2006**
            
            
            **For
                the Cumulative Period From May 12, 2005 (Inception) through**
              **June 30, 2007**Common
                stock issued for services rendered
            
            $
            311,735
            
            
            $
            210,301
            
            
            $
            522,036Stock
                options issued to the officers as compensation
            
            
            27,062
            
            
            
            87,318
            
            
            
            114,380Stock
                warrants granted to scientific advisory board
            
            
            114,404
            
            
            
            130,084
            
            
            
            244,488Common
                stock issued for interest on debentures
            
            
            7,644
            
            
            
            66,286
            
            
            
            73,930Shares
                of common stock issued in connection with debenture
                offering
            
            
            -
            
            
            
            49,000
            
            
            
            49,000Warrants
                issued in connection with private placement
            
            
            -
            
            
            
            1,262,632
            
            
            
            1,262,632Common
                stock issued upon conversion of convertible debentures
            
            
            1,000,000
            
            
            
            -
            
            
            
            1,000,000Debt
                discount related to beneficial conversion feature of convertible
                debt
            
            
            -
            
            
            
            713,079
            
            
            
            713,079Warrants
                issued in connection with private placement
            
            
            -
            
            
            
            1,262,632
            
            
            
            1,262,632




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




F-11
 *Table
          of Contents*




**NANOVIRICIDES,
      INC**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**


**JUNE
      30, 2007 AND 2006**




**Note
      1. Organization and Nature of Business**




NanoViricides,
      Inc. was incorporated under the laws of the State of Colorado on July 25, 2000
      as Edot-com.com, Inc**.**and was organized for the purpose of
      conducting internet retail sales.  On April 1, 2005, Edot-com.com,
      Inc**.**was incorporated under the laws of the State of Nevada for
      the purpose of re-domiciling the Company as a Nevada corporation.  On
      May 12, 2005, the Corporations were merged and Edot-com.com, Inc**.,**a Nevada corporation, (the Company), became the surviving
      entity.




On
      June
      1, 2005, Edot-com.com, Inc. (“ECMM”) acquired Nanoviricide, Inc., a privately
      owned Florida corporation (“NVI”), pursuant to an Agreement and Plan of Share
      Exchange (the “Exchange”).  Nanoviricide, Inc. was incorporated under
      the laws of the State of Florida on May 12, 2005.




Pursuant
      to the terms of the Exchange, ECMM acquired NVI in exchange for an aggregate
      of
      80,000,000 newly issued shares of ECMM common stock resulting in an aggregate
      of
      100,000,000 shares of ECMM common stock issued and outstanding.  NVI
      then became a wholly-owned subsidiary of ECMM. The ECMM shares were issued
      to
      the NVI Shareholders on a pro rata basis, on the basis of 4,000 shares of the
      Company’s Common Stock for each share of NVI common stock held by such NVI
      Shareholder at the time of the Exchange.




As
      a
      result of the Exchange Transaction the former NVI stockholders held
      approximately 80% of the voting capital stock of the Company immediately after
      the Exchange Transaction.  For financial accounting purposes,
      this  acquisition was a reverse acquisition of the Company by NVI,
      under the purchase method of accounting, and was treated as a recapitalization
      with NVI as the acquirer. Accordingly, the financial statements have been
      prepared to give retroactive effect to May 12, 2005 (date of inception), of
      the
      reverse acquisition completed on June 01, 2005, and represent the operations
      of
      NVI.




On
      June
      28, 2005, NVI was merged into its parent ECMM and the separate corporate
      existence of NVI ceased.  Effective on the same date, EDOT-COM.COM, Inc.
      changed its name to NanoViricides, Inc. and its stock symbol to
“NNVC”, respectively.  The Company is considered a development stage
      company at this time.




NanoViricides, Inc.
      (the “Company”), is a nano-biopharmaceutical company whose business goals are to
      discover, develop and commercialize therapeutics to advance the care of patients
      suffering from life-threatening viral infections. We are a development stage
      company with several drugs in various stages of early development. Our drugs
      are
      based on several patents, patent applications, provisional patent applications,
      and other proprietary intellectual property held by TheraCour Pharma, Inc.,
      to
      which we have the necessary licenses in perpetuity for the treatment of the
      following human viral diseases: Human Immunodeficiency Virus (HIV/AIDS),
      Hepatitis B Virus (HBV), Hepatitis C Virus (HCV), Herpes Simplex Virus (HSV),
      Influenza and Asian Bird Flu Virus. We focus our research and clinical programs
      on specific anti-viral solutions. We are seeking to add to our existing
      portfolio of products through our internal discovery and clinical development
      programs and through an in-licensing strategy. To date, the Company has not
      developed any commercial products.




**Note
      2 - Substantial Doubt Regarding Ability to Continue as a Going
      Concern**




Since
      May
      2005, the Company has been engaged exclusively in research and development
      activities focused on developing targeted nano viral drugs.  The Company
      has not yet commenced any product commercialization. The Company has incurred
      significant operating losses since its inception, resulting in an accumulated
      deficit of $6,469,400 at June 30, 2007. Such losses are expected to continue
      for
      the foreseeable future and until such time, if ever, as the Company is able
      to
      attain sales levels sufficient to support its operations. There can be no
      assurance that the Company will achieve or maintain profitability in the future.
      Despite the Company’s financings in 2007, 2006 and 2005 (See Notes 7 and 8) and
      a cash balance of $967,797 at June 30, 2007, substantial additional financing
      will be required in future periods, as the Company believes it will require
      in
      excess of $5,000,000 to fund its operations during the next twelve months.
      These
      factors raise substantial doubts about the Company's ability to continue as
      a
      going concern.




In
      September, 2007, the Company had received subscriptions in the aggregate amount
      of $2.5 million financing through the offering of shares of the Company's common
      stock.  Accordingly, the accompanying financial statements do not
      include any adjustments relating to the realization of the carrying value of
      assets or the amounts and classification of liabilities that might be necessary
      should the company be unable to continue as a going concern. Continuance of
      the
      Company as a going concern is dependent on its future profitability and on
      the
      on-going support of its shareholders, affiliates and creditors.




F-12
 *Table
          of Contents*




**Note
      3. Summary of Significant Accounting Policies**




A.
            **Accounting
                Basis**– The Company has not earned any revenue from limited
                principal operations. Accordingly, the Company's activities have
                been
                accounted for as those of a "Development Stage Company" as set forth
                in
                Financial Accounting Standards Board Statement No. 7 (“SFAS 7"). Among the
                disclosures required by SFAS 7 are that the Company's financial statements
                be identified as those of a development stage company, and that the
                statements of earnings, retained earnings and stockholders' equity
                and
                cash flows disclose activity since the date of the Company's
                inception.




B.
            **Cash
                and Cash Equivalents**– The Company considers highly liquid debt
                instruments with original maturities of three months or less to be
                cash
                equivalents. In addition, the Company maintains cash and cash equivalents
                at financial institutions, which may exceed federally insured amounts
                at
                times.




C.
            **Equipment**–
                Equipment is stated at cost and depreciated over the estimated useful
                lives of the assets (generally five years) using the straight-line
                method.




D.
            **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 disclosure
                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.




E.
            **Research
                and Development**– Research and development expenses consist
                primarily of costs associated with the preclinical and or clinical
                trials
                of drug candidates, compensation and other expenses for research
                and
                development, personnel, supplies and development materials, costs
                for
                consultants and related contract research and facility costs. Expenditures
                relating to research and development are expensed as
                incurred.




F.
            **Accounting
                for Stock Based Compensation**– The company adopted the fair value
                recognition provisions of “FASB Statement No. 123(R) Share-Based Payment”,
                using the modified prospective-transition method. Under that transition
                method, compensation cost recognized in the years ended June 30,
                2007
                and  2006 includes compensation cost for all share-based payment
                granted based on the grant-date fair value estimated in accordance
                with
                provisions of FASB 123(R).




The
      fair
      value of the Company’s option-based awards granted to executive officers for the
      year ended June 30, 2006 were estimated using the Black-Scholes option-pricing
      model with following assumptions.




Expected
                life in years
            5
                yearsRisk
                free interest rate
            3.88
                to 4.10%Expected
                volatility
            108.00
                to 109.00%Dividend
                yield
            0%





Computation
      of expected volatility for the year ended June 30, 2006, is based on the equity
      volatilities of four comparable companies. The computation of expected life
      is
      as stated in employment contracts. The risk free interest rates used in the
      valuations of the fair value are based on risk free bond rates of similar time
      periods as the expected life of the stock options. Because the Company has
      no
      historical forfeiture rates, the stock option expense is not adjusted by an
      estimate for forfeiture as required under FASB 123(R).




F-13
 *Table
          of Contents*


G.
            **Accounting
                for Non-Employee Stock Based Compensation**– The Company accounts
                for shares and options issued for non-employees in accordance with
                the
                provision of Emerging Issue Task Force Issue No. 96-18, “Accounting for
                Equity Instruments that are issued to other than Employees for Acquiring
                or in Conjunction with selling Goods or Services”. According to the
                provisions of ETIF 96-18, the Company determines the fair value of
                stock
                and options granted to non-employees on the measurement date which
                is
                either the date of a commitment for performance has been reached
                or when
                performance has been completed, depending upon the facts and
                circumstances. The fair value of the shares and options valued at
                commitment date is expensed immediately if they were for past
                services.




H.
            **Income
                Taxes**– The Company utilizes Statement of Financial Accounting
                Standards No. 109, “Accounting for Income Taxes,” which requires an asset
                and liability approach to financial accounting and reporting for
                income
                taxes. The difference between the financial statement and tax basis
                of
                assets and liabilities is determined annually. Deferred income tax
                assets
                and liabilities are computed for those temporary differences that
                have
                future tax consequences using the current enacted tax laws and rates
                that
                apply to the periods in which they are expected to affect taxable
                income.
                Valuation allowances are established, if necessary, to reduce the
                deferred
                tax asset to the amount that will, more likely than not, be realized.
                Income tax expense is the current tax payable or refundable for the
                year
                plus or minus the net change in the deferred tax assets and
                liabilities.





I.
            **Basic
                Earnings (Loss) per Share**– Basic Earnings (Loss) per Share is
                calculated in accordance with SFAS No. 128, "Earnings per Share,"
                by
                dividing income or loss attributable to common stockholders by the
                weighted average common stock outstanding. Diluted EPS is calculated
                in
                accordance with SFAS No. 128 by adjusting weighted average common
                shares
                outstanding by assuming conversion of all potentially dilutive shares.
                In
                periods where a net loss is recorded, no effect is given to potentially
                dilutive securities, since the effect would be antidilutive. Total
                stock
                options and warrants not included in the calculation of common shares
                outstanding (including both exercisable and nonexercisable) as of
                June 30,
                2007 and 2006 were 4,570,00 and 5,605,000
                respectively.




The
      following table presents the calculation of basic and diluted net loss per
      share:




**2007**
            
            
            **2006**Net
                loss available to common shareholders
            
            $
            (3,118,963
            )
            
            $
            (3,284,432
            )Net
                loss per share, basic and diluted
            
            $
            (0.03
            )
            
            $
            (0.03
            )Weighted-average
                shares used in computing net loss per share, basic anddiluted
            
            
            112,255,669
            
            
            
            103,591,691




J.
            **Concentrations
                of Risk**– Financial instruments that potentially subject us to a
                significant concentration of credit risk consist primarily of cash
                and
                cash equivalents. The Company maintains deposits in federally insured
                institutions in excess of federally insured limits. The Company does
                not
                believe it is exposed to significant credit risk due to the financial
                position of the depository institutions in which those deposits are
                held.




K.
            **Segment
                Reporting**– As of June 30, 2007 the Company has determined that it
                operates in only one segment. Accordingly, no segment disclosures
                have
                been included in the notes to the consolidated financial
                statements.





L.
            **New
                Accounting Pronouncements Affecting the
                Company**





On
      July
      13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
      in
      Income Taxes—an interpretation of FASB Statement No. 109. Interpretation 48
      clarifies the accounting for uncertainty in income taxes recognized in an
      entity’s financial statements in accordance with Statement 109 and prescribes a
      recognition threshold and measurement attribute for financial statement
      disclosure of tax positions taken or expected to be taken on a tax return.
      Additionally, Interpretation 48 provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition. Interpretation 48 is effective for fiscal years
      beginning after December 15, 2006, with early adoption permitted. We are
      currently evaluating whether the adoption of Interpretation 48 will have a
      material effect on our consolidated financial position, results of operations
      or
      cash flows.





F-14
 *Table
          of Contents*




In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No.
      157”). SFAS No.157 defines fair value, establishes a framework for measuring
      fair value and expands disclosures about fair value measurements. SFAS No.
      157
      is effective for the Company beginning with fiscal year ending June 30,2008.
      The
      Company is in the process of assessing the effect SFAS No. 157 may have on
      its
      financial statements.




In
      September 2006, the SEC issued Staff Accounting Bulletin
      (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements
      when Quantifying Misstatements in Current Year Financial Statements.” SAB
      No. 108 addresses how the effects of prior year uncorrected misstatements
      should be considered when quantifying misstatements in current year financial
      statements. SAB No. 108 requires companies to quantify misstatements using
      a balance sheet and income statement approach and to evaluate whether either
      approach results in quantifying an error that is material in light of relevant
      quantitative and qualitative factors. SAB No. 108 is effective for periods
      ending after November 15, 2006.  The adoption of SAB No. 108 had no
      impact on our financial position and results of operations.




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, "The Fair Value Option for Financial Assets and Financial Liabilities,"
      ("FASB 159"). This statement permits entities to choose to measure many
      financial instruments and certain other items at fair value. An entity shall
      report unrealized gains and losses on items for which the fair value option
      has
      been elected in earnings at each subsequent reporting date. The statement is
      effective as of the beginning of an entity's first fiscal year that begins
      after
      November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
      year that begins on or after November 15, 2007, provided the entity also elects
      to apply the provisions of FASB 157. The Company is continuing to evaluate
      the
      impact of this statement.




**Note
      4. Significant Alliances and Related Parties**




***TheraCour
      Pharma, Inc.***




Pursuant
      to an Exclusive License Agreement we entered into with TheraCour Pharma, Inc.,
      (TheraCour), the Company was granted exclusive licenses in perpetuity for
      technologies developed by TheraCour for the virus types: HIV, HCV, Herpes,
      Asian
      (bird) flu, Influenza and rabies.  Additionally, TheraCour has
      permitted the Company to use its nanomaterials to develop a treatment for dengue
      fever until such time as the Company and TheraCour can negotiate an amendment
      to
      the Licensing Agreement to include dengue fever viruses, West Niles Virus and
      Japanese Encephalitis Virus among the virus types we are permitted to
      manufacture, use and offer for sale. In consideration for obtaining this
      exclusive license, we agreed: (1) that TheraCour can charge its costs (direct
      and indirect) plus no more than 30% of direct costs as a Development Fee and
      such development fees shall be due and payable in periodic installments as
      billed.  (2) we will pay  $25,000 per month for usage
      of  lab supplies and chemicals from existing stock held by TheraCour,
      (3) we will pay $2,000 or actual costs, whichever is higher for other general
      and administrative expenses incurred by TheraCour on our behalf (4) make royalty
      payments (calculated as a percentage of net sales of the licensed drugs) of
      15%
      to TheraCour Pharma, Inc. (5) agreed that TheraCour Pharma, Inc. retains the
      exclusive right to develop and manufacture the licensed drugs. TheraCour Pharma,
      Inc. agreed that it will manufacture the licensed drugs exclusively for
      NanoViricides, and unless such license is terminated, will not manufacture
      such
      product for its own sake or for others, (6) TheraCour may request and
      NanoViricides, Inc. will pay an advance payment (refundable) equal to twice
      the
      amount of the previous months invoice to be applied as a prepayment towards
      expenses.




TheraCour
      Pharma, Inc., may terminate the license upon a material breach by us as
      specified in the agreement. However, we may avoid such termination if within
      90
      days of receipt of such termination notice we cure the breach.




Development
      costs charged by and paid to TheraCour Pharma, Inc. were $617,007 and $692,892
      for the years ended June 30, 2007 and 2006, respectively and $1,340,670 since
      inception. No royalties have been paid through the year ended June 30,
      2007.




F-15
 *Table
          of Contents*




TheraCour
      Pharma, Inc., is affiliated with the Company through the common control of
      it
      and our Company by Anil Diwan, President, who is a director of each corporation,
      and owns approximately 65% of the capital stock of TheraCour Pharma, Inc.,
      which
      itself owns approximately 31% of the capital stock of the Company.




TheraCour
      Pharma, Inc. owns 35,370,000 share of the Company’s outstanding common stock as
      of June 30, 2007.




The
      FASB
      has issued Interpretation No. 46 (FIN-46R) (Revised December 2003),
*Consolidation of Variable Interest Entities*. FIN-46R clarifies the
      application of Accounting Research Bulletin No. 51, “Consolidated Financial
      Statements,” to certain entities in which equity investors do not have the
      characteristics of a controlling financial interest or do not have sufficient
      equity at risk for the entity to finance its activities without additional
      subordinated financial support from other parties. It separates entities into
      two groups: (1) those for which voting interests are used to determine
      consolidation and (2) those for which variable interests are used to determine
      consolidation (the subject of FIN-46R). FIN-46R clarifies how to identify a
      variable interest entity and how to determine when a business enterprise should
      include the assets, liabilities, non-controlling interests, and results of
      activities of a variable interest entity in its consolidated financial
      statements.





FIN-46R
      requires that a variable interest entity to be consolidated by its “Primary
      Beneficiary.” The Primary Beneficiary is the entity, if any, that stands to
      absorb a majority of the variable interest entity’s expected losses, or in the
      event that no entity stands to absorb a majority of the expected losses, then
      the entity that stands to receive a majority of the variable interest entity’s
      expected residual returns. If it is reasonably possible that an enterprise
      will
      consolidate or disclose information about a variable interest entity when FIN-
      46R becomes effective, the enterprise is required to disclose in all financial
      statements initially issued after December 31, 2003, the nature, purpose, size,
      and activities of the variable interest entity and the enterprise’s maximum
      exposure to loss as a result of its involvement with the variable interest
      entity. At June 30, 2006 and 2007 the Company evaluated its relationship with
      TheraCour Pharma, Inc. for purposes of FIN-46R, and concluded that it is not
      a
      variable interest entity that is subject to consolidation in the Company’s
      financial statements under FIN-46R.




***KARD
      Scientific, Inc.***




In
      June
      2005, the Company engaged KARD Scientific to conduct pre clinical animal studies
      and provide the Company with a full history of the study and final report with
      the data collected from Good Laboratory Practices (CGLP) style
      studies.  Dr. Krishna Menon, the Company’s Chief Regulatory Officer,
      is also an officer and principal owner of KARD Scientific. Lab fees charged
      by
      KARD Scientific for services for the years ended June 30, 2007 and 2006 were
      $114,801 and $206,419 respectively and $321,220 since inception. In addition
      the
      Company paid KARD a $50,000 advance payment towards future fees.




**Note
      5. Prepaids**




Prepaids
      at June 30 are summarized as follows:




2007
            
            
            2006TheraCour
                Pharma, Inc.
            
            $
            186,722
            
            
            $
            163,728Kard
                Scientific, Inc.
            
            
            50,000
            
            
            
            50,000$
            236,722
            
            
            $
            213,728




(See
      Note
      4. Significant Alliances and Related Parties)





F-16
 *Table
          of Contents*




**Note
      6. Deferred Financing Expenses**




Deferred
      Financing Expenses represent the value of cash payments and common stock issued
      for attorney fees and to an investor as consideration for debt financing during
      fiscal year ended June 30, 2006 were being amortized on a straight-line basis
      over the term of the debenture.  Amortization expense for the years
      ended 2007 and 2006 was $6,714 and  $44,461,
      respectively.




**Note
      7. Stock Transactions**




Pursuant
      to the terms of the reverse acquisition of Nanoviricide, Inc. an aggregate
      of
      100,000,000 shares of common stock were issued and outstanding as of June 1,
      2005, the date of the reverse acquisition.  Of this amount, 80,000,000
      represented founders shares of Nanoviricide, Inc. and 20,000,000 represented
      shares held by shareholders of Edotcom.com (see Note 1).




In
      June
      2005, Allan Marshall and Robert Weidenbaum, stockholders who were instrumental
      in the negotiation, execution, and consummation of the acquisition by
      Edotcom.com of Nanoviricide, Inc., each received options to purchase 1,000,000
      shares of NVI Common Stock at a price of $.05 per share, expiring May 31, 2008.
      The options were issued to these stockholders as finders fees. The fair value
      of
      these options in the amount of $107,028 was charged to additional paid in
      capital. In May 2006, options were converted into 1,800,000 shares of common
      stock resulting in proceeds to the Company of $90,000. In order to reconcile
      the
      number of the Company's outstanding securities as represented in the exchange
      agreement with NanoViricide, Inc., the remaining 200,000 options were cancelled
      pursuant to an agreement between the parties. The fair value of cancelled
      options of $10,703 was reversed against additional paid in capital.




In
      June
      2005, MJT Consulting, Inc., another party that was instrumental in the
      negotiation, execution, and consummation of the acquisition by ECMM of NVI,
      was
      granted an option to purchase 1,000,000 shares of NVI Common Stock at a price
      of
      $2.50 per share, expiring in May 2006.  These options were not
      converted and have expired.




In
      May
      2005, the Company's Board of Directors established a Scientific Advisory Board.
      As compensation, each member of the Scientific Advisory Board (SAB) is to be
      granted quarterly 10,000 warrants to purchase the Company’s common stock at 120%
      of the Company’s closing stock price on the day following the meeting. Through
      June 30, 2006, the SAB was granted a total of 160,000 stock warrants exercisable
      into common shares at prices from $0.18 to $2.20 per
      share.   These warrants, if not exercised will expire on various
      dates through February 2010. The fair value of these warrants , by using the
      Black- Scholes option pricing model, were valued at $130,084
      and  recorded as consulting expense.




In
      September 2005, the Company's Board of Directors authorized the issuance of
      2,200,000 shares of its common stock with a restrictive legend, as scientific
      consulting compensation for development work on the Company’s anti viral
      compounds.  Based upon the fair market value of the common stock on
      the commitment date, the Company recorded a consulting expense of
      $178,200.




In
      September 2005, the Company's Board of Directors authorized the issuance of
      100,000 shares of its common stock with a restrictive legend, to an outside
      consultant advising the Company on government procurements.  Based
      upon the fair market value of the common stock on the commitment date, the
      Company recorded a consulting expense of $8,100




In
      September 2005, the Company's Board of Directors authorized the issuance of
      48,177 shares of its common stock with a restrictive legend, to the debenture
      holders in lieu of interest on debentures as set forth in the contract. The
      Company recorded an interest expense of $4,315.




In
      November and December 2005, the Company closed a private equity financing for
      proceeds of $1,370,000. The Company sold 2,740,000 shares of its common stock
      at
      $.50 per share. These investors also received warrants for the purchase of
      1,370,000 common shares at $1.00 per share. These warrants expire
      on various dates through December 2008. The Company allocated a relative
      fair value of $483,610 to these $1.00 warrants by using the Black-Scholes option
      pricing model.




F-17
 *Table
          of Contents*




In
      December 2005, the Company's Board of Directors authorized the issuance of
      20,000 shares of its common stock with a restrictive legend to an outside
      consultant advising the Company on government procurements. Based upon the
      fair
      market value of the common stock on the commitment date, the Company recorded
      a
      consulting expense of $19,000.




In
      December 2005, the Company's Board of Directors authorized the issuance of
      50,000 shares of its common stock with a restrictive legend, to an investor
      in
      connection with debt financing. Based upon the fair market value of the common
      stock on the commitment date, the Company recorded a deferred financing cost
      of
      $49,000, which is being amortized using the straight-line method over the term
      of the debenture.




In
      December 2005, the Company's Board of Directors authorized the issuance of
      19,476 shares of its common stock with a restrictive legend, to the debenture
      holders in lieu of interest on debentures as set forth in the contract. The
      Company recorded an interest expense of $17,340.




From
      July
      through December 2005, the Company issued  $1,000,000 of 9% Series A
      convertible debentures with warrants attached to purchase 200,000 shares of
      common stock exercisable at a price per common share of $.25 (See Note
      8).  Interest on these debentures was payable quarterly in common
      stock and resulted in the issuance of 90,000 shares of common stock. As of
      June
      30, 2006 the Company recorded an interest expense of $66,286 for the issuance
      of
      these shares.   The warrants on these debentures were exercised
      in July 2006 (subsequent to the Balance Sheet date) and resulted in proceeds
      to
      the Company of $50,000 and the issuance of 200,000 common shares.




In
      January 2006, the Company's Board of Directors authorized the issuance of 3,425
      shares of its common stock with a restrictive legend, to an outside consultant
      for services.  Based upon the fair market value of the common stock on
      the commitment date, the Company recorded a consulting expense of
      $5,001.




In
      March
      2006, the Company's Board of Directors authorized the issuance of 7,921 shares
      of its common stock with a restrictive legend, to the debenture holders in
      lieu
      of interest on debentures as set forth in the contract. The Company recorded
      an
      interest expense of $22,192.




In
      June
      2006, the Company closed a private equity financing for proceeds of $1,875,000.
      The Company sold 1,875,000 shares of its common stock. These investors also
      received warrants for the purchase of 1,875,000 common shares at $2.50 per
      share. These warrants expire in June 2009.  The Company allocated a
      relative fair value of $779,022 of these warrants by using the Black-Scholes
      option pricing model.




In
      June
      2006, the Company's Board of Directors authorized the issuance of 14,426 shares
      of its common stock with a restrictive legend, to the debenture holders in
      lieu
      of interest on debentures as set forth in the contract. The Company recorded
      an
      interest expense of $22,438.




In
      July
      2006, the Company's Board of Directors authorized the issuance of 5,744 shares
      of its common stock with a restrictive legend, to debenture holders in lieu
      of
      interest on debentures as set forth in the contract. The Company recorded an
      interest expense of $7,644 for the month of July 2006.




In
      July
      2006, warrants to purchase 200,000 shares of common stock exercisable at a
      price
      per common share of $.25 were exercised, and proceeds of $50,000 were
      received.




In
      July
      2006, convertible debentures in the amount of $1,000,000 were converted into
      common stock, resulting in the issuance of 3,333,333 common shares.




In
      August
      2006, the Scientific Advisory Board (SAB) was granted warrants to purchase
      40,000 shares of common stock at $1.36 per share.   These
      warrants, if not exercised will expire in August 2010. The fair value of these
      warrants, by using the Black-Scholes option pricing model, were valued at
      $30,184 and recorded as consulting expense.





In
      November 2006, the Scientific Advisory Board (SAB) was granted warrants to
      purchase 40,000 shares of common stock common stock at $1.19 per
      share.   These warrants, if not exercised will expire in November
      2010.  The fair value of these warrants, by using the Black-Scholes
      option pricing model, were valued at $25,888, and recorded as consulting
      expense.





F-18
 *Table
          of Contents*




On
      January 2, 2007,  the Company entered into consulting agreements for
      future services with Dr. Randall Barton for scientific consulting, and Mr.
      Harry
      Schochat, Esq. for legal consulting.  The company issued Dr. Randall
      Barton 114,000 shares of its common stock and Mr. Harry Schochat, Esq.
      102,000  shares of its common stock, for a total of 216,000 shares as
      upfront payments (non-refundable) to these consultants. Based upon the fair
      market value of the common stock on the commitment date, the Company recorded
      a
      consulting expense of $164,160.




In
      February 2007, the Scientific Advisory Board (SAB) was granted warrants to
      purchase 40,000 shares of common stock at $1.54 per
      share.   These warrants, if not exercised will expire in February
      2011.  The fair value of these warrants by, using the Black-Scholes
      option pricing model, were valued at  $32,668 and recorded as
      consulting expense.





In
      May
      2007, the Scientific Advisory Board (SAB) was granted warrants to purchase
      40,000 shares of common stock at $1.30 per share.   These
      warrants, if not exercised will expire in May 2011.  The fair value of
      these warrants, by using the Black-Scholes option pricing model, were
      valued at $25,664 and recorded as consulting expense.




In
      June
      2007, the company's Board of Directors authorized the issuance of 752 shares
      of
      its common stock with a restrictive legend to an outside consultant advising
      the
      Company on government procurements. Based upon the fair market value of the
      common stock on the commitment date, the Company recorded a consulting expense
      of $775.




In
      June
      2007, the Company's Board of Directors authorized the issuance of 100,000 shares
      of its common stock with a restrictive legend to an outside consultant advising
      the Company on government procurements. Based upon the fair market value of
      the
      common stock on the commitment date, the Company recorded a consulting expense
      of $115,000.




In
      June
      2007, the Company's Board of Directors authorized the issuance of 15,791 shares
      of its common stock with a restrictive legend to Dr. Randall Barton for
      scientific consulting, the Company on government procurements. Based upon the
      fair market value of the common stock on the commitment date, the Company
      recorded a consulting expense of $16,800.




In
      June
      2007, the Company's Board of Directors authorized the issuance of 14,099 shares
      of its common stock with a restrictive legend to Mr. Harry Schochat, Esq. for
      legal consulting, the Company on government procurements. Based upon the fair
      market value of the common stock on the commitment date, the Company recorded
      a
      consulting expense of $15,000.




In
      June
      2007, 870,000 warrants were converted into common stock, resulting in the
      issuance of 1,305,000 common shares. The Company received $870,000 upon this
      conversion.




**Options
      Granted To Officers**




In
      September 2005, 500,000 stock options were granted to Eugene Seymour, our CEO
      under an employment agreement.  Of these options, 250,000 were vested
      immediately and are exercisable from September  2005
      until  September 2015, and the  remaining  options
      vest annually on January 1, in two  equal amounts.




In
      September 2005, 1,000,000 stock options were granted to Anil Diwan, our Chairman
      and President under an employment agreement.  Of these options,
      333,333 were vested immediately and are exercisable from September 2005 until
      September 2015, and the remaining options vest annually on January 1, in two
      equal amounts.




F-19
 *Table
          of Contents*




In
        September 2005, 500,000 stock options were granted to Leo Ehrlich, our former
        CFO under an employment agreement. Of these options, 250,000 were vested
        immediately and are exercisable from September 2005 until September 2015,
        and
        the remaining options vest annually in two equal amounts.   On
        May 16, 2007, Leo Ehrlich resigned as the Company's Chief Financial Officer.
        At
        time of his resignation 375,000 options were vested and are exercisable from
        September 2005 until September 2015.The remaining options were
        forfeited.
  The
        Company has accounted for these options granted to officers under the provisions
        of Financial Accounting Standard No. 123 and SFAS 123R, "Accounting for Stock
        Based Compensation." Based on fair market value of these options, $114,380
        was
        recognized as stock based compensation expense, and $7,044 will be expensed
        over
        the remaining employment term.


**Note
      8. Convertible Notes Payable**




In
      July
      2005 the Company’s board of directors authorized the issuance and sale of up to
      one million dollars of convertible debentures. These debentures matured July
      31,
      2006 and carried an interest rate of 9% per year and were convertible into
      common stock at the lower of 70% of the average closing price of the common
      stock during the 15 days trading days preceding the Maturity Date or $.30 per
      share. In accordance with EITF Issue 98-5 “Accounting for Convertible Securities
      with Beneficial Conversion Features or Contingently Adjustable Conversion
      Ratios”, as amended by EITF 00-27 “Application of Issue No. 98-5 to certain
      Convertible Instruments”, the Company had evaluated that the convertible debt
      had a beneficial conversion feature as the conversion price was less than the
      fair value of the Company's common stock on the measurement date. Accordingly,
      the Company recognized this beneficial conversion feature by recording debt
      discount and corresponding additional paid in capital, in the amount of
      $713,079. The debt discount was being amortized on a straight-line basis over
      the term of these debentures. Amortization expense for the years ended June
      30,
      2007 and 2006 and since inception was $82,918 and $630,161 and $713,079,
      respectively.




In
      July
      2006,  the debentures holders converted all outstanding
      debentures.  As a result of these conversions, the amounts to be converted
      ($1,000,000) which existed at June 30, 2006, were reflected as long-term
      liabilities on the Company's June 30, 2006 balance sheet. Also, as a result
      of
      these conversions, the Company issued an aggregate total of 3,333,333 shares
      of
      the Company's $.001 par value common stock.




For
      the
      years ended June 30, 2007 and 2006 and since inception, interest expense on
      the
      convertible notes in the amount of $7,644 and $66,286 and $73,930 respectively,
      was paid with 5,744 and 90,000 and 95,744 shares of the Company’s common stock
      respectively.




**Note
      9. Stock Options And Warrants**




**Stock
      Options**




The
      following table presents the combined activity of stock options issued for
      the
      years ended June 30, as follows:




Stock
                Options
            
            Number
                of Shares
            
            
            Weighted
                Average Exercise Price per share ($)
            
            
            Weighted
                Average Remaining Contractual Term (years)
            
            
            Aggregate
                Intrinsic Value ($)Outstanding
                at June 30, 2005
            
            
            3,000,000
            
            
            $
            0.86
            
            
            
            2.25
            
            
            $
            -Granted
            
            
            2,000,000
            
            
            
            0.10
            
            
            
            10.00
            
            
            
            2,980,000Exercised
            
            
            (1,800,000
            )
            
            
            0.05
            
            
            
            -
            
            
            
            -Expired
            
            
            (1,000,000
            )
            
            
            2.50
            
            
            
            -
            
            
            
            -Canceled
            
            
            (200,000
            )
            
            
            0.05
            
            
            
            -
            
            
            
            -Outstanding
                at June 30, 2006
            
            
            2,000,000
            
            
            
            0.10
            
            
            
            9.25
            
            
            
            -Granted
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Canceled
            
            
            (125,00
            )
            
            
            .10
            
            
            
            -
            
            
            
            -Outstanding
                at June 30, 2007
            
            
            1,875,000
            
            
            $
            0.10
            
            
            
            8.25
            
            
            $
            1,537,500Exercisable
                at June 30, 2007
            
            
            1,416,666
            
            
            $
            0.10
            
            
            
            8.25
            
            
            $
            683,,333





F-20
 *Table
          of Contents*




As
      of
      June 30, 2007, there was $7,044 of unrecognized compensation cost, related
      to
      non-vested options granted under employment contracts, which is expected to
      be
      recognized over a weighted average period of  less than 1
      year.





On
      May
      31, 2007, 125,000 stock options previously granted to Leo Ehrlich, formerly
      chief financial officer, and not yet vested were cancelled upon his resignation
      from the company.





**Stock
      Warrants**




The
      following table presents the combined activity of stock warrants issued for
      the
      years ended June 30, as follows:




Stock
                Warrants
            
            Number
                of Shares
            
            
            Weighted
                Average Exercise Price per share ($)
            
            
            Weighted
                Average Remaining Contractual Term (years)
            
            
            Aggregate
                Intrinsic Value ($)Outstanding
                at June 30, 2005
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -Granted
            
            
            3,605,000
            
            
            
            1.72
            
            
            
            2.65
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Canceled
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Outstanding
                at June 30, 2006
            
            
            3,605,000
            
            
            
            1.72
            
            
            
            2.65
            
            
            
            -Granted
            
            
            160,000
            
            
            
            1.35
            
            
            
            3.50
            
            
            
            -Exercised
            
            
            (1,070,000
            )
            
            
            1.21
            
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Canceled
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Outstanding
                at June 30, 2007
            
            
            2,695,000
            
            
            $
            1.95
            
            
            
            1.94
            
            
            $
            -Exercisable
                at June 30, 2007
            
            
            2,695,000
            
            
            $
            1.95
            
            
            
            1.94
            
            
            $
            -




Of
      the
      above warrants 2,375,000 expire in fiscal year ending June 30, 2009, 160,000
      expire in fiscal year ending June 30, 2010, and 160,000 expire in fiscal
      year ending June 30, 2011.




F-21
 *Table
          of Contents*




**Note
      10. Income Taxes**




Deferred
      income taxes arise from the temporary differences between financial statements
      and income tax recognition of net operating losses. The net operating loss
      carryforwards will begin to expire in the year 2017 if not utilized. Utilization
      of the Company's net operating loss carry forwards are limited based on changes
      in ownership as defined in Internal Revenue Code Section 382. As of June 30,
      2007 the Company accumulated a tax loss of $5,102,011 resulting in a deferred
      tax benefit of approximately $2,529,400, which has been offset by a 100%
      valuation allowance.




The
      following is reconciliation of inome tax expense (benefit):




2007
            
            
            2006Net
                operating loss carryforwards
            
            $
            1,611,400
            
            
            $
            710,800Research
                and development credit
            
            
            391,700
            
            
            
            234,000Other
            
            
            526,300
            
            
            
            363,700Gross
                deferred tax assets
            
            
            2,529,400
            
            
            
            1,308,500Valuation
                allowances
            
            
            (2,529,400
            )
            
            
            (1,308,500
            )Deferred
                tax assets
            
            $
            -
            
            
            $
            -




During
      the year ended June 30, 2007, the valuation allowance increased by
      $1,220,900.




F-22
 *Table
          of Contents*




**Note
      11. Commitments and Contingencies**




**OPERATING
      LEASE**




The
      Company’s principal executive offices are located at 135 Wood Street, West
      Haven, Connecticut, and include approximately 1,500 square feet of office space
      at a base monthly rent of $1,875. The term of lease expired in February
      2007.  We occupy the premises on a month-to-month basis since the
      lease has expired.




On
      February 27, 2007, NanoViricides, Inc. entered into a sublease to occupy 5,000
      square feet of space at 4 Research Drive, in Woodbridge, Connecticut. The
      term of the occupancy is until January 30, 2009 at a monthly rent of $11,667,
      plus an additional $500 per month for utilities. At June 30, 2007, future
      minimum rental payments due under this operating lease are as
      follows:




Year
                  Ending June 30,2008
              
              $
              140,0042009
              
              
              81,669Total
              
              $
              221,673


Total
      rent expense amounts to $68,796 and $9,000 for the years ended June 30, 2007
      and
      2006 respectively, and $78,296 for the period from inception.




**OFFICERS’
      COMPENSATION**




The
      Company in September 2005, signed employment agreements with its three executive
      officers to pay minimum annual base salaries of  $200,000 each for
      three years. This base salary will increase to $250,000 per year upon closing
      of
      a financing to the company with gross proceeds of at least
      $5,000,000.  In addition to salary, the Company is obligated to pay
      health and life  insurance benefits and reimburse expenses incurred by
      the officers on behalf of  the company. The Company also granted stock
      options as part of these employment agreements  (See Note
      7).  Each executive officer, if terminated by the Company without
      cause, would be entitled six months salalry  ($100,000) as severance
      compensation.






On
      May
      16, 2007 Leo Ehrlich, formerly chief financial officer, resigned from the
      Company. At the time of his resignation, and pursuant to an agreement between
      Mr. Ehrlich and the Company, Mr. Ehrlich was owed $91,666 in earned, but
      deferred compensation. The Company has agreed to pay $31,666 in August, 2007
      and
      the remainder in $10,000 increments commencing September, 2007.




**COOPERATIVE
      RESEARCH AND DEVELOPMENT AGREEMENT (CRADA)**





On
      April
      9, 2007, the Company signed a Cooperative Research and Development Agreement
      (CRADA) with the Walter Reed Army Institute of Research to create new treatments
      for dengue fever using the Company’s nanomedicine technology.  Each
      party is individually responsible for funding its own respective researchers
      throughout this agreement, including laboratory facilities, salaries, overhead
      and indirect costs. There were no costs incurred in the fiscal year ended June
      30, 2007.




F-23
 *Table
          of Contents*




**OTHER
      CONTINGENCIES**




The
      Company is dependent upon its license agreement with TheraCour Pharma, Inc.
      (See
      Note 4).  If it  loses the right to utilize any of the
      proprietary information that is the subject of the TheraCour Pharma license
      agreement on which it depends, the Company will incur substantial delays and
      costs in development of its drug candidates.


**LEGAL**
  While
        no
        legal actions are currently pending, the Company may be party to certain
        claims
        brought against it arising from certain contractual matters. It is not possible
        to state the ultimate liability, if any, in these matters. In management’s
        opinion, the ultimate resolution of any such claim will not have a material
        adverse effect on the financial position of the Company.


**Note
      12. Subsequent Event**




In
        September, 2007, the Company had received subscriptions in the aggregate
        amount
        of $2,500,000 through the offering of shares of the Company's common stock
        (the
        "Offering").  The subscriptions are for shares common stock at a
        purchase price of $0.50 per share and warrants to purchase 0.30 shares of
        common
        stock  at an exercise price of $1.00 per share; which warrants may be
        exercised at any time and expire in three years.  In accordance with
        the Offering, on September 21, 2007, the Company sold 1,500,000 shares of
        common
        stock and warrants to purchase 450,000 shares of common stock at an exercise
        price of $1.00 per share for a purchase price of $750,000. The warrants may
        be exercised at any time and expire in three years.  It is anticipated
        that these funds should enable the Company to support operations through
        the end
        of its fiscal year ending June 30, 2008.  The Company anticipates
        raising an aggregate of $5,000,000 in the Offering.






F-24