Exhibit 13.1

Commonwealth Biotechnologies, Inc.

2010

ANNUAL REPORT



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Commonwealth Biotechnologies, Inc.

Table of Contents



|                                                                                    |  |            |    | 
|----------------------------------------------------------------------------------- |  | ---------- | -- | 
|                                                                                    |  | PageNumber |   
|Stockholder Matters                                                                 |  |            | 1  | 
|                                                                                    | 
|Selected Financial Data                                                             |  |            | 2  | 
|                                                                                    | 
|Management Discussion and Analysis of Financial Condition and Results of Operations |  |            | 3  | 
|                                                                                    | 
|Report of Independent Registered Public Accounting Firm                             |  |            | 14 | 
|                                                                                    | 
|Consolidated Financial Statements                                                   |  |            |    | 
|                                                                                    | 
|Balance Sheets                                                                      |  |            | 15 | 
|                                                                                    | 
|Statements of Operations                                                            |  |            | 16 | 
|                                                                                    | 
|Statements of Stockholders Equity                                                  |  |            | 17 | 
|                                                                                    | 
|Statements of Cash Flows                                                            |  |            | 18 | 
|                                                                                    | 
|Summary of Significant Accounting Policies                                          |  |            | 19 | 
|                                                                                    | 
|Notes to Financial Statements                                                       |  |            | 26 | 



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Commonwealth Biotechnologies, Inc.



Stockholder Matters



The Companys common stock traded on the NASDAQ Capital Market (NASDAQ) under the symbol
CBTE until January 25, 2010. The Companys common stock currently trades on the Pink Sheets under the symbol CBTEQ.PK. The following table sets forth the range of high and low sales price per share of common stock for the years
ended December 31, 2010, 2009 and 2008, respectively. These market quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission and may not necessarily represent actual transactions. On April 13, 2011, the last reported sales price for a share of the Companys Common Stock was $0.04. As of April 14, 2011, there were 48
holders of record of the Companys Common stock and 2 beneficial holders. The Company has not paid and does not expect to pay any cash
dividends on its Common Stock.


Period

HighStockPrice


LowStockPrice1st Quarter, 2010

$
0.65


$
0.152nd Quarter, 2010

$
0.26


$
0.163rd Quarter, 2010

$
0.17


$
0.094th Quarter, 2010

$
0.11


$
0.061st Quarter, 2009

$
0.39


$
0.212nd Quarter, 2009

$
1.18


$
0.223rd Quarter, 2009

$
0.80


$
0.504th Quarter, 2009

$
.077


$
0.361st Quarter, 2008

$
2.87


$
1.912nd Quarter, 2008

$
3.14


$
1.233rd Quarter, 2008

$
1.51


$
0.714th Quarter, 2008

$
0.82


$
0.23






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Commonwealth Biotechnologies, Inc.



Selected Financial Data

Set forth below is selected financial data with respect to the years ended December 31, 2010 and 2009. The selected financial data set forth below
should be read in conjunction with Managements Discussion and Analysis of Financial Conditions and Results of Operation.



|                                                                              |  |                                            |            |   |      |   |            |  
|----------------------------------------------------------------------------- |  | ------------------------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                              |  | As of and for the year ended December 
31, |           
|                                                                              |  | 2010                                       |            |   | 2009 |  
|Operational Data                                                              |  |                                            |            |   |      |   |            |  
|Total revenues                                                                |  | $                                          | 610,281    |   |      | $ | 99,894     |  
|                                                                              |  |                                            |            |   |      |   |            |  
|Loss from continuing operations                                               |  |                                            | (644,617   | ) |      |   | (2,456,039 | )
|Income (Loss) from discontinued operations                                    |  |                                            | (359,653   | ) |      |   | 95,667     |  
|                                                                              |  |                                            |            |   |      |   |            |  
|Net loss                                                                      |  | $                                          | (1,004,270 | ) |      | $ | (2,360,372 | )
|                                                                              |  |                                            |            |   |      |   |            |  
|Basic and diluted loss per common share from continued operations             |  | $                                          | (0.06      | ) |      | $ | (0.33      | )
|                                                                              |  |                                            |            |   |      |   |            |  
|Basic and diluted income (loss) per common share from discontinued operations |  |                                            | (0.04      | ) |      |   | 0.02       |  
|                                                                              |  |                                            |            |   |      |   |            |  
|Basic and diluted loss per common share                                       |  | $                                          | (0.10      | ) |      | $ | (0.31      | )
|                                                                              |  |                                            |            |   |      |   |            |  
|Weighted average shares outstanding                                           |  |                                            | 9,864,040  |   |      |   | 7,549,845  |  
|                                                                              |  |                                            |            |   |      |   |            |  
|Balance Sheet Data                                                            |  |                                            |            |   |      |   |            |  
|Total Current Assets                                                          |  | $                                          | 2,372,245  |   |      | $ | 3,139,886  |  
|Total Assets                                                                  |  |                                            | 6,147,389  |   |      |   | 7,290,432  |  
|Total Current Liabilities                                                     |  |                                            | 3,437,341  |   |      |   | 3,981,604  |  
|Total Liabilities                                                             |  |                                            | 5,746,348  |   |      |   | 6,581,170  |  
|Total Stockholders Equity                                                    |  | $                                          | 401,041    |   |      | $ | 709,262    |  



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Commonwealth Biotechnologies, Inc.



Managements Discussion and Analysis of Financial Condition and
Results of Operations

The following should be read in conjunction with Selected Financial Data and the
Companys Audited Financial Statements and Notes thereto included within.

Overview

Commonwealth Biotechnologies, Inc. (the Company or CBI) is a specialized life sciences outsourcing business that offers
cutting-edge expertise and a complete array of Peptide-based discovery chemistry and biology products and services through Mimotopes Pty Limited (Mimotopes), a wholly-owned subsidiary of CBI. Through November 2, 2009, CBI also
provided services through CBI Services and Fairfax Identity Laboratories (FIL), two divisions that were sold to Bostwick Laboratories, Inc. (Bostwick) effective November 2, 2009.

On January 20, 2011, the Registrant filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of Virginia (the
Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code. On April 7, 2011, the Bankruptcy Court approved the private sale of Mimotopes for a gross sales price of $875,000. After
expenses, the Company anticipates receiving net proceeds of approximately $825,000. In addition, the Company has a sales agreement for the purchase of land, office and laboratory space located at 601 Biotech Drive in Chesterfield County, Virginia.
The sale is subject to acceptance and approval by the Bankruptcy Court. Management believes that this offer will be accepted as the Stalking Horse bid by the Bankruptcy Court. The Company plans to use the net proceeds from these asset
sales to pay off all secured and unsecured creditors and to fund operations. Once the Company is a debt-free public shell, a merger with a private Company seeking access to the public financial markets will be pursued. This process is currently
underway.

CBI Services, FIL and Mimotopes are shown in the Consolidated Statement of Operations as discontinued operations.

Going Concern

The accompanying
financial statements have been prepared on a going concern basis which contemplates realization of assets and satisfaction of liabilities in the normal course of business. If the Company is unable to improve operating results and meet its debt
obligations, it may have to cease operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Total losses for the Company were $1,004,270 and $2,360,372 for the years ended December 31, 2010 and 2009, respectively. Recent operating losses may continue into future periods and there can be no
assurance by management that the Companys financial outlook will improve. For the years ended December 31, 2010 and 2009, losses from continuing operations were $644,617 and $2,456,039,



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Commonwealth Biotechnologies, Inc.



respectively. Income (Loss) resulting from the discontinued operations in 2010 and 2009 were $(359,653) and $95,667, respectively.

The Company generated negative cash flows of $454,748 in 2010, compared to an increase in cash of $473,731 in 2009. Net working capital as of December 31, 2010 and December 31, 2009 was
($1,065,096) and ($841,718), respectively. The negative working capital is primarily due to continuing losses and debt obligations due within one year.

As of December 31, 2010, the Company had $99,912 in cash and cash equivalents, which was an 82.0% decrease over the cash balance at December 31, 2009. This decrease was primarily due to
continued operating losses.

Cash used by operating activities was $173,807 in 2010 compared to cash provided by operating activities of
$267,944 in 2009. This change was primarily a result of continued losses and reduced accounts receivable resulting from the sale of CBI Services and FIL. In addition, 2009 included debt discount amortization of approximately $249,000. This discount
was fully amortized in 2009.

Cash used by investing activities was $0 in 2010, compared to cash provided by investing activities in 2009 of
$574,165. The primary investing activities in 2009 were proceeds from the sale of CBI Services and FIL and from the sale of investment securities. Substantially all of the Companys investment securities were liquidated in 2009.

Cash used by financing activities for 2010 and 2009 was $280,941 and $365,378, respectively. Restricted cash required to be escrowed for the benefit of
the PIPE Investors in 2009 was distributed in October 2010 and accounted for as a reduction in principal outstanding.

On November 2,
2009, the Company re-negotiated the terms of its outstanding mortgage debt with BB&T which now becomes due in November 2012, including any non compliance with upcoming covenants which could cause the Company to be in default.

On January 20, 2011, the Registrant filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of Virginia (the
Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code. On April 7, 2011, the Bankruptcy Court approved the private sale of Mimotopes for a gross sales price of $875,000. After
expenses, the Company anticipates receiving net proceeds of approximately $825,000. In addition, the Company has a sales agreement for the sale of land, office and laboratory space located at 601 Biotech Drive in Chesterfield County, Virginia. The
sale is subject to acceptance and approval by the Bankruptcy Court. Management believes that this offer will be accepted as the Stalking Horse bid by the Bankruptcy Court. The Company plans to use the net proceeds from these asset sales
to pay off all secured and unsecured creditors and to fund operations. Once the Company is a debt-free public shell, a merger with a private Company seeking access to the public financial markets will be pursued. This process is currently underway.

A continued lack of adequate cash resulting from the Companys inability to generate cash flow from operations or to raise capital from
external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business.

There can be no assurance that any funds required during the next twelve months or thereafter can be generated from operations. Nor can there be any assurance that funds will be available from external
sources, such as debt or equity financing or other potential sources, if they cannot be generated internally. Lastly, there can be no assurance that the Company will be able to secure a suitable merger partner.



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Commonwealth Biotechnologies, Inc.



During the last year, the Companys business has undergone substantial
changes in relation to size, scale and scope of activities. Once the sale of Mimotopes is complete, the Company will have no operating units or subsidiaries.

As a result of the foregoing circumstances, there is substantial doubt about the Companys ability to continue as a going concern. The financial statements included herein do not include any
adjustments relating to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

The Companys independent auditors have included a paragraph emphasizing going concern in their report on the 2010 financial statements.
The financial statements included herein do not include any adjustments relating to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to
continue as a going concern.

Change in Operating Structure

Through November 2, 2009, revenues from all business units were derived principally from providing macromolecular synthetic and analytical services to researchers in the biotechnology industry or to
researchers who are engaged in life sciences research in government or academic labs throughout the world. This arrangement distinguishes CBI from many other biotechnology companies in that revenues were derived from services rather than from the
successful commercialization of a new biotechnology product. CBI believes that Mimotopes, CBI Services and FIL have all developed a strong reputation as leading providers in their respective markets.

At its Richmond, Virginia location, CBI Services core competencies were in the area of genomics and proteomics, principally serving the early stage
research and development needs of its clients. These support true drug discovery at the most fundamental stage but also support many of the pre-clinical needs of our clients and, most recently, several clinical trials are being supported. Through
CBI Services, the Company provided these services under the FDAs Good Laboratory Practices (GLP) Guidelines (21CFR Part 58). CBI Services was also able to provide clinical trial support under Good Clinical Practices (GCP) Guidelines by virtue
of its Clinical Laboratory Improvement Act (CLIA) certification. A unique feature of the Richmond location is its Bio-Safety Level 3 (BSL-3) laboratory and its CDC Registration for Select Agents. The Company had capabilities in the area of bacterial
and viral organisms and a very strong program in bio-threat toxin analysis. This capability had been at the core of the Companys government-based contracts.

Also at the Richmond location is FIL. FIL has been at the forefront of DNA technology of profiling for identity since it opened its doors in 1990. FILs rigorous standards were designed to provide
credible evidence that affects decisions regarding criminal trials, paternity, immigration, estate settlement, adoption, and other issues of identity. FIL provides Forensics, Paternity and Convicted Offender DNA Index System (CODIS)
services to government and private concerns. FIL was accredited by the American Association of Blood Banks, the National Forensic Science Technology Center, and the Department of Health, State of New York. All testing was done under CLIA guidelines.
Its employees have extensive laboratory and courtroom experience.

The sale of assets relating to CBI Services and FIL was approved at the
2009 Annual Meeting of Shareholders. This transaction was completed effective November 2, 2009 resulting in net proceeds to the Company of $343,780.

Melbourne-based Mimotopes was acquired by CBI in 2007. It provides world class research grade peptide synthesis and analysis. Mimotopes also has several proprietary technologies for the preparation of
peptide and small molecule libraries for drug discovery and for epitope analysis in support of its clients vaccine development programs. Mimotopes also has a formal peptide alliance with Genzyme



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Commonwealth Biotechnologies, Inc.



Pharmaceuticals, a world class provider of GMP pharmaceutical grade peptides and also enjoys a strong relationship with GL Biochem, a Shanghai-based peptide synthesis and reagent company.

On January 20, 2011, the Registrant filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of
Virginia (the Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code. On April 7, 2011, the Bankruptcy Court approved the private sale of Mimotopes for a gross sales price of
$875,000. After expenses, the Company anticipates receiving net proceeds of approximately $825,000. Once the sale of Mimotopes is complete, the Company will have no operating units or subsidiaries.

Strategy Going Forward

On
January 20, 2011, the Registrant filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of Virginia (the Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the
United States Code. On April 7, 2011, the Bankruptcy Court approved the private sale of Mimotopes for a gross sales price of $875,000. After expenses, the Company anticipates receiving net proceeds of approximately $825,000. In addition, the
Company has a sales agreement for the purchase of land, office and laboratory space located at 601 Biotech Drive in Chesterfield County, Virginia. The sale is subject to acceptance and approval by the Bankruptcy Court. Management believes that this
offer will be accepted as the Stalking Horse bid by the Bankruptcy Court. The Company plans to use the net proceeds from these asset sales to pay off all secured and unsecured creditors and to fund operations. Once the Company is a
debt-free public shell, a merger with a private Company seeking access to the public financial markets will be pursued. This process is currently underway.



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Commonwealth Biotechnologies, Inc.



Results of Operations

Year Ended December 31, 2010 Compared with Year Ended December 31, 2009

All financial comparisons are for continuing operations unless otherwise noted for discontinued operations or extraordinary item.

Revenues

Total revenues increased by $510,387 or 510.9% from $99,894 during 2009 to
$610,281 during 2010. Revenues consist solely of rental income received from Bostwick for the lease of office and laboratory space located at 601 Biotech Drive in Chesterfield County, Virginia. This lease commenced in November 2009. Consequently,
2010 includes twelve months of rent compared to two months of rent in 2009.

General and Administrative

General and administrative expenses (GA) consist primarily of compensation and related costs for corporate administrative staff, facility
expenditures, professional fees, consulting, taxes, and depreciation. Total GA costs decreased $867,818, or 45.8%, from $1,894,255 in 2009 to $1,026,437 in 2010. This decrease is primarily a result of decreased operations and the elimination of
corporate overhead costs subsequent to the sale of CBI Services and FIL in November 2009. Currently, the corporate administrative staff consists of the CEO, Staff Accountant and a consultant who serves as the acting principal financial officer.

Other Income (Expenses)

Realized losses were $0 and $189,820 in 2010 and 2009, respectively. These losses relate to the sale of substantially all investment securities held by the Company in 2009.

Interest expense decreased $232,331, or 49.9%, from $465,479 in 2009 to $233,148 in 2010. This decrease is primarily due to the following:



| |  |  | Discount amortization on the PIPE Investor notes of approximately $349,043 in 2009 as compared to $0 in 2010. The discount was fully amortized in 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately $256,000 of interest on the Companys mortgage was allocated to CBI Services and FIL and included in discontinued operations in
2009.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The mortgage was refinanced in November 2009 reducing the effective interest rate from 8.00% to 5.25%.
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | In January 2010, the PIPE investors converted approximately $462,000 of principal outstanding into common stock.
| | - |  | ----------------------------------------------------------------------------------------------------------------

Discontinued Operations

At the
2009 Annual Meeting of Shareholders, approval was made to sell the assets of CBIs FIL and CBI Services Divisions. The sale of these assets to Bostwick was completed in November 2009. As of November 2, 2009, the Company has deconsolidated
the operations of these divisions and recorded a loss related to the remaining net investment as a discontinued operation.

On
January 20, 2011, the Registrant filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of Virginia (the Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the
United States Code. On April 7, 2011, the Bankruptcy Court approved the private



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Commonwealth Biotechnologies, Inc.



sale of Mimotopes for a gross sales price of $875,000. After expenses, the Company anticipates receiving net proceeds of approximately $825,000. Results of operating Mimotopes are shown as
discontinued operations in the Consolidated Statement of Operations for 2010 and 2009. In addition, the related assets and liabilities of Mimotopes are shown as Assets of discontinued operations and Liabilities of discontinued operations in the
Consolidated Balance Sheet as December 31, 2010 and 2009.

Income (loss) from discontinued operations was ($359,653) in 2010 and $95,667
in 2009. The amount for 2010 consists solely of the operations of Mimotopes. The 2009 amount is comprised of CBI Services and FILs income from discontinued operations of $407,684 and Mimotopes loss from discontinued operations of
($312,017).

Liquidity and Capital Resources

Total losses for the Company were $1,004,270 and $2,360,372 for the years ended December 31, 2010 and 2009, respectively. Recent operating losses may continue into future periods and there can be no
assurance by management that the Companys financial outlook will improve. For the years ended December 31, 2010 and 2009, losses from continuing operations were $644,617 and $2,456,039, respectively. Income (Loss) resulting from the
discontinued operations in 2010 and 2009 were $(359,653) and $95,667, respectively.

The Company generated negative cash flows of $454,748 in
2010, compared to an increase in cash of $473,731 in 2009. Net working capital as of December 31, 2010 and December 31, 2009 was ($1,065,096) and ($841,718), respectively. The negative working capital is primarily due to continuing losses
and debt obligations due within one year.

As of December 31, 2010, the Company had $99,912 in cash and cash equivalents, which was an
82.0% decrease over the cash balance at December 31, 2009. This decrease was primarily due to continued operating losses.

Cash used by
operating activities was $173,807 in 2010 compared to cash provided by operating activities of $267,944 in 2009. This change was primarily a result of continued losses and reduced accounts receivable resulting from the sale of CBI Services and FIL.
In addition, 2009 included debt discount amortization of approximately $249,000. This discount was fully amortized in 2009.

Cash used by
investing activities was $0 in 2010, compared to cash provided by investing activities in 2009 of $574,165. The primary investing activities in 2009 were proceeds from the sale of CBI Services and FIL and from the sale of investment securities.
Substantially all of the Companys investment securities were liquidated in 2009.

Cash used by financing activities for 2010 and 2009
was $280,941 and $365,378, respectively. Restricted cash required to be escrowed for the benefit of the PIPE Investors in 2009 was distributed in October 2010 and accounted for as a reduction in principal outstanding.

On November 2, 2009, the Company re-negotiated the terms of its outstanding mortgage debt with BB&T which now becomes due in November 2012,
including any non compliance with upcoming covenants which could cause the Company to be in default.

Accounts receivable were $0 at
December 31, 2010 compared to $169,753 at December 31, 2009. This decrease was a result of the following:



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Commonwealth Biotechnologies, Inc.





| |  |  | Based on advice from legal counsel, accounts receivable (two customer accounts) of approximately $74,000 were written off through a charge to the
allowance for doubtful accounts effective December 31, 2010.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The remaining receivable balance of $40,085 related to receivables retained by the Company when CBI Services and FIL were sold in November 2009. Due to
the age and the lack of success by the outside agency employed to collect these receivables, the Company deemed them uncollectible at December 31, 2010. Consequently, a reserve in the amount of 100% of the outstanding balance was established
through a charge to bad debt expense at December 31, 2010.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On January 20, 2011, the Registrant filed a voluntary
petition in the United States Bankruptcy Court for the Eastern District of Virginia (the Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code. On April 7, 2011, the Bankruptcy
Court approved the private sale of Mimotopes for a gross sales price of $875,000. After expenses, the Company anticipates receiving net proceeds of approximately $825,000. In addition, the Company has a sales agreement for the purchase of land,
office and laboratory space located at 601 Biotech Drive in Chesterfield County, Virginia. The sale is subject to acceptance and approval by the Bankruptcy Court. Management believes that this offer will be accepted as the Stalking Horse
bid by the Bankruptcy Court. The Company plans to use the net proceeds from these asset sales to pay off all secured and unsecured creditors and to fund operations. Once the Company is a debt-free public shell, a merger with a private Company
seeking access to the public financial markets will be pursued. This process is currently underway.

A continued lack of adequate cash
resulting from the Companys inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on
its business.

There can be no assurance that any funds required during the next twelve months or thereafter can be generated from operations.
Nor can there be any assurance that funds will be available from external sources, such as debt or equity financing or other potential sources, if they cannot be generated internally. Lastly, there can be no assurance that the Company will be able
to secure a suitable merger partner.

During the last year, the Companys business has undergone substantial changes in relation to size,
scale and scope of activities. Once the sale of Mimotopes is complete, the Company will have no operating units or subsidiaries.

Recent
Accounting Pronouncements

On July 1, 2009, the Accounting Standards Codification became FASBs officially recognized source
of authoritative U.S. generally accepted accounting principles applicable to all public and non-public non-governmental entities, superseding existing FASB, AICPA, EITF and related literature. Rules and interpretive releases of the SEC under the
authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer to U.S. GAAP in financial
statements and accounting policies.

In June 2009, the FASB issued a standard regarding the FASB Accounting Standards Codification and the
hierarchy of generally accepted accounting principles, which replaces the standard previously issued by the FASB regarding the hierarchy of generally accepted accounting principles. This standard identifies the



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Commonwealth Biotechnologies, Inc.



source of accounting principles and the framework for selecting the principles used in the preparation of financial statements of non-governmental entities that are presented in conformity with
generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). In addition, this standard establishes the FASB Accounting Standard Codification (the Codification) as the source of
authoritative GAAP recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. All guidance contained in the Codification carries an equal level of authority. The initial date
of the adoption of this standard was effective for financial statements issued for interim and annual periods ending after June 15, 2009. On June 3, 2009, FASB decided that this standard is effective for interim and annual periods ending
after September 15, 2009. The Company adopted this standard during the third quarter of 2009. Its adoption did not have a significant impact on the Companys results of operations or consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), which was primarily codified into
FASB ASC Topic 810, Consolidation. This standard establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the
parent and to the non-controlling interest, changes in a parents ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. This standard also establishes disclosure requirements
that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. This guidance will be effective January 1, 2010. The adoption of this guidance did not have a material impact on its
consolidated financial statements.

In May 2009, the Financial Accounting Standards Board issued ASC 855-10, formerly SFAS No. 165,
Subsequent Events (SFAS 165). ASC 855-10 establishes principles and requirements for the reporting of events or transactions that occur after the balance sheet date, but before financial statements are issued or are
available to be issued. ASC 855-10 is effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009. As such, the Company adopted these provisions at the beginning of the interim period ended
June 30, 2009. Adoption of ASC 855-10 did not have a material effect on the Companys consolidated financial statements.

In June
2009, the FASB issued revisions to ASC 860-10, ASC 860-40, ASC 860-50 which enhances information reported to users of financial statements by providing greater transparency about transfers of financial assets and the companys continuing
involvement in transferred assets. This statement removes the concept of qualifying special purpose entity, changes the requirements for derecognizing financial assets, and requires enhanced disclosures to provide financial statement users with
greater transparency about transfers of financial assets and a transferors continuing involvement with transfers of financial assets accounted for as sales. This update is effective for annual reporting periods beginning after
November 15, 2009, for interim periods within the first annual reporting period and for interim and annual reporting periods thereafter (effective January 1, 2010 for the Company). The adoption of this guidance did not have a material
impact on its consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position FSP FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments(ASC Topic 320-10-65-1). ASC Topic 320-10-65-1 establishes a new method of recognizing and reporting other-than-temporary impairments of debt securities.
It also contains additional disclosure requirements related to debt and equity securities and changes existing impairment guidance under Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (ASC Topic 320-10). For debt securities, the ability and intent to hold provision is eliminated, and impairment is considered to be other-than-temporary if an entity (i) intends to sell the
security, (ii) more likely than not will be required



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to sell the security before recovering its cost, or (iii) does not expect to recover the securitys entire amortized cost basis (even if the entity does not intend to sell). This new
framework does not apply to equity securities (i.e., impaired equity securities will continue to be evaluated under previously existing guidance). The probability standard relating to the collectability of cash flows is eliminated, and
impairment is now considered to be other-than-temporary if the present value of cash flows expected to be collected from the debt security is less than the amortized cost basis of the security. ASC Topic 320-10-65-1 also provides that for debt
securities which (i) an entity does not intend to sell and (ii) it is not more likely than not that the entity will be required to sell before the anticipated recovery of its remaining amortized cost basis, the impairment is separated into
the amount related to estimated credit losses and the amount related to all other factors. The amount of the total impairment related to all other factors is recorded in other comprehensive loss and the amount related to estimated credit loss is
recognized as a charge against current period earnings. ASC Topic 320-10-65-1 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted. The adoption of this guidance did not have a material impact on
the Companys consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1,
Interim Disclosures about Fair Value of Financial Instruments (ASC Topic 825-10-65-1). This FSP relates to fair value disclosures in public entity financial statements for financial instruments that are within the
scope of Statement of Financial Accounting Standards No. 107 (ASC Topic 825-10), Disclosures about Fair Value of Financial Instruments. This guidance increases the frequency of those disclosures, requiring public entities to provide
the disclosures on a quarterly basis, rather than annually. FSP 107-1 is effective for interim and annual periods ending after June 15, 2009. The adoption of this guidance did not have a material impact on the Companys consolidated
financial statements.

Corporate Guidance

As a consequence of the Sarbanes-Oxley Act, the NASDAQ imposed certain changes in the rules of corporate governance which are aimed at strengthening its listing standards. The Securities and Exchange
Commission (SEC) approved the rules imposed by NASDAQ. Thus:



| |  |  | CBIs Board is composed of four independent and three Insider directors.
| | - |  | ------------------------------------------------------------------------



| |  |  | Only independent directors serve on the three principal committees: Audit, Compensation and Nominating.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | All the independent directors, Mr. Samuel P. Sears, Mr. James Causey, and Mr. Eric V. Tao who serve on the Audit Committee,
meet all of the requirements as defined by the SEC for being a financial expert.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Audit Committee reviews and approves all related-party transactions. CBI has adopted a formal Corporate Code of Conduct. Copies are available on
request from the Company or on the Companys website at www.cbi-biotech.com.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11



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Commonwealth Biotechnologies, Inc.



Critical Accounting Policies

A summary of the Companys critical accounting policies follows:

Estimates

The preparation of financial statements 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 period.
Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue upon the completion of laboratory service projects, or upon the delivery of biologically relevant materials that have been synthesized in accordance with project terms.
Laboratory service projects are generally administered under fee-for-service contracts or purchase orders. Any revenues from research and development arrangements, including corporate contracts and research grants, are recognized pursuant to the
terms of the related agreements as work is performed, or as scientific milestones, if any, are achieved. Product sales are recognized when shipped. Amounts received in advance of the performance of services or acceptance of a milestone, are recorded
as deferred revenue and recognized when completed.

Impairment of Long-Lived Assets

Under current accounting standards, long-lived assets besides goodwill are reviewed for impairment when events or changes in circumstances indicate the
carrying value of an asset may not be recoverable. For long-lived assets other than goodwill that are to be held and used in operations, an impairment is indicated when the estimated total undiscounted cash flow associated with the asset or group of
assets is less than carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value.

Forward Looking Statements

Management
has included herein certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used, statements that are not
historical in nature, including the words anticipated, estimate, should, expect, believe, intend, and similar expressions are intended to identify forward-looking statements.
Such statements are, by their nature, subject to certain risks and uncertainties.

Among the factors that could cause the actual results to
differ materially from those projected are the following:



| |  |  | business conditions and the general economy,
| | - |  | --------------------------------------------



| |  |  | the development and implementation of the Companys long-term business goals,
| | - |  | -----------------------------------------------------------------------------



| |  |  | federal, state, and local regulatory environment,
| | - |  | -------------------------------------------------



| |  |  | lack of demand for the Companys services,
| | - |  | ------------------------------------------



| |  |  | the ability of the Companys customers to perform services similar to those offered by the Company in-house,
| | - |  | --------------------------------------------------------------------------------------------------------------



12



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Commonwealth Biotechnologies, Inc.





| |  |  | potential cost containment by the Companys customers resulting in fewer research and development projects,
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | the Companys ability to receive accreditation to provide various services, including, but not limited to paternity testing
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys ability to hire and retain highly skilled employees,
| | - |  | ------------------------------------------------------------------



| |  |  | the Companys ability to raise additional equity financing,
| | - |  | -----------------------------------------------------------



| |  |  | the Companys inability to pay debt obligations.
| | - |  | ------------------------------------------------

Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected are detailed from time to time in reports filed by the company with the Securities and
Exchange Commission, including Forms 8-K, 10-QSB, and 10-KSB.



13



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Commonwealth Biotechnologies, Inc.

Richmond, Virginia

We have audited the accompanying consolidated balance sheets of Commonwealth
Biotechnologies, Inc. and Subsidiary as of December 31, 2010 and 2009 and the related consolidated statements of operations, stockholders equity, and cash flows for the years then ended. The Companys management is responsible for
these consolidated financial statements. Our responsibility is to express an opinion on these consolidated 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 audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Commonwealth Biotechnologies, Inc. and Subsidiary as of
December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, the Companys recurring losses from operations and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as
a going concern. Managements plans concerning these matters are also discussed in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.

LOGO

Witt Mares, PLC

Richmond, Virginia

April 15, 2011

.



14



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Commonwealth Biotechnologies, Inc.



Commonwealth Biotechnologies, Inc.

Consolidated Balance Sheets



|                                                                                                                           |  |              |             |   |      |   |             |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                                           |  | December 31, |            
|                                                                                                                           |  | 2010         |             |   | 2009 |  
|Assets                                                                                                                     |  |              |             |   |      |   |             |  
|Current Assets                                                                                                             |  |              |             |   |      |   |             |  
|Cash and cash equivalents                                                                                                  |  | $            | 99,912      |   |      | $ | 554,660     |  
|Investments                                                                                                                |  |              | 527         |   |      |   | 589         |  
|Accounts receivable                                                                                                        |  |              |            |   |      |   | 169,753     |  
|Other current assets                                                                                                       |  |              | 3,735       |   |      |   | 2,534       |  
|Assets of discontinued operations (Note 12)                                                                                |  |              | 2,268,071   |   |      |   | 2,412,350   |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Total current assets                                                                                                       |  |              | 2,372,245   |   |      |   | 3,139,886   |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Property and Equipment, net (Note 2)                                                                                       |  |              | 5,432       |   |      |   | 23,434      |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Other Assets                                                                                                               |  |              |             |   |      |   |             |  
|Assets held for sale (Note 3)                                                                                              |  |              | 3,769,712   |   |      |   | 3,927,112   |  
|Restricted cash (Note 7)                                                                                                   |  |              |            |   |      |   | 200,000     |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Total other assets                                                                                                         |  |              | 3,769,712   |   |      |   | 4,127,112   |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Total Assets                                                                                                               |  | $            | 6,147,389   |   |      | $ | 7,290,432   |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Liabilities and Stockholders Equity                                                                                       |  |              |             |   |      |   |             |  
|Current liabilities                                                                                                        |  |              |             |   |      |   |             |  
|Accounts payable                                                                                                           |  | $            | 525,049     |   |      | $ | 621,224     |  
|Current maturities of long term debt (Note 4)                                                                              |  |              | 1,325,538   |   |      |   | 1,979,280   |  
|Other current liabilities                                                                                                  |  |              | 128,434     |   |      |   | 92,234      |  
|Accrued payroll liabilities                                                                                                |  |              | 226,066     |   |      |   | 268,659     |  
|Interest payable                                                                                                           |  |              | 236,380     |   |      |   | 177,515     |  
|Liabilities of discontinued operations (Note 11)                                                                           |  |              | 995,874     |   |      |   | 842,692     |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Total current liabilities                                                                                                  |  |              | 3,437,341   |   |      |   | 3,981,604   |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Long-term deposit                                                                                                          |  |              | 144,873     |   |      |   | 144,873     |  
|Long-term debt less current maturities (Note 4)                                                                            |  |              | 2,164,134   |   |      |   | 2,454,693   |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Total long-term liabilities                                                                                                |  |              | 2,309,007   |   |      |   | 2,599,566   |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Total Liabilities                                                                                                          |  |              | 5,746,348   |   |      |   | 6,581,170   |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Commitments, and contingencies (Notes 3 and 4)                                                                             |  |              |            |   |      |   |            |  
|Stockholders equity                                                                                                       |  |              |             |   |      |   |             |  
|Preferred stock, no par value, 1,000,000 shares authorized - none outstanding                                              |  |              |            |   |      |   |            |  
|Common stock, no par value, 100,000,000 shares authorized; 2010 - 9,906,338 2009 - 8,791,712 shares issued and
outstanding |  |              |            |   |      |   |            |  
|Additional paid-in-capital                                                                                                 |  |              | 26,119,191  |   |      |   | 25,555,878  |  
|Restricted stock                                                                                                           |  |              |            |   |      |   |            |  
|Other comprehensive income (Note 8)                                                                                        |  |              | 652,927     |   |      |   | 520,191     |  
|Accumulated deficit                                                                                                        |  |              | (26,371,077 | ) |      |   | (25,366,807 | )
|                                                                                                                           |  |              |             |   |      |   |             |  
|Total stockholders equity                                                                                                 |  |              | 401,041     |   |      |   | 709,262     |  
|                                                                                                                           |  |              |             |   |      |   |             |  
|Total Liabilities and Stockholders Equity                                                                                 |  | $            | 6,147,389   |   |      | $ | 7,290,432   |  
|                                                                                                                           |  |              |             |   |      |   |             |  

See accompanying summary of accounting policy and notes to financial statements



15



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Commonwealth Biotechnologies, Inc.



Commonwealth Biotechnologies, Inc.

Consolidated Statement of Operations



|                                                                             |  |                          |            |   |      |   |            |  
|---------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                             |  | Years Ended December 31, |           
|                                                                             |  | 2010                     |            |   | 2009 |  
|Revenues                                                                     |  |                          |            |   |      |   |            |  
|Rental income                                                                |  | $                        | 610,281    |   |      | $ | 99,894     |  
|                                                                             |  |                          |            |   |      |   |            |  
|Total revenues                                                               |  |                          | 610,281    |   |      |   | 99,894     |  
|                                                                             |  |                          |            |   |      |   |            |  
|Operating costs and expenses                                                 |  |                          |            |   |      |   |            |  
|General and administrative                                                   |  |                          | 1,026,437  |   |      |   | 1,894,255  |  
|                                                                             |  |                          |            |   |      |   |            |  
|Total Operating Costs and Expenses                                           |  |                          | 1,026,437  |   |      |   | 1,894,255  |  
|                                                                             |  |                          |            |   |      |   |            |  
|Operating loss                                                               |  |                          | (416,156   | ) |      |   | (1,794,361 | )
|                                                                             |  |                          |            |   |      |   |            |  
|Other income (expense)                                                       |  |                          |            |   |      |   |            |  
|Realized losses on investments                                               |  |                          |           |   |      |   | (189,820   | )
|Interest expense                                                             |  |                          | (233,148   | ) |      |   | (465,479   | )
|Other income (expense)                                                       |  |                          | 4,687      |   |      |   | (6,379     | )
|                                                                             |  |                          |            |   |      |   |            |  
|Total other income (expense)                                                 |  |                          | (228,461   | ) |      |   | (661,678   | )
|                                                                             |  |                          |            |   |      |   |            |  
|Loss from continuing operations                                              |  |                          | (644,617   | ) |      |   | (2,456,039 | )
|                                                                             |  |                          |            |   |      |   |            |  
|Gain on sale of discontinued operations                                      |  |                          |           |   |      |   | 383,782    |  
|Loss from operating discontinued operations                                  |  |                          | (359,653   | ) |      |   | (288,115   | )
|                                                                             |  |                          |            |   |      |   |            |  
|Total income (loss) from discontinued operations                             |  |                          | (359,653   | ) |      |   | 95,667     |  
|                                                                             |  |                          |            |   |      |   |            |  
|Net loss                                                                     |  | $                        | (1,004,270 | ) |      | $ | (2,360,372 | )
|                                                                             |  |                          |            |   |      |   |            |  
|Basic and diluted loss per common share from continued operations            |  | $                        | (0.06      | ) |      | $ | (0.33      | )
|                                                                             |  |                          |            |   |      |   |            |  
|Basic and diluted income (loss) per common share from discontinued operation |  | $                        | (0.04      | ) |      | $ | 0.02       |  
|                                                                             |  |                          |            |   |      |   |            |  
|Basic and diluted loss per common share after discontinued operation         |  | $                        | (0.10      | ) |      | $ | (0.31      | )
|                                                                             |  |                          |            |   |      |   |            |  

See accompanying summary of accounting policy and notes to financial statements



16



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Commonwealth Biotechnologies, Inc.



Commonwealth Biotechnologies, Inc.

Consolidated Statements of Stockholders Equity



|                                                |  |                                  |           |  |                           |   |            |                 |  |   |                                 |  |  |                    |          |  |       |   |             |   |  |   |            |  
|----------------------------------------------- |  | -------------------------------- | --------- |  | ------------------------- | - | ---------- | --------------- |  | - | ------------------------------- |  |  | ------------------ | -------- |  | ----- | - | ----------- | - |  | - | ---------- | -
|                                                |  | Number ofCommonSharesOutstanding |           |  | AdditionalPaid -inCapital |   |            | RestrictedStock |  |   | OtherComprehensiveIncome (Loss) |  |  | AccumulatedDeficit |          |  | Total |  
|Balance January 1, 2009                         |  |                                  | 6,465,734 |  |                           | $ | 24,453,298 |                 |  | $ | (100,333)                       |  |  | $                  | (83,251) |  |       | $ | (23,006,435 | ) |  | $ | 1,263,279  |  
|Issuance of common stock                        |  |                                  | 2,325,978 |  |                           |   | 1,064,180  |                 |  | $ |                                |  |  | $                  |         |  |       | $ |            |   |  |   | 1,064,180  |  
|Restricted stock                                |  |                                  |          |  |                           |   |           |                 |  |   | 100,333                         |  |  |                    |         |  |       |   |            |   |  |   | 100,333    |  
|Stock option expense                            |  |                                  |          |  |                           |   | 38,400     |                 |  |   |                                |  |  |                    |         |  |       |   |            |   |  |   | 38,400     |  
|Net loss                                        |  |                                  |          |  |                           |   |           |                 |  |   |                                |  |  |                    |         |  |       |   | (2,360,372  | ) |  |   | (2,360,372 | )
|Change in unrealized gain (loss) on investments |  |                                  |          |  |                           |   |           |                 |  |   |                                |  |  |                    | 253,699  |  |       |   |            |   |  |   | 253,699    |  
|Foreign currency gain                           |  |                                  |          |  |                           |   |           |                 |  |   |                                |  |  |                    | 349,743  |  |       |   |            |   |  |   | 349,743    |  
|Total comprehensive loss                        |  |                                  |          |  |                           |   |           |                 |  |   |                                |  |  |                    |         |  |       |   |            |   |  |   | (1,756,930 | )
|                                                |  |                                  |           |  |                           |   |            |                 |  |   |                                 |  |  |                    |          |  |       |   |             |   |  |   |            |  
|Balance December 31, 2009                       |  |                                  | 8,791,712 |  |                           | $ | 25,555,878 |                 |  | $ |                                |  |  | $                  | 520,191  |  |       | $ | (25,366,807 | ) |  | $ | 709,262    |  
|Issuance of common stock                        |  |                                  | 1,114,626 |  |                           |   | 557,313    |                 |  |   |                                |  |  |                    |         |  |       |   |            |   |  |   | 557,313    |  
|Stock option expense                            |  |                                  |          |  |                           |   | 6,000      |                 |  |   |                                |  |  |                    |         |  |       |   |            |   |  |   | 6,000      |  
|Net Loss                                        |  |                                  |          |  |                           |   |           |                 |  |   |                                |  |  |                    |         |  |       |   | (1,004,270  | ) |  |   | (1,004,270 | )
|Foreign currency gain                           |  |                                  |          |  |                           |   |           |                 |  |   |                                |  |  |                    | 132,736  |  |       |   |            |   |  |   | 132,736    |  
|Total comprehensive loss                        |  |                                  |          |  |                           |   |           |                 |  |   |                                |  |  |                    |         |  |       |   |            |   |  |   | (871,534   | )
|                                                |  |                                  |           |  |                           |   |            |                 |  |   |                                 |  |  |                    |          |  |       |   |             |   |  |   |            |  
|Balance December 31, 2010                       |  |                                  | 9,906,338 |  |                           | $ | 26,119,191 |                 |  | $ |                                |  |  | $                  | 652,927  |  |       | $ | (26,371,077 | ) |  | $ | 401,041    |  
|                                                |  |                                  |           |  |                           |   |            |                 |  |   |                                 |  |  |                    |          |  |       |   |             |   |  |   |            |  



17



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Commonwealth Biotechnologies, Inc.



Commonwealth Biotechnologies, Inc.

Consolidated Statements of Cash Flows



|                                                                                          |  |                  |            |   |                  |   |            |  
|----------------------------------------------------------------------------------------- |  | ---------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                          |  | Year Ended       |           
|                                                                                          |  | December 31,2010 |            |   | December 31,2009 |  
|Cash flows from operating activities:                                                     |  |                  |            |   |                  |   |            |  
|Net loss                                                                                  |  | $                | (1,004,270 | ) |                  | $ | (2,360,372 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                  |            |   |                  |   |            |  
|Intercompany loans                                                                        |  |                  | 70,546     |   |                  |   | 290,485    |  
|Gain on sale of CBI Services and FIL                                                      |  |                  |           |   |                  |   | (383,782   | )
|Loss from discontinued operations                                                         |  |                  | 359,653    |   |                  |   | 312,017    |  
|Depreciation and amortization                                                             |  |                  | 175,464    |   |                  |   | 758,194    |  
|Unrealized gain (loss)                                                                    |  |                  |           |   |                  |   | (66,131    | )
|Stock-based compensation                                                                  |  |                  | 6,000      |   |                  |   | 138,733    |  
|Realized loss on investments                                                              |  |                  |           |   |                  |   | 41,133     |  
|Expenses satisfied with the issuance of stock                                             |  |                  |           |   |                  |   | 327,800    |  
|Changes in:                                                                               |  |                  |            |   |                  |   |            |  
|Accounts receivable                                                                       |  |                  | 169,753    |   |                  |   | 784,650    |  
|Prepaid expenses and inventory                                                            |  |                  | (1,200     | ) |                  |   | 63,911     |  
|Accounts payable and other current liabilities                                            |  |                  | 50,247     |   |                  |   | 216,433    |  
|Long-term deposit                                                                         |  |                  |           |   |                  |   | 144,873    |  
|                                                                                          |  |                  |            |   |                  |   |            |  
|Net cash provided by (used in) operating activities                                       |  |                  | (173,807   | ) |                  |   | 267,944    |  
|                                                                                          |  |                  |            |   |                  |   |            |  
|Cash flows from investing activities:                                                     |  |                  |            |   |                  |   |            |  
|Proceeds from the sale of CBI Services and FIL                                            |  |                  |           |   |                  |   | 610,000    |  
|Proceeds from the sale of investments                                                     |  |                  |           |   |                  |   | 128,079    |  
|Purchases of property, plant and equipment                                                |  |                  |           |   |                  |   | (163,914   | )
|                                                                                          |  |                  |            |   |                  |   |            |  
|Net cash provided by (used in) investing activities                                       |  |                  |           |   |                  |   | 574,165    |  
|                                                                                          |  |                  |            |   |                  |   |            |  
|Cash flows from financing activities:                                                     |  |                  |            |   |                  |   |            |  
|Issuance of common stock                                                                  |  |                  | 1,000      |   |                  |   |           |  
|Principal payments on long term debt                                                      |  |                  | (481,941   | ) |                  |   | (165,378   | )
|Change in restricted cash                                                                 |  |                  | 200,000    |   |                  |   | (200,000   | )
|                                                                                          |  |                  |            |   |                  |   |            |  
|Net cash used in financing activities                                                     |  |                  | (280,941   | ) |                  |   | (365,378   | )
|                                                                                          |  |                  |            |   |                  |   |            |  
|Net increase (decrease) in cash and cash equivalents                                      |  |                  | (454,748   | ) |                  |   | 476,731    |  
|Cash and cash equivalents, beginning of year                                              |  |                  | 554,660    |   |                  |   | 77,929     |  
|                                                                                          |  |                  |            |   |                  |   |            |  
|Cash and cash equivalents, end of year                                                    |  | $                | 99,912     |   |                  | $ | 554,660    |  
|                                                                                          |  |                  |            |   |                  |   |            |  
|Supplemental Disclosure of Cash Flow Information                                          |  |                  |            |   |                  |   |            |  
|Cash payments for interest                                                                |  | $                | 138,922    |   |                  | $ | 126,097    |  
|Non-cash investing and financing activities                                               |  |                  |            |   |                  |   |            |  
|Expenses satisfied with the issuance of stock                                             |  | $                |           |   |                  | $ | 327,800    |  
|Principal reduction on mortgage                                                           |  | $                |           |   |                  | $ | 250,000    |  
|Reduction of convertible debt through issuance of common stock                            |  | $                | 462,361    |   |                  | $ | 611,381    |  
|Accounts payable and other current liabilities satisfied with the issuance of stock       |  | $                | 93,952     |   |                  | $ |           |  

See accompanying summary of
accounting policies and notes to financial statements



18



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Commonwealth Biotechnologies, Inc.



Summary of Significant Accounting Policies

The Company was formed on September 30, 1992, for the purpose of providing specialized analytical laboratory services for the life scientist. During
2007, the Company acquired Mimotopes which has developed a number of proprietary and patented technologies and is an industry leader in the synthesis of research grade peptides.

The sale of the assets of CBIs FIL and CBI Services divisions were approved at the 2009 Annual Meeting of Shareholders. These operations were discontinued in November 2009. (See Note 12)

On January 20, 2011, the Registrant filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of Virginia (the
Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code. On April 7, 2011, the Bankruptcy Court approved the private sale of Mimotopes for a gross sales price of $875,000. After
expenses, the Company anticipates receiving net proceeds of approximately $825,000. Once the sale of Mimotopes is complete, the Company will have no operating units or subsidiaries.

Consolidation Policy

The consolidated financial statements include the accounts of CBI and
its wholly owned subsidiary, Mimotopes. All inter-company accounts and transactions have been eliminated in consolidation.

Estimates

The preparation of financial statements 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 period. Actual results could differ from those estimates.

Revenue Recognition

The Company
recognizes revenue upon the completion of laboratory service projects, or upon the delivery of biologically relevant materials that have been synthesized in accordance with project terms. Laboratory service projects are generally administered under
fee-for-service contracts or purchase orders. Any revenues from research and development arrangements, including corporate contracts and research grants, are recognized pursuant to the terms of the related agreements as work is performed, or as
scientific milestones, if any, are achieved. Product sales are recognized when shipped. Amounts received in advance of the performance of services or acceptance of a milestone, are recorded as deferred revenue and recognized when completed.

Rental income is recorded when earned under the terms of the related lease.



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Commonwealth Biotechnologies, Inc.



Foreign Currency Translation

The Companys consolidated financial statements are reported in U.S. dollars. Assets and liabilities of foreign subsidiaries are translated using
rates of exchange as of the balance sheet dates, and related revenues and expenses are translated at average rates of exchange in effect during the periods. Cumulative translation adjustments have been recorded as a separate component within
accumulated other comprehensive income (loss) of stockholders equity. Realized gains and losses from foreign currency translations are included in other income (expense).

Fair Value Measurements

On January 1, 2008, the Company adopted FASB ASC 820, which
defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. FASB ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing
accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances. The adoption of FASB ASC 820 did not have a material effect on the carrying values of the Companys assets.

FASB ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value
measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, FASB ASC 820 establishes a
fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the
reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level
2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as
inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset
or liability which are typically based on an entitys own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair
value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Companys assessment of the
significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash equivalents. At times, the Company maintains cash balances in excess of FDIC insured amounts.

Restricted Cash

Restricted cash in CBI represents amounts held in escrow as required under
the terms of the Convertible Note due to the PIPE Investors. In October 2009, this money was released to the PIPE investors and applied to the principal balance outstanding. The total amount held in escrow at December 31, 2009 was $200,000.



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Commonwealth Biotechnologies, Inc.



Restricted cash in Mimotopes represents the amount that is held by a third
party in escrow as required under the terms of the Companys land lease agreement. The total amount held in escrow as of December 31, 2010 and 2009 was $111,178 and $98,359, respectively. Interest income earned on restricted cash is
recorded in other interest income.

Investments

The Company classifies its investments in securities as available-for-sale. These investments are carried at the estimated fair value, with unrealized gains and losses reported in other comprehensive
income (loss). Upon the sale of a security, the realized net gain or loss is reported in results of operations.

Accounts Receivable

The majority of our accounts receivable are due from trade customers. Credit is extended based on evaluation of our customers
financial condition and collateral is not required. Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for doubtful accounts. Accounts that are outstanding longer than
the payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, customers current ability to pay their
obligations to us, the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for
doubtful accounts.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed principally by the straight-line method over their estimated useful lives providing depreciation and amortization for financial
reporting purposes. The cost of repairs and maintenance is expensed as incurred. The estimated useful lives of the assets are as follows:



|                                         |  |       
|---------------------------------------- |  | ------
|                                         |  | Years 
|Buildings                                |  | 39.5  
|Laboratory and computer equipment        |  | 3  10
|Furniture, fixtures and office equipment |  | 7     

Assets under capital lease obligations are recorded at
the lesser of the present value of the minimum lease payments or the fair market value of the leased asset, at inception of the lease.

Impairment of Long-Lived Assets

The
Company reviews and accounts for the impairment of long-lived assets other than goodwill, including property and equipment and certain other noncurrent assets in accordance with ASC 360-35, Accounting for the Impairment or Disposal of
Long-Lived Assets. Long-lived assets besides goodwill are reviewed for impairment when events or changes in circumstances indicate the carrying value of an asset may not be recoverable. For long-lived assets other than goodwill that are to be
held and used in operations, an impairment is indicated when the estimated total undiscounted cash flow associated with the asset or group of assets is less than carrying value. If impairment exists, an adjustment is made to write the asset down to
its fair value, and a loss is recorded as the difference between the carrying value and fair value.



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Commonwealth Biotechnologies, Inc.



Income Taxes

Deferred taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

FASB Accounting Standards Codification 740, Accounting for Uncertainty in Income Taxes, prescribes a recognition threshold and measurement of a tax
position taken or expected to be taken in a tax return. The Companys Management has evaluated the impact of this guidance to its consolidated financial statements. Management is not aware of any material uncertain tax positions, and has not
accrued the effect of any uncertain tax positions as of December 31, 2010 and 2009. The Companys tax returns are subject to examination by the taxing authorities, generally for a period of three years from the date they are filed. With
few exceptions, the Company is no longer subject to income tax examinations by federal, state or local tax authorities for years before 2007. The Companys policy is to classify income tax related interest and penalties in interest expense and
other expenses, respectively.

Income (Loss) Per Common Share

Basic income (loss) per share has been computed on the basis of the weighted-average number of common shares outstanding. Common shares which can be issued upon exercise of stock options and warrants have
not been included in the computation because their inclusion would have been anti-dilutive. Weighted average shares outstanding for basic and diluted loss per common share were 9,864,040 and 7,549,845 for the twelve months ended December 31,
2010 and 2009, respectively (see Note 14).

Reclassification

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

Employee Stock Plans

The Company
adopted a Stock Incentive Plan on June 24, 1997. The Plan provides for granting to employees, officers, directors, consultants and certain other non-employees of the Company options to purchase shares of common stock. This plan has expired and
no additional shares may be issued.

A 2000 Stock Incentive Plan was adopted by the Board of Directors and approved by the shareholders. The
Plan makes up to 300,000 shares of common stock available for grants of restricted stock awards and stock options in the form of incentive stock options and non-qualified options to employees, directors and consultants of the Company. This plan has
expired and no additional shares may be issued.

A 2002 Stock Incentive Plan was adopted by the Board of Directors and approved by the
shareholders. The Plan makes up to 600,000 shares of common stock available for grants of restricted stock awards and stock options in the form of incentive stock options and non-qualified options to employees, directors and consultants of the
Company.

A 2007 Stock Incentive Plan was adopted by the Board of Directors and approved by the shareholders. The Plan makes up to 1,000,000
shares of common stock available for grants of restricted stock awards



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Commonwealth Biotechnologies, Inc.



and stock options in the form of incentive stock options and non-qualified options to employees, directors and consultants of the Company.

A 2009 Stock Incentive Plan was adopted by the Board of Directors and approved by the shareholders. The Plan makes up to 1,000,000 shares of common stock
available for grants of restricted stock awards and stock options in the form of incentive stock options and non-qualified options to employees, directors and consultants of the Company.

Incentive awards may be in the form of stock options, restricted stock, incentive stock or tax offset rights. In the case of incentive stock options (within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended), the exercise price will not be less than 100% of the fair market value of shares covered at the time of the grant, or 110% for incentive stock options granted to persons who own more than 10% of the Companys
voting stock. Options granted under the Plans generally vest over a five-year period from the date of grant and are exercisable for ten years, except that the term may not exceed five years for incentive stock options granted to persons who own more
than 10% of the Companys outstanding common stock.

New Accounting Pronouncements

On July 1, 2009, the Accounting Standards Codification became FASBs officially recognized source of authoritative U.S. generally accepted
accounting principles applicable to all public and non-public non-governmental entities, superseding existing FASB, AICPA, EITF and related literature. Rules and interpretive releases of the SEC under the authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies.

In June 2009, the FASB issued a standard regarding the FASB Accounting Standards Codification and the hierarchy of generally accepted accounting
principles, which replaces the standard previously issued by the FASB regarding the hierarchy of generally accepted accounting principles. This standard identifies the source of accounting principles and the framework for selecting the principles
used in the preparation of financial statements of non-governmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). In addition, this
standard establishes the FASB Accounting Standard Codification (the Codification) as the source of authoritative GAAP recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in
conformity with GAAP. All guidance contained in the Codification carries an equal level of authority. The initial date of the adoption of this standard was effective for financial statements issued for interim and annual periods ending after
June 15, 2009. On June 3, 2009, FASB decided that this standard is effective for interim and annual periods ending after September 15, 2009. The Company adopted this standard during the third quarter of 2009. Its adoption did not have
a significant impact on the Companys results of operations or consolidated financial statements.

In June 2009, the FASB issued SFAS
No. 167, Amendments to FASB Interpretation No. 46(R), which was primarily codified into FASB ASC Topic 810, Consolidation. This standard establishes accounting and reporting standards for ownership interests
in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parents ownership interest and the valuation of retained non-controlling
equity investments when a subsidiary is deconsolidated. This standard also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. This guidance
will be effective January 1, 2010. The adoption of this guidance did not have a material impact on its consolidated financial statements.



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Commonwealth Biotechnologies, Inc.



In May 2009, the Financial Accounting Standards Board issued ASC 855-10,
formerly SFAS No. 165, Subsequent Events (SFAS 165). ASC 855-10 establishes principles and requirements for the reporting of events or transactions that occur after the balance sheet date, but before financial
statements are issued or are available to be issued. ASC 855-10 is effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009. As such, the Company adopted these provisions at the beginning of the
interim period ended June 30, 2009. Adoption of ASC 855-10 did not have a material effect on the Companys consolidated financial statements.

In June 2009, the FASB issued revisions to ASC 860-10, ASC 860-40, ASC 860-50 which enhances information reported to users of financial statements by providing greater transparency about transfers of
financial assets and the companys continuing involvement in transferred assets. This statement removes the concept of qualifying special purpose entity, changes the requirements for derecognizing financial assets, and requires enhanced
disclosures to provide financial statement users with greater transparency about transfers of financial assets and a transferors continuing involvement with transfers of financial assets accounted for as sales. This update is effective for
annual reporting periods beginning after November 15, 2009, for interim periods within the first annual reporting period and for interim and annual reporting periods thereafter (effective January 1, 2010 for the Company). The adoption of
this guidance did not have a material impact on its consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position FSP
FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments(ASC Topic 320-10-65-1). ASC Topic 320-10-65-1 establishes a new method of recognizing and reporting other-than-temporary
impairments of debt securities. It also contains additional disclosure requirements related to debt and equity securities and changes existing impairment guidance under Statement of Financial Accounting Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities (ASC Topic 320-10). For debt securities, the ability and intent to hold provision is eliminated, and impairment is considered to be other-than-temporary if an entity
(i) intends to sell the security, (ii) more likely than not will be required to sell the security before recovering its cost, or (iii) does not expect to recover the securitys entire amortized cost basis (even if the entity does
not intend to sell). This new framework does not apply to equity securities (i.e., impaired equity securities will continue to be evaluated under previously existing guidance). The probability standard relating to the collectability of
cash flows is eliminated, and impairment is now considered to be other-than-temporary if the present value of cash flows expected to be collected from the debt security is less than the amortized cost basis of the security. ASC Topic 320-10-65-1
also provides that for debt securities which (i) an entity does not intend to sell and (ii) it is not more likely than not that the entity will be required to sell before the anticipated recovery of its remaining amortized cost basis, the
impairment is separated into the amount related to estimated credit losses and the amount related to all other factors. The amount of the total impairment related to all other factors is recorded in other comprehensive loss and the amount related to
estimated credit loss is recognized as a charge against current period earnings. ASC Topic 320-10-65-1 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted. The adoption of this guidance did not
have a material impact on the Companys consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position FAS 107-1
and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (ASC Topic 825-10-65-1). This FSP relates to fair value disclosures in public entity financial statements for financial instruments that are
within the scope of Statement of Financial Accounting Standards No. 107 (ASC Topic 825-10), Disclosures about Fair Value of Financial Instruments. This guidance increases the frequency of those disclosures, requiring public entities
to provide the disclosures on a quarterly basis, rather than annually. FSP 107-1 is effective



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Commonwealth Biotechnologies, Inc.



for interim and annual periods ending after June 15, 2009. The adoption of this guidance did not have a material impact on the Companys consolidated financial statements.



25



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Notes

Notes to Consolidated Financial Statements

1. Going Concern

The accompanying financial statements have been prepared on a going concern basis which contemplates realization of assets and satisfaction of liabilities
in the normal course of business. If the Company is unable to improve operating results and meet its debt obligations, it may have to cease operations. The financial statements do not include any adjustments that might be necessary if the Company is
unable to continue as a going concern.

Total losses for the Company were $1,004,270 and $2,360,372 for the years ended December 31, 2010
and 2009, respectively. Recent operating losses may continue into future periods and there can be no assurance by management that the Companys financial outlook will improve. For the years ended December 31, 2010 and 2009, losses from
continuing operations were $644,617 and $2,456,039, respectively. Income (Loss) resulting from the discontinued operations in 2010 and 2009 were $(359,653) and $95,667, respectively.

The Company generated negative cash flows of $454,748 in 2010, compared to an increase in cash of $473,731 in 2009. Net working capital as of December 31, 2010 and December 31, 2009 was
($1,065,096) and ($841,718), respectively. The negative working capital is primarily due to continuing losses and debt obligations due within one year.

As of December 31, 2010, the Company had $99,912 in cash and cash equivalents, which was an 82.0% decrease over the cash balance at December 31, 2009. This decrease was primarily due to
continued operating losses.

Cash used by operating activities was $173,807 in 2010 compared to cash provided by operating activities of
$267,944 in 2009. This change was primarily a result of continued losses and reduced accounts receivable resulting from the sale of CBI Services and FIL. In addition, 2009 included debt discount amortization of approximately $249,000. This discount
was fully amortized in 2009.

Cash used by investing activities was $0 in 2010, compared to cash provided by investing activities in 2009 of
$574,165. The primary investing activities in 2009 were proceeds from the sale of CBI Services and FIL and from the sale of investment securities. Substantially all of the Companys investment securities were liquidated in 2009.

Cash used by financing activities for 2010 and 2009 was $280,941 and $365,378, respectively. Restricted cash required to be escrowed for the benefit of
the PIPE Investors in 2009 was distributed in October 2010 and accounted for as a reduction in principal outstanding.

On November 2,
2009, the Company re-negotiated the terms of its outstanding mortgage debt with BB&T which now becomes due in November 2012, including any non compliance with upcoming covenants which could cause the Company to be in default.



26



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On January 20, 2011, the Registrant filed a voluntary petition in the United States Bankruptcy Court
for the Eastern District of Virginia (the Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code. On April 7, 2011, the Bankruptcy Court approved the private sale of Mimotopes for a
gross sales price of $875,000. After expenses, the Company anticipates receiving net proceeds of approximately $825,000. In addition, the Company has a sales agreement for the sale of land, office and laboratory space located at 601 Biotech Drive in
Chesterfield County, Virginia. The sale is subject to acceptance and approval by the Bankruptcy Court. Management believes that this offer will be accepted as the Stalking Horse bid by the Bankruptcy Court. The Company plans to use the
net proceeds from these asset sales to pay off all secured and unsecured creditors and to fund operations. Once the Company is a debt-free public shell, a merger with a private Company seeking access to the public financial markets will be pursued.
This process is currently underway.

A continued lack of adequate cash resulting from the Companys inability to generate cash flow from
operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business.

There can be no assurance that any funds required during the next twelve months or thereafter can be generated from operations. Nor can there be any assurance that funds will be available from external
sources, such as debt or equity financing or other potential sources, if they cannot be generated internally. Lastly, there can be no assurance that the Company will be able to secure a suitable merger partner.

During the last year, the Companys business has undergone substantial changes in relation to size, scale and scope of activities. Once the sale of
Mimotopes is complete, the Company will have no operating units or subsidiaries.

As a result of the foregoing circumstances, there is
substantial doubt about the Companys ability to continue as a going concern. The financial statements included herein do not include any adjustments relating to the recoverability or classification of asset carrying amounts or the amounts and
classification of liabilities that may result should the Company be unable to continue as a going concern.

The Companys independent
auditors have included a paragraph emphasizing going concern in their report on the 2010 financial statements. The financial statements included herein do not include any adjustments relating to the recoverability or classification of
asset carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.



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2. Property and Equipment

Property and Equipment relating to CBI consisted of the following:



|                                                      |  |              |        |  |      |   |         | 
|----------------------------------------------------- |  | ------------ | ------ |  | ---- | - | ------- | 
|                                                      |  | December 31, |       
|                                                      |  | 2010         |        |  | 2009 |  
|Furniture, fixtures and office and computer equipment |  | $            | 53,575 |  |      | $ | 138,351 | 
|Other                                                 |  |              | 9,077  |  |      |   | 3,407   | 
|                                                      |  |              |        |  |      |   |         | 
|                                                      |  |              | 62,652 |  |      |   | 141,758 | 
|Less Accumulated Depreciation                         |  |              | 57,220 |  |      |   | 118,324 | 
|                                                      |  |              |        |  |      |   |         | 
|                                                      |  | $            | 5,432  |  |      | $ | 23,434  | 
|                                                      |  |              |        |  |      |   |         | 

Depreciation expense was approximately $162,000 and $371,000 for the years ended December 31, 2010 and 2009,
respectively, and includes depreciation on office and laboratory space that is classified as held for sale and discontinued operations at December 31, 2010 (Note 3 and 12).

At December 31, 2010 and 2009, Mimotopes had Property and Equipment, net of accumulated depreciation, of $1,649,464 and $1,710,679, respectively, which are included in assets of discontinued
operations in the Consolidated Balance Sheet.

3. Assets Held for Sale

The Company has a sales agreement for the sale of land, office and laboratory space located at 601 Biotech Drive in Chesterfield County, Virginia. The sale is subject to acceptance and approval by the
Bankruptcy Court. The net book value of these assets was $3,769,712 and $3,927,112 at December 31, 2010 and 2009, respectively. The components of net book value are as follows:



|                         |  |              |            |   |      |   |            |  
|------------------------ |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                         |  | December 31, |           
|                         |  | 2010         |            |   | 2009 |  
|Land                     |  | $            | 403,919    |   |      | $ | 403,919    |  
|Building                 |  |              | 5,230,369  |   |      |   | 5,221,112  |  
|                         |  |              |            |   |      |   |            |  
|                         |  |              | 5,634,288  |   |      |   | 5,625,031  |  
|Accumulated Depreciation |  |              | (1,864,576 | ) |      |   | (1,697,919 | )
|                         |  |              |            |   |      |   |            |  
|                         |  | $            | 3,769,712  |   |      | $ | 3,927,112  |  
|                         |  |              |            |   |      |   |            |  



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4. Debt



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |              |           |  |      |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | --------- |  | ---- | - | --------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | December 31, |          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 2010         |           |  | 2009 |  
|Long term Debt consists of:                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |              |           |  |      |   |           | 
|Mortgage payable to BB&T due in monthly installments of approximately $35,000 with a fixed interest rate of 5.25%. The loan
matures in October 2012 and is collateralized by the corporate offices and laboratory facilities located in Ricmond, Virginia, as well as substantially all assets of the Company.                                                                                                                                                           |  | $            | 2,456,634 |  |      | $ | 2,737,713 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |             
|In February 2007, the Company entered into a thirty-six month capitalized leasing agreement with Technology Leasing Concepts for
several pieces of computer equipment. The monthly principal and interest payments are $898.                                                                                                                                                                                                                                             |  |              |          |  |      |   | 2,641     | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |             
|Secured convertible promissory note with LH Financial (PIPE Investors) which matured June 30, 2010 . The note is
collateralized by a security interest in substantially all the assets of the Company. Interest compounds monthly at an annual rate of 12% beginning July 1, 2010. Prior to July 1, 2010 interest compounded monthly at an annual rate of 10%.
Interest is payable in cash, or at the discretion of note holder, with registered shares of common stock. |  |              | 533,038   |  |      |   | 1,193,619 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |             
|Convertible promissory note with Fornova Pharmaworld Inc. which matured on December 31, 2009. Interest compounds monthly at
a rate of 12%.                                                                                                                                                                                                                                                                                                                               |  |              | 500,000   |  |      |   | 500,000   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |              |           |  |      |   |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |              | 3,489,672 |  |      |   | 4,433,973 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |              |           |  |      |   |           | 
|Less current maturities and unamortized discounts                                                                                                                                                                                                                                                                                                                                                                                                                        |  |              | 1,325,538 |  |      |   | 1,979,280 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |              |           |  |      |   |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $            | 2,164,134 |  |      | $ | 2,454,693 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |              |           |  |      |   |           | 



29



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The mortgage includes certain restrictive covenants, which require the Company to maintain minimum levels of
the current ratio, debt to net worth and debt service ratios. At December 31, 2010, the Company was in violation of covenants, however, the Company was granted a waiver through March 31, 2011.

Future payments due under the terms of the Companys debt are as:



|                        |  |   |           | 
|----------------------- |  | - | --------- | 
|Year Ended December 31, |  |   |          
|2011                    |  | $ | 1,325,538 | 
|2012                    |  |   | 2,164,134 | 
|                        |  |   |           | 
|Total                   |  | $ | 3,489,672 | 
|                        |  |   |           | 

5. Leasing Commitments

The Company leases equipment and facilities under non-cancelable operating leases. Total expense for the years ended December 31, 2010 and 2009 was approximately $150,000 and $75,000, respectively.
Leases are secured by the equipment. Future minimum lease payments and the present value thereof under capitalized leases and future minimum rentals under all non-cancelable operating leases with remaining terms in excess of one year as of
December 31, 2010 are as follows:



|                        |  |   |            | 
|----------------------- |  | - | ---------- | 
|Year Ended December 31, |  |   |           
|2011                    |  | $ | 151,000.00 | 
|2012                    |  |   | 148,000    | 
|2013                    |  |   | 123,000    | 
|2014                    |  |   | 118,000    | 
|2015                    |  |   | 118,000    | 
|Thereafter              |  |   | 79,000     | 
|                        |  |   |            | 
|Total                   |  | $ | 737,000    | 
|                        |  |   |            | 

6. Retirement Plan

CBI maintains a 401(k) Plan (the Plan) which covers substantially all employees. Under the Plan, employees may elect to defer a portion of their salary, up to the maximum allowed by law, and
the Company can elect to match the contribution up to 3% of the employees contribution. Company contributions were $5,909 and $13,489 for the years ended December 31, 2010 and 2009, respectively.

Mimotopes is required by law to make contributions to a retirement plan covering all of its eligible employees at a rate of 9% of their base earnings.
Company contributions were $98,900 and $103,446 for the years ended December 31, 2010 and 2009, respectively.



30



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7. Restricted Cash

Under the terms of the Companys Convertible Note due to the PIPE Investors, $200,000 was held in escrow at December 31, 2009. These funds were distributed to the PIPE Investors in October 2010
and accounted for as a reduction in the principal owed the PIPE investors.

Under the terms of the Companys land lease in Australia,
$111,178 and $98,359 is being held in escrow at December 31, 2010 and 2009, respectively. This amount is equivalent to one year of lease payments. Restricted cash relating to Mimotopes is included in assets of discontinued operations in
the Consolidated Balance Sheet.

8. Comprehensive Loss

The components of comprehensive loss, net of tax, for the years ended December 31, 2010 and 2009 were as follows:



|                               |  |                         |            |   |      |   |            |  
|------------------------------ |  | ----------------------- | ---------- | - | ---- | - | ---------- | -
|                               |  | Year Ended December 31, |           
|                               |  | 2010                    |            |   | 2009 |  
|Net Loss                       |  | $                       | (1,004,270 | ) |      | $ | (2,360,372 | )
|Unrealized Loss on Investments |  |                         |           |   |      |   | 253,699    |  
|FX Adjustments                 |  |                         | 132,736    |   |      |   | 349,743    |  
|                               |  |                         |            |   |      |   |            |  
|Total Comprehensive Loss       |  | $                       | (871,534   | ) |      | $ | (1,756,930 | )
|                               |  |                         |            |   |      |   |            |  

9. Income Taxes

The difference between expected income tax benefits and income tax benefits recorded in the financial statements is explained below:



|                                                  |  |              |          |   |      |   |          |  
|------------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                                  |  | December 31, |         
|                                                  |  | 2010         |          |   | 2009 |  
|Income taxes (benefit) computed at statutory rate |  | $            | (350,681 | ) |      | $ | (810,138 | )
|State income tax benefit, net                     |  |              | (35,902  | ) |      |   | (107,859 | )
|Change in valuation allowance                     |  |              | 513,228  |   |      |   | 692,088  |  
|Other                                             |  |              | (126,645 | ) |      |   | 225,902  |  
|                                                  |  |              |          |   |      |   |          |  
|                                                  |  | $            |         |   |      | $ |         |  
|                                                  |  |              |          |   |      |   |          |  



31



---

The significant components of deferred income tax assets and liabilities consist of the following:



|                                                  |  |              |           |  |      |   |           | 
|------------------------------------------------- |  | ------------ | --------- |  | ---- | - | --------- | 
|                                                  |  | December 31, |          
|                                                  |  | 2010         |           |  | 2009 |  
|Deferred tax assets                               |  |              |           |  |      |   |           | 
|Net operating loss carryforward                   |  | $            | 7,977,516 |  |      | $ | 7,518,738 | 
|Research and development credit carryforward      |  |              | 52,600    |  |      |   | 52,600    | 
|Allowance for doubtful accounts                   |  |              | 17,700    |  |      |   | 27,050    | 
|Stock based compensation                          |  |              |          |  |      |   | 5,200     | 
|Other                                             |  |              | 34,100    |  |      |   | 20,500    | 
|                                                  |  |              |           |  |      |   |           | 
|                                                  |  |              | 8,081,916 |  |      |   | 7,624,088 | 
|                                                  |  |              |           |  |      |   |           | 
|Deferred tax liabilities                          |  |              |           |  |      |   |           | 
|Other                                             |  |              | 34,000    |  |      |   | 34,000    | 
|                                                  |  |              |           |  |      |   |           | 
|                                                  |  |              | 34,000    |  |      |   | 34,000    | 
|                                                  |  |              |           |  |      |   |           | 
|Net deferred tax asset before valuation allowance |  |              | 8,047,916 |  |      |   | 7,590,088 | 
|Less valuation allowance                          |  |              | 8,047,916 |  |      |   | 7,590,088 | 
|                                                  |  |              |           |  |      |   |           | 
|Net deferred tax asset                            |  | $            |          |  |      | $ |          | 
|                                                  |  |              |           |  |      |   |           | 

Operating loss carryforwards at December 31, 2010 relating to US operations of approximately $18,000,000 may be used to
offset future taxable income and expire through 2027. The Company also has research and development credit carryforwards at December 31, 2010 of approximately $52,600 that expire through 2022. A valuation allowance has been established for
deferred tax assets at December 31, 2010 and 2009 as realization is dependent upon generating future taxable income.

10. Stock
Compensation

Stock-Based Compensation PlansStock-based compensation expense recognized during a period is based on the value of the
portion of stock-based awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized for the year ended December 31, 2010 and 2009 included compensation expense for stock-based awards granted prior
to, but not yet vested as of December 31, 2010 and 2009, based on the fair value on the grant date.

Stock-based compensation expense
related to employee stock options recognized under ASC 718 for the years ended December 31, 2010 and 2009 was approximately $6,000 and $38,400, respectfully, and is included in selling, general and administrative.

The total intrinsic value of stock awards (which is the amount by which the stock price exceeded the exercise price of the options on the date of
exercise) exercised during the year ended December 31, 2010 was $ 0. During the year ended December 31, 2010, the Company did not receive cash from the exercise of stock awards.



32



---

The following table sets forth fair value per share information, including related weighted-average
assumptions, used to determine compensation cost for stock options consistent with the requirements of ASC 718.



|                                                                             |  |      |          |   |                               |   |      |      |  |  |                               |   |  |   |      | 
|---------------------------------------------------------------------------- |  | ---- | -------- | - | ----------------------------- | - | ---- | ---- |  |  | ----------------------------- | - |  | - | ---- | 
|                                                                             |  | 2010 |          |   | WeightedAverageExercise Price |   |      | 2009 |  |  | WeightedAverageExercise Price |  
|Options and warrants outstanding, beginning of year                          |  |      | 757,089  |   |                               | $ | 4.43 |      |  |  | 828,936                       |   |  | $ | 5.27 | 
|Granted                                                                      |  |      | 10,000   |   |                               |   | 0.50 |      |  |  | 20,000                        |   |  |   | 0.36 | 
|Exercised                                                                    |  |      |         |   |                               |   |     |      |  |  |                              |   |  |   |     | 
|Expired                                                                      |  |      | (334,077 | ) |                               |   | 9.90 |      |  |  | (91,847                       | ) |  |   | 9.90 | 
|                                                                             |  |      |          |   |                               |   |      |      |  |  |                               |   |  |   |      | 
|Options and warrants outstanding, end of year                                |  |      | 433,012  |   |                               | $ | 4.48 |      |  |  | 757,089                       |   |  | $ | 4.43 | 
|                                                                             |  |      |          |   |                               |   |      |      |  |  |                               |   |  |   |      | 
|Options and warrants exercisable, end of year                                |  |      | 433,012  |   |                               | $ | 4.48 |      |  |  | 737,089                       |   |  | $ | 4.48 | 
|                                                                             |  |      |          |   |                               |   |      |      |  |  |                               |   |  |   |      | 
|Weighted -average fair value per option and warrants granted during the year |  |      |          |   |                               | $ | 0.48 |      |  |  |                               |   |  | $ | 0.36 | 

The following table sets forth fair
value per share information, including related weighted-average assumptions, used to determine compensation cost for our stock awards consistent with the requirements of ASC 718.

The assumption used to determine the fair value per option are as follows:



|                               |  |      |        |   |      |  |        |  
|------------------------------ |  | ---- | ------ | - | ---- |  | ------ | -
|                               |  | 2010 |        |   | 2009 | 
|Assumptions:                   |  |      |        |   |      |  |        |  
|Expected volatility            |  |      | 142.50 | % |      |  | 310.69 | %
|Expected annual dividend yield |  |      | 0.00   | % |      |  | 0.00   | %
|Risk free rate of return       |  |      | 3.30   | % |      |  | 3.31   | %
|Expected option term (years)   |  |      | 10     |   |      |  | 10     |  



33



---

10. Stock Compensation (continued)

The following table summarizes information about stock options and warrants outstanding at December 31, 2010:



|                         |  |                    |  |                                                    |  |                                           |  |                    |  |                                          
|------------------------ |  | ------------------ |  | -------------------------------------------------- |  | ----------------------------------------- |  | ------------------ |  | -----------------------------------------
|Exercise Price Per Share |  | Number
Outstanding |  | Weighted
Average
RemainingContractual Life (Years) |  | Weighted
Average
Exercise
Price Per
Share |  | Number
Exercisable |  | Weighted
Average
Exercise
Price Per
Share
|$0.36 - 2.00             |  | 30,000             |  | 6                                                  |  | $0.41                                     |  | 30,000             |  | $0.41                                    
|$2.01 - 5.49             |  | 241,512            |  | 5                                                  |  | 3.17                                      |  | 241,512            |  | 3.17                                     
|$5.50 - 7.00             |  | 37,500             |  | 1                                                  |  | 5.92                                      |  | 37,500             |  | 5.92                                     
|$7.01 - 9.49             |  | 124,000            |  | 4                                                  |  | 7.57                                      |  | 124,000            |  | 7.57                                     
|$9.50 - 12.50            |  |                   |  | 0                                                  |  |                                          |  |                   |  |                                         
|                         |  |                    |  |                                                    |  |                                           |  |                    |  |                                          
|$0.36 - 12.50            |  | 433,012            |  |                                                    |  | $4.48                                     |  | 433,012            |  | $4.48                                    
|                         |  |                    |  |                                                    |  |                                           |  |                    |  |                                          

At December 31, 2010 and 2009, there was no unrecognized
compensation cost related to non-vested Restricted Stock Units (RSUs) granted under the CBI stock plan. Compensation expense related to RSUs for the years ended December 31, 2010 and 2009 was $0 and $100,000, respectively, and is included in
selling, general and administrative expenses.

The following table summarizes information about Restricted Stock Unit (RSU) activity for the
year ended December 31, 2009:



|                                |  |                                |        |  |                                 |   |      | 
|------------------------------- |  | ------------------------------ | ------ |  | ------------------------------- | - | ---- | 
|                                |  | Number ofRestrictedStock Units |        |  | WeightedAverage GrantDate Value |  
|Non-vested at December 31, 2008 |  |                                | 22,251 |  |                                 | $ | 4.52 | 
|Granted                         |  |                                |       |  |                                 |   |      | 
|Vested                          |  |                                | 22,251 |  |                                 | $ | 4.52 | 
|Expired                         |  |                                |       |  |                                 |   |      | 
|                                |  |                                |        |  |                                 |   |      | 
|Non-vested at December 31, 2009 |  |                                |       |  |                                 | $ | 4.52 | 
|                                |  |                                |        |  |                                 |   |      | 



34



---

11. Sale of CBI Services and Fairfax Identity Labs

On July 16, 2009 the Company announced that an agreement had been signed with Bostwick for the sale of the assets of CBIs FIL and CBI Services
divisions. Bostwick agreed to purchase such assets for a purchase price of $1,110,000, in cash and certain royalty payments to CBI over a five-year period. In addition, CBI will lease to Bostwick the building located at 601 Biotech Drive, Richmond,
Virginia, housing the CBI Services and FIL. The lease is for a term of five years at $48,000 per month.

The sale to Bostwick was completed on
November 2, 2009 resulting in net proceeds to the Company of $343,780. A reconciliation of the gross purchase price to net proceeds received by the Company is as follows:



|                                     |  |   |           |  
|------------------------------------ |  | - | --------- | -
|Purchase Price                       |  | $ | 1,110,000 |  
|Professional Fees                    |  |   | (282,235  | )
|Payment to Mortgage Holder           |  |   | (255,000  | )
|Convertible Noteholders Escrow Funds |  |   | (200,000  | )
|Real Estate Taxes                    |  |   | (26,426   | )
|Filing Fees                          |  |   | (2,559    | )
|                                     |  |   |           |  
|                                     |  | $ | 343,780   |  
|                                     |  |   |           |  

The funds held in escrow may be paid to the Company if the note is satisfied through the issuance of common stock instead of
cash.

In connection with this sale, the Company issued 250,000 share of restricted stock to the Convertible Note Holders.

12. Discontinued Operations

At the 2009
Annual Meeting of Shareholders, approval was made to sell the assets of CBIs FIL and CBI

Services Divisions. The sale of these assets
to Bostwick was completed in November 2009. As of November 2, 2009, the Company has deconsolidated the operations of these divisions and recorded a loss related to the remaining net investment as a discontinued operation.

On January 20, 2011, the Registrant filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of Virginia (the
Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code. On April 7, 2011, the Bankruptcy Court approved the private sale of Mimotopes for a gross sales price of $875,000. After
expenses, the Company anticipates receiving net proceeds of approximately $825,000. At December 31, 2010, Mimotopes was considered an asset held for sale and was reported as a discontinued operation in the Consolidated Balance Sheet and
Consolidated Statement of Operations.



35



---

The components of assets and liabilities of discontinued operations (Mimotopes) are as follows:



|                                             |  |              |            |   |      |   |            |  
|-------------------------------------------- |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                                             |  | December 31, |           
|                                             |  | 2010         |            |   | 2009 |  
|Assets                                       |  |              |            |   |      |   |            |  
|Cash                                         |  | $            | 91,825     |   |      | $ | 137,432    |  
|Accounts receivable (1)                      |  |              | 414,211    |   |      |   | 464,851    |  
|Other assets                                 |  |              | 1,163      |   |      |   | 1,029      |  
|Restricted cash                              |  |              | 111,178    |   |      |   | 98,359     |  
|                                             |  |              |            |   |      |   |            |  
|                                             |  |              | 618,377    |   |      |   | 701,671    |  
|                                             |  |              |            |   |      |   |            |  
|Building                                     |  |              | 1,932,699  |   |      |   | 1,709,863  |  
|Furniture and Fixtures                       |  |              | 266,614    |   |      |   | 235,874    |  
|Office equipment                             |  |              | 189,605    |   |      |   | 167,744    |  
|Lab equipment                                |  |              | 949,981    |   |      |   | 803,084    |  
|Other                                        |  |              | 17,339     |   |      |   | 15,340     |  
|                                             |  |              |            |   |      |   |            |  
|                                             |  |              | 3,356,238  |   |      |   | 2,931,905  |  
|Accumulated depreciation                     |  |              | (1,706,544 | ) |      |   | (1,221,226 | )
|                                             |  |              |            |   |      |   |            |  
|                                             |  |              | 1,649,694  |   |      |   | 1,710,679  |  
|                                             |  |              |            |   |      |   |            |  
|Total assets of discontinued operations      |  | $            | 2,268,071  |   |      | $ | 2,412,350  |  
|                                             |  |              |            |   |      |   |            |  
|                                             |  |             
|Liabilities                                  |  |              |            |   |      |   |            |  
|Accounts payable                             |  | $            | 443,283    |   |      | $ | 486,596    |  
|Accrued payroll liabilities                  |  |              | 281,534    |   |      |   | 225,025    |  
|Other liabilities                            |  |              | 271,057    |   |      |   | 131,071    |  
|                                             |  |              |            |   |      |   |            |  
|Total liabilities of discontinued operations |  | $            | 995,874    |   |      | $ | 842,692    |  
|                                             |  |              |            |   |      |   |            |  



|(1) | Related Party Transaction: Accounts receivable includes a related party receivable of approximately $41,000 that is due from the Chairman of the Board of
Directors of Mimotopes.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



36



---

The components of the income (loss) from the discontinued operations:



|                                            |  |                                      |            |  
|------------------------------------------- |  | ------------------------------------ | ---------- | -
|                                            |  | Year
EndedDecember 31, 2010Mimotopes |           
|Revenues                                    |  | $                                    | 2,785,483  |  
|Cost of services                            |  |                                      | (2,029,390 | )
|                                            |  |                                      |            |  
|Gross profit                                |  |                                      | 756,093    |  
|Sales, general and administrative           |  |                                      | 1,481,213  |  
|                                            |  |                                      |            |  
|Operating loss                              |  |                                      | (725,120   | )
|Other income/(expense)                      |  |                                      | 365,467    |  
|                                            |  |                                      |            |  
|Loss from operating discontinued operations |  | $                                    | (359,653   | )
|                                            |  |                                      |            |  



|                                                     |  |                              |            |   |                     |   |            |       |  |   |            |  
|---------------------------------------------------- |  | ---------------------------- | ---------- | - | ------------------- | - | ---------- | ----- |  | - | ---------- | -
|                                                     |  | Year Ended December 31, 2009 |           
|                                                     |  | Mimotopes                    |            |   | FIL and CBIServices |   |            | Total | 
|Revenues                                             |  | $                            | 3,167,892  |   |                     | $ | 4,241,576  |       |  | $ | 7,409,468  |  
|Cost of services                                     |  |                              | (2,250,393 | ) |                     |   | (3,567,653 | )     |  |   | (5,818,046 | )
|                                                     |  |                              |            |   |                     |   |            |       |  |   |            |  
|Gross profit                                         |  |                              | 917,499    |   |                     |   | 673,923    |       |  |   | 1,591,422  |  
|Sales, general and administrative                    |  |                              | 1,184,613  |   |                     |   | 392,996    |       |  |   | 1,577,609  |  
|                                                     |  |                              |            |   |                     |   |            |       |  |   |            |  
|Operating income (loss)                              |  |                              | (267,114   | ) |                     |   | 280,927    |       |  |   | 13,813     |  
|Other income/(expense)                               |  |                              | (44,903    | ) |                     |   | 89         |       |  |   | (44,814    | )
|Interest expense                                     |  |                              |           |   |                     |   | (257,114   | )     |  |   | (257,114   | )
|Gain on sale                                         |  |                              |           |   |                     |   | 383,782    |       |  |   | 383,782    |  
|                                                     |  |                              |            |   |                     |   |            |       |  |   |            |  
|Income (loss) from operating discontinued operations |  | $                            | (312,017   | ) |                     | $ | 407,684    |       |  | $ | 95,667     |  
|                                                     |  |                              |            |   |                     |   |            |       |  |   |            |  



37



---

13. Short Term Notes with Conversion Features

PIPE Investors Agreement

On
December 31, 2007 the Company issued $1,950,000 of convertible debt in a subscription agreement between the Company and the PIPE Investors. The debt carries an interest rate of 10% annually and matured in July 31, 2009. Quarterly interest
payments may be made in the form of either cash or common stock. The debt may be converted into shares of common stock at a conversion price of $2.00 per share. In conjunction with the debt, the Company also issued Class A warrants to purchase
975,000 shares of common stock at an exercise price of $2.85 per share that expire in May 2013.

The fair value of the Class A warrants
is $1.79 per share. The fair value of the Class A warrants is calculated using the Black-Scholes method. Assumptions for Class A warrants include the stock asset price at $2.55 and a stock option price of $2.85 with a maturity date of 5
years and effective interest rate of 3.40%. The Company also issued Class B warrants to purchase 243,750 shares of common stock at an exercise price of $5.00 per share. The fair value of the Class B warrants is $0.36 per share. The fair value of the
Class B warrants is calculated using the Black- Scholes method. The debt carries a beneficial conversion feature, which along with the relative fair value of the warrants, resulted in a debt discount of $1,950,000 which was recorded against the
convertible debt and offset in additional paid in capital. This discount will be amortized as interest expense over the life of the debt which resulted in amortization of approximately $748,000 for the nine months ended September 30, 2009. The
Company registered the required minimum number of shares based upon the agreement on April 30, 2008 and will register the remaining shares by as soon as possible as required under the agreement

Modification, Waiver and Acknowledgement Agreement

On September 18, 2008, the Company entered into a modification, waiver and acknowledgement agreement with LH Financial for the convertible debt listed above. Under the modified Agreement, the
restructured terms of the Agreement is that the exercise price of the Class A Warrants was reduced from $2.85 to $0.71 per common share, and the exercise price of the Class B Warrants was reduced from $5.00 to $1.01 per common share, subject to
further reduction as described in the Transaction Documents. The restructured terms of the Agreement are as follows:



| | (1) | the conversion price for every 33% of remaining principal amount of each Investors pro rata portion of the Notes was reduced from $2.00 to $0.50 per common share,
subject to further reduction as described in the transaction documents:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | all interest accrued through March 31, 2008 on the debt shall be paid at a rate of 10% in shares of the Companys common stock and all interest further
accrued between April 1, 2008 and September 30, 2008 on the debt shall be paid at the rate of 12% in shares of the Companys common stock: and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | the exercise price of the Class A Warrants was reduced from $2.85 to $0.71 per common share, and the exercise price of the Class B Warrants was reduced from $5.00
to $1.01 per common share, subject to further reduction as described in the Transaction Documents.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of the above
modification, the Company reported a loss of $1,202,419 for the extinguishment of debt relative to the original beneficial conversion feature and debt discount.



38



---

On June 22, 2009, the registrant completed the issuance of an aggregate principal amount of $369,950 of
subordinated notes (the Notes) convertible into shares of the registrants common stock, without par value per share (Common Stock), to 6 institutional investors (the  PIPE Investors). The Notes mature on
December 31, 2009, and have an interest rate of 8% per annum. The registrant will pay any interest and principal on the maturity date. Prior to maturity, a holder of a Note may convert such Note into shares of the registrants Common
Stock at a conversion price of $0.50 per share. The purchase price for the Notes was paid by the partial surrender of certain outstanding promissory notes and deemed payment of interest in connection therewith. According to the registrants
transfer agent, on June 22, 2009, the registrant had issued and outstanding 7,416,896 shares of common stock. The amount of common stock underlying the Notes represents less than 9.99% of the registrants issued and outstanding common
stock on June 22, 2009. All shares were exercised and no additional interest will be accrued for the rest of the year.

On July 22,
2009, the Company reached an agreement with its PIPE investors to extend for 6 months its convertible note facilities of approximately $1.3M that matured on June 30 and has also received consent to suspend the financial covenants under such
note facilities through the 4th Quarter. During this period, obligations under the note will continue to accrue.

This note matured on
June 30, 2010 and was considered in default on July 1, 2010. Under the terms of the notes, the interest rate increased from 10% to 12% on July 1, 2010.

In October 2010, restricted cash of $200,000 was distributed to the PIPE Investors and accounted for as a reduction of principal outstanding.

Second Modification, Waiver and Acknowledgement Agreement

On October 9, 2009,
the second Modification Agreement relating to the above mentioned debt was approved at the 2009 Annual Meeting of Shareholders. The restructured agreement calls for the conversion price for the remaining balance of PIPE notes to be lowered from
$2.00 per share to $0.50 per share.

Sale of CBI Services and FIL

On November 2, 2009, the Company entered into an Agreement with its PIPE investors in connection with the sale of CBI Services and FIL. As a condition of the Agreement, the Lenders received 250,000
shares of restricted common stock and CBI placed into escrow $200,000 to be released back to the Borrower upon satisfaction of the note. In October 2010 these funds were distributed to the PIPE Investors and accounted for as a reduction in principal
outstanding.

Principal and Interest Conversions

During the year ended December 31, 2009, the Company received notices of conversion for $611,381 in principal and $165,593 in interest resulting in the issuance of 1,696,224 shares of common stock.

During January 2010, the Company received notices of conversion for $462,361 in principal and $34,452 in interest resulting in the issuance
of 993,626 shares of common stock.



39



---

Fornova Agreement

On September 4, 2008, the Company completed the issuance of a $500,000 convertible promissory note (the Note) payable to Fornova Pharmaworld Inc. (the Holder). The Note has an
interest rate of 10% per annum compounded monthly. The Company will pay interest on a monthly basis beginning on September 28, 2008. At any time between October 27, 2008 and August 21, 2009, the Holder may convert the Notes into
shares of the Companys common stock at a conversion price of $1.01 per share. Additionally, the Note features a call date beginning January 29, 2009, if exercised the holder can call the note in the amount of the outstanding principal
balance plus accrued interest. If the holders call feature is exercised, the Company would most likely satisfy the debt and accrued interest with common stock.

As of December 31, 2009, this note has matured.

14. Earnings per Share

The Company follows the guidance provided in ASC 260, Earnings Per Share, which establishes standards for computing and presenting earnings per
share and applies to entities with publicly held common stock or potential common stock. Basic earnings (loss) per common share are computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding during the
period. Diluted per share amounts assume the conversion, exercise or issuance of all potential common stock instruments such as warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share.



|                                                                              |  |                         |            |   |      |   |            |  
|----------------------------------------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                              |  | Year Ended December 31, |           
|                                                                              |  | 2010                    |            |   | 2009 |  
|Basic and diluted loss per share:                                             |  |                         |            |   |      |   |            |  
|Loss from continuing operations                                               |  | $                       | (644,617   | ) |      | $ | (2,456,039 | )
|Income (Loss) from discontinued operations                                    |  |                         | (359,653   | ) |      |   | 95,667     |  
|                                                                              |  |                         |            |   |      |   |            |  
|Net loss                                                                      |  | $                       | (1,004,270 | ) |      | $ | (2,360,372 | )
|                                                                              |  |                         |            |   |      |   |            |  
|Basic and diluted loss per common share from continued operations             |  | $                       | (0.06      | ) |      | $ | (0.33      | )
|                                                                              |  |                         |            |   |      |   |            |  
|Basic and diluted income (loss) per common share from discontinued operations |  | $                       | (0.04      | ) |      | $ | 0.02       |  
|                                                                              |  |                         |            |   |      |   |            |  
|Basic and diluted loss per common share after discontinued operations         |  | $                       | (0.10      | ) |      | $ | (0.31      | )
|                                                                              |  |                         |            |   |      |   |            |  
|Weighted average share outstanding                                            |  |                         | 9,864,040  |   |      |   | 7,549,845  |  



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15. Suspension of Agreement with Biosignal LTD.

On July 22, 2009, the Company reached an agreement with Biosignal Ltd., an Australian biotechnology company, pursuant to which Biosignal was to
complete a $1,600,000 investment in the Company and would agree to assign its biofilm technology to the Company. The biofilm technology is based around a family of natural products which disrupt bacterial colonization and thereby inhibit growth.
Such biofilm disrupters are expected to be commercialized to support a variety of medical and industrial application.

Pursuant to the terms
of a Share Subscription Agreement, Biosignal was to purchase 1,600,000 shares of the Companys common stock, without par value, for the purchase price of $1,600,000, paid in the form of a 12 month unsecured convertible note bearing interest at
10% per annum. To the extent Biosignal obtained shareholder approval, Biosignal could, at its option, convert the note and all accrued interest into the aggregate of 65,339,458 shares of Biosignal.

In addition, the Company and Biosignal were to enter into a Deed of Assignment to which Biosignal would convey certain intellectual property and
contracts related to the development and possible exploitation of Biosignals biofilm technology to the Company subject to the satisfactory completion of due diligence and other conditions. Biosignal would retain licensed rights to use this
intellectual property to service some contracts that were not assigned to the company.

This transaction was suspended by the Company and
Biosignal in August 2009. On March 19, 2010 the Biosignal shareholders voted not to pursue this transaction.

16. Delisting and
Reinstatement from NASDAQ

On July 24, 2009, The NASDAQ Stock Market notified CBI that CBI was to be delisted from the NASDAQ Capital
Market as a result of (i) a failure to comply with NASDAQ Listing Rule 5550(b) due to a failure to maintain minimum stockholders equity of $2.5 million and a failure to file a Form 8-K affirming compliance with Rule 5550(b), (ii) a
failure to comply with NASDAQ Listing Rule 5635(a) due to a failure to obtain shareholder approval of an issuance of stock in excess of 20% of the pre-transaction shares outstanding in connection with the structure of a prior agreement with
Biosignal, Ltd, an Australian company, and (iii) a failure to comply with NASDAQ Listing Rule 5250(e)(2)(D) due to a failure to timely file a Form LAS for that Biosignal issuance.

After receiving the July 24, 2009 notice, CBI and Biosignal agreed to terminate the earlier agreement and, subsequently, CBI filed a Form LAS in connection with a proposed amended and re-stated
Biosignal Transaction thus bringing the company back into compliance with NASDAQ Rules 5635(a) and 5250(e)(2)(D). However, NASDAQ has determined that the Company has not met the requirements of Rule 5550(b). The Company appealed this decision under
NASDAQ Rule 5800. The hearing was convened on September 3, 2009. On October 20, 2009, CBI was notified that the Hearing Panel granted the request of CBI to remain listed on The NASDAQ Stock Market through January 20, 2010, subject to
the condition that, on or before January 20, 2010, CBI evidence shareholders equity of at least $2.5 million or demonstrate compliance with one of the alternative listing criteria of NASDAQ Listing Rule 5550(b). Failure to meet the
Listing Rule 5550(b) may result in CBIs delisting after such date.

Effective January 25, 2010, the Companys stock began
trading on the Pink Sheets under the symbol CBTEQ.PK.



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17. Subsequent Events

In January 2011, bonuses, in the form of restricted stock, were issued to three current employees and a consultant. Total shares issued were 500,000. The market value of these shares was approximately
$35,000. These transactions were approved by the Companys Board of Directors.

In December 2010, the Board of Directors approved a
resolution allowing officers of the Company to receive restricted stock in lieu of cash compensation. In March 2011, 1,687,500 restricted shares were issued to the Companys CEO under this arrangement. The market value of these shares was
approximately $51,000. The issuance of these shares resulted in a $51,000 reduction in accrued payroll liabilities that were included in the consolidated balance sheet at December 31, 2010.

On January 20, 2011, the Registrant filed a voluntary petition in the United States Bankruptcy Court for the Eastern District of Virginia (the
Bankruptcy Court) seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code. On April 11, 2011, the Bankruptcy Court approved the private sale of Mimotopes for a gross sales price of $875,000. After
expenses, the Company anticipates receiving net proceeds of approximately $825,000. Estimated loss at closing is as follows:



|                                                                                          |  |   |            |  
|----------------------------------------------------------------------------------------- |  | - | ---------- | -
|Estimated net cash to be received at Closing                                              |  | $ | 825,000    |  
|Investment in Mimotopes Common Stock                                                      |  |   | (4,981,000 | )
|Receivable due from Mimotopes (written off per the terms of the share purchase agreement) |  |   | (650,000   | )
|                                                                                          |  |   |            |  
|Estimated loss on sale of Mimotopes Common Stock                                          |  | $ | (4,806,000 | )
|                                                                                          |  |   |            |  

In addition, the Company has a sales agreement for the sale of land, office and laboratory space located at 601 Biotech
Drive in Chesterfield County, Virginia. The sale is subject to acceptance and approval by the Bankruptcy Court.

The Company has evaluated
subsequent events for through April 14, 2001 for potential recognition and/or disclosure and determined that there were none, other than those described above, that required accrual or disclosure.



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Corporate Information

Commonwealth Biotechnologies, Inc.

718 Grove Road

Midolothian, VA 23114

Phone:
(804) 464-1601

Fax: (804)464-1604

E-mail: info@cbi-biotech.com

Web site: www.cbi-biotech.com

Mimotopes Pty, Ltd.

11 Duerdin St

Clayton, Victoria 3168 Australia

General Counsel

Kaufman and Canoles, PC

1051 E. Cary St

3 James Center

Richmond, VA 23219

Transfer
Agent and Registrar

Computershare Trust Co.

350 Indiana St.

Golden, CO 80401

Independent Auditors

Witt Mares, PLC

3951 Westerre Parkway

Suite 200

Richmond, VA 23233



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Executive Officers

Richard J. Freer, Ph.D.

COO

Directors of the Company

Richard J. Freer, Ph.D.

CEO

Paul DSylva, Ph.D.

Director

Dr. William
Guo

VenturePharm Lab

Samuel
P. Sears, Jr., Esq.

Attorney at Law

James Causey.

VP, Dominion Media

Dominion Enterprises

Eric V. Tao

Chief Investment Officer and Director

AGI Capital Group, Inc.

Maria Song, MD, Ph.D.

VP, Venturepharm



44



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Commonwealth Biotechnologies, Inc.

PO Box 35042

Richmond, VA 23235

phone: 804-464-1601

fax: 804-464-1604

email: info@cbi-biotech.com

www.cbi-biotech.com