UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549
                                   FORM 10-K

(MARK ONE)
    X                ANNUAL REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
                                       OR

                  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
           FOR THE TRANSITION PERIOD FROM ____________ TO ____________

                        COMMISSION FILE NUMBER:  0-21802

                                [GRAPHIC OMITTED]

                        N-VIRO INTERNATIONAL CORPORATION
                (Exact name of registrant as specified in its charter)

              DELAWARE                                   34-1741211
     (STATE OR OTHER JURISDICTION OF         (I.R.S. EMPLOYER IDENTIFICATION NO.
      INCORPORATION OR ORGANIZATION)

                        3450 W. CENTRAL AVENUE, SUITE 328
                     TOLEDO, OHIO                            43606
           (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)         (ZIP CODE)

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:    (419) 535-6374

  SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT:    None

  SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:  Common Stock, par
                                                           value $.01 per share


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

Indicate  by  check  mark  if  the  registrant  is  not required to file reports
pursuant  to  Section  13  or  15(d)  of  the  Exchange  Act.  Yes     No  X

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

Indicate  by  check mark whether the registrant has submitted electronically and
posted  on  its corporate Web site, if any, every Interactive Data File required
to  be  submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the  registrant  was  required  to  submit and post such files).      Yes     No

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  (229.405 of this chapter) is not contained herein, and will
not  be contained, to the best of registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or  any  amendment  to  this  Form  10-K.  [  ]

Indicate  by  check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.  See
the  definitions  of "large accelerated filer", "accelerated filer" and "smaller
reporting  company"  in  Rule  12b-2  of  the  Exchange  Act.

Large  accelerated  filer
Accelerated  filer
Non-accelerated  filer
Smaller  reporting  company  X

Indicate  by check mark whether the registrant is a shell company (as defined in
Rule  12b-2  of  the  Exchange  Act).

Yes     No  X

State the aggregate market value of the voting and non-voting common equity held
by  non-affiliates computed by reference to the price at which the common equity
was  last  sold, or the average bid and asked price of such common equity, as of
the  last business day of the registrant's most recently completed second fiscal
quarter:   $7,967,000.

The  number  of shares of Common Stock of the registrant outstanding as of March
19,  2010  was  5,194,153.

                      DOCUMENTS INCORPORATED BY REFERENCE
Certain  information  contained in Part III of this Form 10-K is incorporated by
reference  from  the registrant's Proxy Statement for the 2010 Annual Meeting of
Stockholders,  which  proxy  statement  will  be  filed  with the Securities and
Exchange  Commission  on  or  before  April  30,  2010.

<PAGE>

                                    INDEX

                                                                           PAGE
                                                                           ----

                                     PART I

Item 1.     Business                                                          2

Item 1A.     Risk Factors                                                    10

Item 2.     Properties                                                       13

Item 3.     Legal Proceedings                                                13

Item 4.     (Removed and Reserved)                                           14

                                    PART II

Item 5.     Market for Registrant's Common Equity, Related
     Stockholder Matters and Issuer Purchases of Equity Securities           14

Item 6.     Selected Financial Data                                          15

Item 7.     Management's Discussion and Analysis of Financial
     Condition and Results of Operations                                     15

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk      22

Item 8.     Financial Statements and Supplementary Data                      23

Item 9.     Changes in and Disagreements with Accountants
     on Accounting and Financial Disclosure                                  25

Item 9A(T).     Controls and Procedures                                      25

Item 9B.     Other Information                                               26

                                    PART III

Item 10.     Directors, Executive Officers and Corporate Governance          26

Item 11.     Executive Compensation                                          27

Item 12.     Security Ownership of Certain Beneficial Owners
     and Management and Related Stockholder Matters                          27

Item 13.     Certain Relationships and Related Transactions, and
     Director Independence                                                   27

Item 14.     Principal Accountant Fees and Services                          27


                                    PART IV

Item 15.     Exhibits, Financial Statement Schedules                         27

<PAGE>

                                     PART I

CAUTIONARY  STATEMENT  WITH  RESPECT  TO  FORWARD-LOOKING  STATEMENTS

     This  annual  report  on  Form  10-K  contains  statements  that  are
forward-looking.  We caution that words used in this document such as "expects,"
"anticipates," "believes," "may," and "optimistic," as well as similar words and
expressions used herein, identify and refer to statements describing events that
may  or  may  not  occur in the future. These forward-looking statements and the
matters  to  which  they  refer are subject to considerable uncertainty that may
cause  actual  results  to  be materially different from those described herein.
There  are numerous factors that could cause actual results to be different than
those anticipated or predicted by us, including: (i) a deterioration in economic
conditions in general; (ii) a decrease in demand for our products or services in
particular;  (iii)  our  loss  of  a  key employee or employees; (iv) regulatory
changes,  including  changes  in  environmental  regulations,  that  may have an
adverse  affect on the demand for our products or services; (v) increases in our
operating  expenses  resulting  from  increased costs of labor and/or consulting
services; (vi) our inability to exploit existing or secure additional sources of
revenues  or  capital  to  fund  operations;  (vii) a failure to collect upon or
otherwise  secure  the  benefits  of existing contractual commitments with third
parties,  including our customers; and (viii) other factors and risks identified
in  this  Form  10-K,  including  under  the  caption  "Risk Factors." This list
provides  examples  of  factors  that  could  affect  the  results  described by
forward-looking  statements  contained  in this Form 10-K; however, this list is
not  exhaustive  and  many  other  factors  could  impact our business and it is
impossible  to  predict with any accuracy which factors could result in negative
impacts.  Although  we  believe that the forward-looking statements contained in
this Form 10-K are reasonable, we cannot provide you with any guarantee that the
anticipated results will not be adverse and that the anticipated results will be
achieved.  All  forward-looking  statements  in  this  Form  10-K  are expressly
qualified  in  their  entirety  by  the  cautionary statements contained in this
section and you are cautioned not to place undue reliance on the forward-looking
statements  contained  in this Form 10-K. In addition to the risks listed above,
other  risks  may  arise in the future, and we disclaim any obligation to update
information  contained  in  any  forward-looking  statement.


ITEM 1.     BUSINESS

GENERAL

     We were incorporated in Delaware in April 1993, and became a public company
in  October  1993.  We  own  and  sometimes license various N-Viro processes and
patented  technologies  to  treat  and  recycle wastewater and other bio-organic
wastes,  utilizing  certain  alkaline  and  mineral  by-products produced by the
cement,  lime,  electric  utilities  and  other industries.  To date, the N-Viro
Process  has  been  commercially utilized for the recycling of wastewater sludge
from  municipal  wastewater  treatment  facilities.  N-Viro  SoilTM,  produced
according  to  the  N-Viro  Process  specifications, is an "exceptional quality"
sludge  product  under  the  40  CFR Part 503 Sludge Regulations under the Clean
Water  Act  of  1987  (the  "Part  503  Regs").

     Our  business strategy is to market our N-Viro technologies, which produces
an  "exceptional  quality" sludge product, as defined in the Part 503 Regs, with
multiple  commercial  uses.  In  this strategy, the primary focus is to identify
allies,  public and private, who will allow the opportunity for N-Viro to build,
own and operate N-Viro facilities.  Currently the company operates two biosolids
process facilities located in Toledo, Ohio and Daytona, Florida.  Our goal is to
continue  to  operate  these  facilities  and  aggressively  market  our  N-Viro
BioDry(TM)  and N-Viro Fuel(TM) technologies.  These patented processes are best
suited  for  current  and  future  demands  of  both  waste treatment as well as
domestic  and  international  pressures  for  clean,  renewable alternative fuel
sources.

THE  N-VIRO  PROCESS

     The N-Viro Process is a patented process for the treatment and recycling of
bio-organic  wastes,  utilizing  certain  alkaline  by-products  produced by the
cement,  lime,  electric  utilities  and  other industries.  To date, the N-Viro
Process  has  been  commercially utilized for the recycling of wastewater sludge
from  municipal  wastewater  treatment  facilities.  N-Viro  SoilTM  produced
according  to  the  N-Viro  Process  specifications  is an "exceptional quality"
sludge  product  under  the  Part  503  Regs.

     The  N-Viro  Process involves mixing the wastewater sludge with an alkaline
admixture  and  then  subjecting  the mixture to a controlled period of storage,
mechanical  turning and accelerated drying in which a blending of the sludge and
the  alkaline  admixture  occurs.  The N-Viro Process stabilizes and pasteurizes
the  wastewater  sludge,  reduces  odors  to  acceptable  levels, neutralizes or
immobilizes  various  toxic  components  and  generates N-Viro SoilTM, a product
which  has  a  granular  appearance  similar to soil and has multiple commercial
uses.  These  uses  include  agricultural lime, soil enrichment, top soil blend,
landfill  cover  and  capping,  and  land  reclamation.

     The  alkaline  admixture  used in the N-Viro Process consists of by-product
dusts  from  cement or lime kilns, certain fly ashes and other products of coal,
coke or petroleum combustion and by-product dusts from sulfuric acid "scrubbers"
used  in acid rain remediation systems and from fluidized bed coal-fired systems
used  in  electric  power  generation.  The  particular  admixture  that is used
usually  depends upon cost and availability in local markets.  In certain cases,
commercial  lime  may  also  be  added  to  the  admixture.

     We  are a distributor of alkaline admixture.  We also work with established
by-product  marketers.  We generally charge a mark-up over our cost for alkaline
admixture  sold  directly  by  us.

N-VIRO  SOIL TM

     N-Viro  SoilTM  is  sold  for agricultural use as a bio-organic and mineral
fertilizer  with  agricultural  liming  and  nutrient  values, as landfill cover
material,  as  a  topsoil blending ingredient and for land reclamation projects.
We  estimate  that approximately twenty percent of the N-Viro SoilTM produced is
utilized  at  landfills  for  cover  material,  small  amounts are sold for land
reclamation  and similar projects, and a substantial portion of the remainder is
sold  for  agricultural  use  or as a topsoil blend.  Although the use of N-Viro
SoilTM  is  not  subject to any federal regulations or restrictions, each N-Viro
facility  is  typically  required  to obtain a state and/or local permit for the
sale  of  N-Viro  SoilTM.  In  addition,  many  states  and/or local governments
require  site-specific  permits  for the use of sludge products in bulk amounts.

N-VIRO  FUEL TM

     N-Viro  FuelTM  is a relatively new and patented biomass alternative energy
fuel  that  has  physical  and  chemical  characteristics similar to coal and is
created  from  municipal biosolids and other organic wastes like manure and pulp
and  paper sludge.  N-Viro Fuel is manufactured from a variety of organic wastes
by  blending  the waste material with one or more mineral by-products and drying
the  mixture.  The  resulting product is blended with coal or petroleum coke and
burned  as  a  partial coal substitute in coal-fired power plants.  An important
advantage of the waste biomass-derived fuel is the ammonia that is released from
the  waste in the process.  This ammonia is available to be used as a substitute
for  ammonia  or urea for NOx removal.  We previously announced that N-Viro Fuel
has  satisfied  guidelines set forth by the U.S. Environmental Protection Agency
(EPA)  to  qualify  as  an  alternative  energy  source  that may be utilized in
commercial  power  generation.  The  N-Viro  Fuel  technology,  utilizing  an
alkaline/heat  process  to produce a fuel product, satisfies all requirements of
the  EPA  40  CFR  part  503 regulations and can be blended with coal for energy
production  or  land  applied  for  agricultural  use  as  N-Viro Soil(TM).  Our
technologies  can convert waste products that traditionally are landfilled, into
safe,  beneficial  and  renewable  long-term  energy  solutions.  Attaining this
status  means that N-Viro Fuel technology is now eligible to qualify for certain
economic  incentives that are granted alternative energy technologies, and it is
also a catalyst for attaining permits in each state in a more timely manner.  We
plan  to  accelerate its development efforts as this designation is an important
factor  for  its  potential  energy  partners.

N-VIRO  PROCESS  FACILITIES

     Our earliest facility is in Toledo, Ohio and has been managed by us through
a  Contract  Management  Agreement  with the City of Toledo since our inception.
Revenue  generated  from and related to the Toledo operation accounted for about
32%  of  our  total  revenue  in  2009.  Through the end of 2009, we processed a
majority  of  Toledo's  wastewater  sludge  and sold the resulting N-Viro SoilTM
product.  In  2004,  the  City exercised its option to renew the contract for an
additional  five  years  through  2009.  In  December of 2009 and again in March
2010,  the  City agreed to an extension of the contract, presently extending our
service  to  them  to process 50% of the City's sludge until September 30, 2010.
Currently,  the  contract is in its twenty-first year of operation.  The Company
is  currently  in  discussions with the City to secure a long-term contract with
terms  and  conditions  that  will be mutually advantageous to both parties.  We
consider  our relationship with the City of Toledo to be satisfactory.  However,
there can be no assurances that the City will continue to extend on a short-term
basis  or  sign  a  new long-term contract with the Company beyond September 30,
2010.

     In  December  2006,  we  acquired  Headwaters  Inc.'s ownership interest in
Florida N-Viro L.P. (Florida N-Viro), who was the majority owner and operator of
a  municipal biosolids processing plant located in Volusia County, Florida.  The
plant  had  been  jointly  owned  by  us  and  Pennsylvania-based VFL Technology
Corporation  (VFL)  -  a  subsidiary  of  Headwaters  -  since  1995.  The plant
currently  processes  regional  biosolids for multiple communities and currently
maintains  contracts  with the City of Altamonte Springs, the City of Englewood,
Seminole  County,  the  City  of  Palm  Coast,  the  City  of  Port  Orange, the
Tohopekaliga  Water  Authority  and  Volusia  County.

     Including  the  facilities  in Toledo, Ohio and Volusia County, Florida, we
estimate  there are currently facilities treating and recycling sludge using the
N-Viro  process  at  an  annualized  rate of over 130,000 wet tons per year.  In
addition,  there  are  several licensees not currently operating, including both
international  and  domestic  contractors  or  public generators, who are in the
process  of  developing  or  designing  site-specific  N-Viro  facilities.

SALES  AND  MARKETING  OF  N-VIRO  PROCESS

     Currently,  the  company markets its technology via internal sales efforts.
All domestic sales and marketing is controlled by management.  The primary focus
of  our  marketing  efforts  is toward the N-Viro BioDry(TM) and N-Viro Fuel(TM)
technologies.  These  patented  processes are best suited for current and future
demands  of both waste treatment as well as domestic and international pressures
for  clean,  renewable  alternative  fuel  sources.

     In  certain  countries  outside  the  United  States, we license the N-Viro
Process  through  agents.  In  their  respective  territories, the Agents market
licenses  for  the  N-Viro Process, serve as distributors of alkaline admixture,
oversee  quality  control  of  the N-Viro Process and N-Viro SoilTM, enforce the
terms  of  the  license  agreements  with licensees and market N-Viro SoilTM (or
assist  licensees in marketing N-Viro SoilTM).  In general, the Agents have paid
one-time, up-front fees to us for the rights to market or use the N-Viro Process
in  their  respective  territories.  Typically,  the  agreements with the agents
provide  for  us  to  receive  a  portion  of the up-front license fees, ongoing
royalty  fees  paid  by  the  licensees,  a  portion  of  the  proceeds from the
distribution  and  resale  of alkaline admixture, and the sale of N-Viro SoilTM.
Agents  have  total  responsibility and control over the marketing and contracts
for  N-Viro technology subject only to license models or minimum agreements with
us.

The following table sets forth our Agents and the territorial rights of each
Agent:

<TABLE>
<CAPTION>

                      The Agents
                      ----------
Agent                                    Territory
--------------------------  ------------------------------------
<S>                         <C>

Bio-Recycle Pty. Ltd.       Australia, New Zealand and Singapore
CRM Technologies            Israel, Greece and Eastern Europe
EIEC                        Spain
Itico                       Egypt, North Africa, The Middle East
N-Viro Filipino             Philippines
South Africa N-Viro         All Africa except North Africa
</TABLE>

EARNINGS  VARIATION  DUE TO BUSINESS CYCLES AND SEASONAL FACTORS.  Our operating
results  can  experience  quarterly or annual variations due to business cycles,
seasonality  and  other  factors.  During  the  last  fiscal  quarter  of  2009,
approximately  97%  of  our  revenue was from management-run operations, 3% from
other domestic third party agreements and 0% from foreign agreements or research
and  development grants.  Sales of the N-Viro technology are affected by general
fluctuations  in  the  business  cycles  in  the  United  States  and worldwide,
instability of economic conditions and interest rates, as well as other factors.
In  addition, operating results of some of our business segments are influenced,
along  with  other factors such as interest rates, by particular business cycles
and  seasonality.  See  Notes  to  the  Financial Statements contained in Item 8
hereof.

     RISKS OF DOING BUSINESS IN OTHER COUNTRIES.  We conduct a very small amount
of  business  in markets outside the United States, and expect to continue to do
so.  In addition to the risk of currency fluctuations, the risks associated with
conducting  business  outside  the  United States include: social, political and
economic instability; slower payment of invoices; underdeveloped infrastructure;
underdeveloped legal systems; and nationalization.  We have not entered into any
currency  swap  agreements which may reduce these risks.  We may enter into such
agreements  in the future if it is deemed necessary to do so.  We cannot predict
the  full  impact  of  this  economic  instability, but it could have a material
adverse  effect  on  revenues  and  profits.

RESEARCH  AND  DEVELOPMENT

     Research and development on the N-Viro Technologies had been, through 2005,
performed  primarily  by BioCheck Laboratories, a former wholly-owned subsidiary
of  ours,  and Dr. Terry J. Logan.  Dr. Logan, a long-time director who resigned
from  our  Board of Directors in November 2006, continues to direct our research
and  patent  development work under a consulting agreement that became effective
July 1, 2004 and currently runs through June 30, 2010, as extended by a one-year
agreement  signed  in  April  2009.  Our  research and development expenses were
under  $5,000  in  2009  and  2008.

     We  continue  to  investigate  methods  to shorten drying time, improve the
BioDryTM  process,  substitute  various  other  materials  for  use  as alkaline
admixture  and  improve  the  quality  and  attractiveness of N-Viro SoilTM to a
variety  of  end-users.  Several developments are the subject of issued patents,
including  the  use  of  carbon  dioxide in the N-Viro Process as a means to (i)
reduce  by-product  carbon  dioxide  emissions  from  industrial  processes  by
immobilizing  carbon  dioxide  in N-Viro SoilTM and (ii) improve the quality and
value  of  N-Viro  SoilTM.  In  addition, we have developed a dryer system which
reduces  processing  time  while continuing to permit the survival of beneficial
microflora.

     In  early  2007 we performed a full scale test of the N-Viro FuelTM product
at  the  T.B.  Simon  Power  Facility  located  on  the campus of Michigan State
University  and in conjunction with them.  The results of the test encouraged us
to  focus  primarily  on  the  development  of  the N-Viro Fuel technology.  Our
efforts  have  been  focused  toward  the development of what could be the first
N-Viro Fuel facility.  Further discussion of our patent development can be found
in  the  section  "Patents  and  Proprietary  Rights".

CURRENT  DEVELOPMENTS

     We  are  currently  in discussions with several companies in the cement and
fuel/power  generation  industries  for the development and commercialization of
the  patented  N-Viro Fuel(TM) technology.  There can be no assurance that these
discussions  will  be  successful.  We  continue  to focus on the development of
regional biosolids processing facilities.  Currently we are in negotiations with
several  privatization  firms  to  permit  and  develop  independent,  regional
facilities.

INDUSTRY  OVERVIEW

     Disposal.  Landfilling,  incineration  and ocean dumping have traditionally
provided  inexpensive,  reliable  methods of sludge disposal.  Ocean dumping was
banned  in  the  United  States  in  December  1992.  Under  the  Part 503 Regs,
landfilling  and  incineration remain permissible sludge management alternatives
but  have  become  subject  to  more  stringent  regulatory standards.  The vast
majority  of  states  have  some site restrictions or other management practices
governing  the disposal of sludge in landfills.  Amendments to the Clean Air Act
governing  incineration  and  disposal  of residual ash also impose stricter air
emission  standards  for  incineration  in general, and the Part 503 Regs impose
additional  specific  pollutant  limits for sludge to be incinerated and for the
resulting  air  emissions.

     Surface  disposal of sludge involves the placement of sludge on the land at
a  dedicated  site  for  disposal  purposes.  The  Part 503 Regs subject surface
disposal  to  increased regulation by requiring, among other things, run-off and
leachate  collection  systems, methane monitoring systems and monitoring of, and
limits  on,  pollutant levels.  In addition, sludge placed in a surface disposal
site  is  required  to  meet  certain  standards with respect to pathogen levels
relating  to coliform or salmonella bacteria counts ("Class B" pathogen levels),
levels  of  various  pollutants,  including  metals,  and  elimination  of
attractiveness  to  pests,  such  as  insects  and  rodents.

     Land  Application  for Beneficial Use.  Land application for beneficial use
involves  the  application  of sludge or sludge-based products, for non-disposal
purposes,  including  agricultural, silvicultural and horticultural uses and for
land  reclamation.  Under  the  Part 503 Regs, N-Viro Soil(TM) is a product that
meets  certain  stringent  standards with respect to pathogen levels relating to
coliform,  salmonella, enteric viruses and viable helminth ova counts ("Class A"
pathogen  levels),  levels  of  various  pollutants,  including  metals,  and
elimination  of  attractiveness  to  pests,  such  as  insects  and rodents, are
considered  by  the  EPA  to  be  "exceptional  quality"  products.  The Class A
pathogen  levels  are  significantly  more  stringent  than the Class B pathogen
levels.  Class  A  N-Viro  Soil(TM)  can be land applied as a fertilizer or lime
agent  without  regulation  in  most  states.

     "Exceptional  quality"  products  are  treated  by  the  EPA  as  soil
amendments/fertilizer  material,  thereby  exempting these products from federal
restrictions  on  their  agricultural  use or land application.  N-Viro Soil(TM)
that  is produced according to N-Viro Process specifications meets the pollutant
concentration  limits  and  other  standards set forth in the Part 503 Regs and,
therefore,  is an "exceptional quality" product that exceeds the EPA's standards
for  unrestricted  agricultural use and land application.  Lower quality sludge,
including  sludge-based  products  that meet Class B pathogen levels and certain
pollutant  control  and pest attraction requirements, may also be applied to the
land  for beneficial use but are subject to greater record keeping and reporting
requirements  and  restrictions  governing,  among  other  items,  the  type and
location  of  application,  the  volume  of application and limits on cumulative
levels  of metals.  Sludge applied to the land for agricultural use in all cases
must  meet  Class  B  pathogen  levels  and,  if applied in bulk, require an EPA
permit.

COMPETITION

     We  are in direct and indirect competition with other businesses, including
disposal  and  other  wastewater  sludge treatment businesses, some of which are
larger  and  more  firmly  established  and  may  have  greater  marketing  and
development  budgets  and  capital resources than us.  There can be no assurance
that  we will be able to maintain a competitive position in the sludge treatment
industry.

     We  compete against companies in a highly competitive market and have fewer
resources  than  most  of  those  companies.  Our  business  competes within and
outside  the  United  States principally on the basis of pricing, reliability of
our services provided, product quality and specifications and technical support.
Competitive  pressures  and other factors could cause us to lose market share or
could  result  in  decreases  in  prices,  either of which could have a material
adverse  effect  on  our  financial  position  and  results  of  operations.

     An  EPA  survey  estimated  that  sludge  generators  in  the United States
utilized landfilling, incineration, surface disposal and ocean dumping as sludge
management  alternatives  for  approximately  two-thirds  of  wastewater  sludge
generated.  Although  ocean  dumping  has  been  banned, other methods of sludge
disposal  remain  permissible  sludge management alternatives under the Part 503
Regs,  and  in  many  instances  will  be less expensive than treatment methods,
including  the  N-Viro  Process.

     Sludge  treatment  alternatives other than disposal include processes, such
as  aerobic  and  anaerobic  digestion  and  lime  stabilization, that typically
produce  lower  quality  sludge  products,  and  other  processes,  such  as
pelletization,  composting, high heat lime sterilization and high heat en-vessel
lime  pasteurization,  that produce "exceptional quality" sludge products.  Some
of these processes have established a significant market presence, and we cannot
predict  whether  any of such competing treatment processes will be more or less
successful  than  the  N-Viro  Process.

ENVIRONMENTAL  REGULATION

     Various  environmental protection laws have been enacted and amended during
recent  decades  in  response  to  public  concern  over  the  environment.  Our
operations and those of our licensees are subject to these evolving laws and the
implementing regulations.  The United States environmental laws which we believe
are,  or  may  be,  applicable to the N-Viro Process and the land application of
N-Viro  SoilTM  include  Resource  Conservation  and  Recovery  Act, or RCRA, as
amended  by  the  Hazardous  and  Solid  Waste  Amendments of 1984, or HSWA, the
Federal  Water  Pollution Control Act of 1972, or the Clean Water Act, the Clean
Air  Act  of  1970,  as  amended,  or  the  Clean  Air  Act,  the  Comprehensive
Environmental  Response,  Compensation,  and  Liability  Act,  or  CERCLA,  the
Pollution  Prevention  Act  of  1990  and the Federal Insecticide, Fungicide and
Rodenticide  Act,  or FIFRA.  These laws regulate the management and disposal of
wastes,  control the discharge of pollutants into the air and water, provide for
the investigation and remediation of contaminated land and groundwater resources
and  establish  a  pollution  prevention  program.  Many  of  these  laws  have
international  counterparts,  particularly  in  Europe  and  elsewhere  in North
America.  In  addition, various states have implemented environmental protection
laws  that  are  similar to the applicable federal laws and, in addition, states
may  require,  among other things, permits to construct N-Viro facilities and to
sell  and/or use N-Viro SoilTM.  There can be no assurance that any such permits
will  be  issued.

     The  Part  503  Regulations.  Historically,  sludge management has involved
either  disposal,  principally  by  landfilling, incineration, ocean dumping and
surface disposal, or land application for beneficial use.  Sewage sludge and the
use  and  disposal  thereof is regulated under the Clean Water Act.  On February
19,  1993,  the  EPA  published  the  Part  503  Regs  under the Clean Water Act
implementing  the  EPA's  "exceptional  quality"  program.  These  regulations
establish  sludge  use and disposal standards applicable to approximately 35,000
publicly  and  privately owned wastewater treatment plants in the United States,
including  approximately  13,000  to  15,000  publicly owned treatment works, or
POTWs.  Under  the  Part  503  Regs, sludge products that meet certain stringent
standards  are  considered  to  be  "exceptional  quality"  products and are not
subject  to  any  federal  restrictions on agricultural use or land application.
N-Viro  Soil(TM)  produced  according  to  N-Viro  Process  specifications is an
"exceptional  quality"  product.  Lower  quality  sludge products are subject to
federal  restrictions  governing,  among  other  items, the type and location of
application, the volume of application and the cumulative application levels for
certain  pollutants.  Agricultural application of these lower quality sludges in
bulk amounts also requires an EPA permit.  Agricultural and land applications of
all sludge and sludge products, including N-Viro Soil(TM) and other "exceptional
quality"  products,  are typically subject to state and local regulation and, in
most  cases,  require  a  permit.

     In order to ensure compliance with the Part 503 Regs, we review the results
of  regular  testing of sludge required by the EPA to be conducted by wastewater
treatment  plants, and it tests N-Viro Soil(TM) produced at N-Viro facilities on
a regular basis.  In general, we do not license or permit the ongoing use of the
N-Viro  Process  to  treat  any  sludge  that  may  not  be  processed  into  an
"exceptional  quality"  sludge  product.  In five N-Viro facilities, however, we
have permitted the use of the N-Viro Process to produce a product that is not an
"exceptional  quality"  sludge  product  due to the high pollutant levels of the
resulting  product.  This product is not considered to be N-Viro Soil(TM) and is
used  solely  for  landfill  cover  at adjacent landfills.  In addition, we have
previously  licensed  for  use  at  five  treatment facilities an earlier sludge
treatment  process  that is designed to produce a sludge product that meets only
Class B pathogen levels, and therefore does not produce an "exceptional quality"
product.

     Although  N-Viro  Soil(TM) exceeds the current federal standards imposed by
the  EPA for unrestricted agricultural use and land application, state and local
authorities  are  authorized  under the Clean Water Act to impose more stringent
requirements than those promulgated by the EPA.  Most states require permits for
land application of sludge and sludge based products and several states, such as
Rhode  Island,  Massachusetts  and  New  Jersey, currently have regulations that
impose more stringent numerical concentration limits for certain pollutants than
the  federal  rules.

     The  Resource  Conservation and Recovery Act.  RCRA regulates all phases of
hazardous  waste  generation,  management  and  disposal.  Waste  is  subject to
regulation  as  a hazardous waste under RCRA if it is a solid waste specifically
listed  as  a  hazardous  waste  by  the  EPA  or  exhibits  a defined hazardous
characteristic.  Although  domestic  sewage  and mixtures of domestic sewage and
other  wastes  that  pass  through  a  sewer  system  to a POTW are specifically
exempted  from  the  definition  of  solid  waste, once treated by the POTW, the
sewage  sludge  is considered a solid waste.  However, such sewage sludge is not
considered  a  hazardous  waste  unless  it exhibits a hazardous characteristic.
While  it  is  possible  that  sewage  sludge  could  exhibit  the  toxicity
characteristic,  we  believe that regular tests for hazardous constituent levels
provide  assurance  that  the  sewage sludge used in the N-Viro Process does not
exhibit the toxicity characteristic.  The alkaline admixtures used in the N-Viro
Process  are  specifically exempted from RCRA regulation by the so-called Bevill
Amendments  to  RCRA.  Although  the  benefit  of  the exemption provided by the
Bevill Amendments can be lost if the alkaline admixture is derived from or mixed
with a hazardous waste, we have adopted and implemented policies and operational
controls,  including  review  of  operating  permits  held by alkaline admixture
suppliers  and  periodic testing of such admixtures, to ensure that the alkaline
admixtures  used  in  the N-Viro Process by us and our licensees are not derived
from  or  mixed  with  hazardous  wastes.

     Although  neither  the alkaline admixture nor wastewater sludge used in the
N-Viro  Process  are  regulated as hazardous waste under RCRA, states may impose
restrictions that are more stringent than federal regulations.  Accordingly, the
raw  materials  used  in  the  N-Viro  Process may be regulated under some state
hazardous  waste  laws  as  "special wastes," in which case specific storage and
record  keeping  requirements  may  apply.

     The  Clean  Air  Act.  The  Clean Air Act empowers the EPA to establish and
enforce ambient air quality standards and limits of emissions of pollutants from
specific facilities.  The Clean Air Act Amendments of 1990, or the Clean Air Act
Amendments,  impose  stringent  requirements  upon  owners  and  operators  of
facilities  that  discharge  emissions  into  the  air.

     Existing  N-Viro  facilities generally have installed "baghouse" technology
for  alkaline  admixture  storage  and  handling  operations in order to collect
airborne dust.  At present, we do not believe that any N-Viro facilities will be
required to undertake any further measures in order to comply with the Clean Air
Act or the existing Clean Air Act Amendments.  Ammonia odors of varying strength
typically  result from sludge treatment processes, including the N-Viro Process.
A  number  of  N-Viro  facilities  have  installed ammonia "scrubbers" to reduce
ammonia  odors  produced  to  varying  degrees  by  the  N-Viro  Process.  The
installation  of ammonia "scrubbers" is not required by the Clean Air Act or the
existing Clean Air Act Amendments.  However, we or our licensees may be required
under  the  Occupational  Safety  and  Health  Act  and  state  laws  regulating
nuisances,  odors  and air toxic emissions to install odor control technology to
limit  ammonia  emissions  and  odors  produced  during  the  N-Viro  Process,
particularly at N-Viro facilities located near populated residential areas.  The
amount  of  ammonia  gas  produced  is  dependent  upon the type of sludge being
treated  and  the  amount  and  type  of  alkaline  admixture  being  used.

     The Comprehensive Environmental Response, Compensation and Liability Act of
1980.  CERCLA  imposes  strict,  joint  and  several  liability  upon owners and
operators  of  facilities  where a release of hazardous substances has occurred,
upon  parties  who generated hazardous substances into the environment that were
released at such facilities and upon parties who arranged for the transportation
of  hazardous  substances  to  such  facilities.

     We believe that the N-Viro Process poses little risk of releasing hazardous
substances  into  the environment that presently could result in liability under
CERCLA.  Although  the  sewage  sludge and alkaline waste products could contain
hazardous  substances  (as  defined  under  CERCLA),  we have developed plans to
manage  the  risk  of CERCLA liability, including training of operators, regular
testing  of  the  sludge  and  the  alkaline  admixture to be used in the N-Viro
Process  and  reviewing incineration and other permits held by the entities from
whom  alkaline  admixtures  are  obtained.

     Other Environmental Laws.  The Pollution Prevention Act of 1990 establishes
pollution  prevention as a national objective, naming it a primary goal wherever
feasible.  The  act  states  that where pollution cannot be prevented, materials
should  be  recycled  in  an  environmentally  safe manner.  We believe that the
N-Viro  Process  contributes to pollution prevention by providing an alternative
to  disposal.

     The  alkaline  admixtures  used in the N-Viro Process may be required to be
registered  as  pesticides  under  FIFRA because of their effect on pathogens in
sludge.  The  EPA  does  not  currently regulate commercial lime or any alkaline
by-products  under  FIFRA  and  has not attempted to assert such jurisdiction to
date.  In the event the alkaline by-products are required to be registered under
FIFRA,  we  would  likely  be  required  to  submit  certain data as part of the
registration  process  and  might  be  subject  to  further  federal regulation.

     State  Regulations.  State regulations typically require an N-Viro facility
to obtain a permit for the sale of N-Viro Soil(TM) for agricultural use, and may
require  a site-specific permit by the user of N-Viro Soil(TM).  In addition, in
some  jurisdictions,  state  and/or  local  authorities  have  imposed  permit
requirements  for,  or have prohibited, the land application or agricultural use
of sludge products, including "exceptional quality" sludge products.  Certain of
our  licensees  operate in jurisdictions that require permits and have been able
to  obtain them for the N-Viro product.  There can be no assurance that any such
permits  will  be issued or that any further attempts to require permits for, or
to  prohibit,  the  land application or agricultural use of sludge products will
not  be  successful.

     In addition, many states enforce landfilling restrictions for non-hazardous
sludge.  These  regulations  typically  require  a  permit to sell or use sludge
products  as  landfill  cover  material.  There  can be no assurance that N-Viro
facilities  or  landfill  operators  will  be  able  to obtain required permits.

     Environmental  impact  studies  may  be  required  in  connection  with the
development  of  future  N-Viro  facilities.  Such  studies  are  generally time
consuming  and  may  create  delays  in  the construction process.  In addition,
unfavorable  conclusions reached in connection with such a study could result in
termination  of or expensive alterations to the N-Viro facility being developed.

     The costs of compliance are typically borne by our licensees, except in the
case  of  direct  sludge  processing into a facility.  Normally this cost is not
material  to  us  in  relation  to  the  total  contract  revenue.

EMPLOYEES

     As  of  December  31, 2009, we had 31 employees.  Six of our employees were
engaged  in  sales  and  marketing; three were in finance and administration and
twenty-two  were in operations.  We consider our relationship with our employees
to  be  satisfactory.

     We are a party to a collective bargaining agreement (the "Labor Agreement")
covering  four  employees  of  National  N-Viro  Tech,  Inc.,  our  wholly-owned
subsidiary.  The  employees  that are covered by the Labor Agreement work at the
Toledo,  Ohio N-Viro facility, which is operated by us for the City of Toledo on
a  contract  management basis.  These employees are members of the International
Brotherhood  of  Teamsters, Chauffeurs, Warehouseman and Helpers Local Union No.
20,  and  we consider our relationship with the organization to be satisfactory.
In  2005, the Labor Agreement was extended through October 31, 2009.  In January
2010,  the  Labor  Agreement  was  extended  mutually on a day-to-day basis.  In
conjunction  with  the  extension  of  our contract with the City of Toledo, the
Labor  Agreement  was also extended.  See "N-Viro Process Facilities" earlier in
this  Item  1.

PATENTS  AND  PROPRIETARY  RIGHTS

     We  have  several  patents  and  licenses  relating  to  the  treatment and
processing  of  biosolids.  While  there is no single patent that is material to
our  business,  we  believe  that  our  aggregate  patents  are important to our
prospects  for future success.  However, we cannot be certain that future patent
applications will be issued as patents or that any issued patents will give us a
competitive  advantage.  It  is  also  possible  that  our  patents  could  be
successfully  challenged  or  circumvented  by competition or other parties.  In
addition,  we cannot assure that our treatment processes do not infringe patents
or  other  proprietary  rights  of  other  parties.

     We  applied  for  two  patents  that  were  approved in 2004 for the use of
mineral  by-products  to  enhance  heating,  drying  and disinfection of organic
wastes  under  non-alkaline conditions.  N-Viro is actively marketing its manure
treatment technology, primarily to the large dairies and poultry operations, and
continues  to  develop and market the N-Viro FuelTM technology.  The new federal
energy  act  may provide incentives for the use of renewable biomass fuels, such
as  N-Viro  FuelTM.

     We  also  hold  several patents relating to N-Viro Fuel(TM).  In the N-Viro
Fuel(TM)  process,  waste  products,  which  can include domestic sewage sludge,
manures  and  other  materials, are treated with mineral by-products, dried by a
mechanical  dryer,  and  converted  into  a renewable fuel that can be used as a
substitute  for  coal  in  coal-fired  boilers  and  kilns.

     Some  early  N-Viro  patents were developed jointly with the former Medical
College of Ohio, now under the name of the University of Toledo ("UT").  Because
of the joint development of early N-Viro patents with the UT, we agreed that the
rights  of UT to the jointly developed intellectual property that was developed,
patentable  or  patented, would generate a royalty payable by us to UT.  We also
agreed  with  UT  that  claims  to  the  traditional N-Viro Soil(TM) process was
one-quarter  of one percent ( %) of technical revenues until expiration of those
patents.  UT  rights to BioBlend(TM) and certain other N-Viro technologies range
from  2%  to  4%  of  technical  revenues derived from these newer technologies.
Cumulative  royalties  paid  to  UT through December 31, 2009 were approximately
$65,000,  and  no  amount  was  expensed  during  2009  or  2008.

     In  addition,  we  make use of our trade secrets or "know-how" developed in
the  course  of  our experience in the marketing of our services.  To the extent
that  we  rely  upon  trade  secrets, unpatented know-how and the development of
improvements  in  establishing  and  maintaining  a competitive advantage in the
market  for  our  services,  we  can provide no assurances that such proprietary
technology  will  remain  a  trade  secret  or  that  others  will  not  develop
substantially  equivalent or superior technologies to compete with our services.

SECURITIES AND EXCHANGE COMMISSION

     As  a  public company, we are required to file periodic reports, as well as
other  information,  with  the  Securities  and Exchange Commission (SEC) within
established  deadlines.  Any  document  we  file  with  the SEC may be viewed or
copied  at  the  SEC's  Public Reference Room at 100 F Street, N.E., Washington,
D.C.  20549.  Additional  information regarding the Public Reference Room can be
obtained  by  calling  the  SEC  at  (800)  SEC-0330.  Our  SEC filings are also
available  to  the  public  through  the  SEC's web site located at www.sec.gov.

     We  maintain  a corporate Web site at www.nviro.com, on which investors may
access  free of charge our annual report on Form 10-K, quarterly reports on Form
10-Q  and amendments to those reports as soon as is reasonably practicable after
furnishing such material with the SEC.  In addition, we will voluntarily provide
electronic  or  paper copies of our filings free of charge upon request at (419)
535-6374  or  c/o James K. McHugh, Chief Financial Officer at jmchugh@nviro.com.

ITEM 1A.     RISK FACTORS

WE HAVE A HISTORY OF LOSSES AND THERE CAN BE NO ASSURANCES REGARDING IF AND WHEN
WE  WILL  ACHIEVE  PROFITABILITY.  IF  WE  ARE  UNABLE  TO  ACHIEVE  PROFITABLE
OPERATIONS,  WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO CONTINUE OUR OPERATIONS,
WHICH MAY NOT BE AVAILABLE ON COMMERCIALLY REASONABLE TERMS OR AT ALL, AND WHICH
MAY  DILUTE  OUR  STOCKHOLDERS.

     Since  2000,  we  have  experienced  net  losses  and  we  have  not  been
consistently  profitable on an annual basis. For the fiscal years ended December
31,  2009 and December 31, 2008, we incurred net losses of $2.4 million and $1.2
million, respectively.  We believe our history of net losses is primarily due to
our  inability  to  add  enough  new  sources  of  revenue to replace decreasing
business from existing sources of revenue and, more recently, through a shift of
our  business  toward lower margin products and services.  Further, for the year
ended  December  31, 2009, we experienced much higher than expected expenditures
for  stock-related  fees  and  compensation  in  excess of our increase in gross
revenue.  To  achieve  profitability,  we  must  accomplish numerous objectives,
including growth in our business, the development of new products and commercial
relationships,  and decreasing our costs.  We can not foresee with any certainty
whether we will be able to achieve these objectives in the future.  Accordingly,
we  may  not  generate  sufficient  net  revenue  to  achieve  profitability.

FAILURE  TO  MAINTAIN  EFFECTIVE INTERNAL CONTROLS COULD HAVE A MATERIAL ADVERSE
EFFECT  ON  OUR  BUSINESS,  OPERATING  RESULTS  AND  STOCK  PRICE.

     We  have  evaluated  and  will  continue  to  evaluate our internal control
procedures  in  order  to  satisfy  the  requirements  of  Section  404  of  the
Sarbanes-Oxley Act, which requires an annual management assessment of the design
and  effectiveness  of  our internal controls over financial reporting.  We have
previously  identified  a  material  weakness  in  our  internal  controls  over
financial  reporting  due  to  a  lack  of personnel to sufficiently monitor and
process transactions.  Due to our continuing lack of financial resources to hire
and  train  accounting  and  financial  personnel, we have not yet remedied this
material  weakness.  While  we are not aware of any material errors to date, our
inability  to  maintain  the adequate internal controls may result in a material
error  in  our  financial  statements.  Moreover,  effective  internal controls,
particularly  those  related  to  revenue  recognition,  are necessary for us to
produce  reliable  financial  reports  and  are  important  to  helping  prevent
financial  fraud.  If we experience a material error in our financial statements
or  if  we  cannot  provide  reliable  financial  reports  or prevent fraud, our
business  and operating results could be harmed, investors could lose confidence
in  our reported financial information, and the trading price of our stock could
drop  significantly.

COMPLIANCE  WITH ENVIRONMENTAL LAWS AND REGULATIONS MAY REDUCE, DELAY OR PREVENT
OUR  REALIZATION  OF  LICENSE  REVENUES.

     Our  licensees  and  their  operations  are  subject to increasingly strict
environmental laws and regulations, including laws and regulations governing the
emission,  discharge,  disposal  and  transportation  of  certain substances and
related  odor.  Wastewater  treatment  plants  and  other  plants  at  which our
biosolids  products or processes may be implemented are usually required to have
permits,  registrations and/or approvals from state and/or local governments for
the  operation  of  such  facilities.  Some of our licensee's facilities require
air,  wastewater,  storm  water,  biosolids  processing,  use or siting permits,
registrations  or  approvals.  These  licensees  may  not be able to maintain or
renew  their  current  permits  or  registrations  or  to  obtain new permits or
registrations.  The  process  of obtaining a required permit or registration can
be lengthy and expensive.  They may not be able to meet applicable regulatory or
permit  requirements,  and therefore may be subject to related legal or judicial
proceedings  that  could  have a materially adverse effect on our income derived
from  these  licensees.

     Any  of  the  permits,  registrations  or approvals noted above, or related
applications  may be subject to denial, revocation or modification, or challenge
by  a  third  party,  under  various  circumstances.  In  addition,  if  new
environmental  legislation or regulations are enacted or existing legislation or
regulations  are  amended  or  are  enforced differently, these licensees may be
required  to  obtain  additional,  or  modify  existing,  operating  permits,
registrations  or  approvals.

     Maintaining,  modifying  or  renewing  current  permits or registrations or
obtaining  new  permits  or registrations after new environmental legislation or
regulations  are  enacted  or existing legislation or regulations are amended or
enforced  differently may be subject to public opposition or challenge.  Much of
this  public opposition and challenge, as well as related complaints, relates to
odor  issues,  even  when our licensees are in compliance with odor requirements
and  even  though  the  licensees  have  worked hard to minimize odor from their
operations.  Public misperceptions about the business and any related odor could
influence  the governmental process for issuing such permits or registrations or
for  responding  to  any  such public opposition or challenge.  Community groups
could  pressure  local municipalities or state governments to implement laws and
regulations  which  could increase our licensees' costs of their operations that
in  turn  could have a material and adverse effect on our business and financial
condition.

OUR  ABILITY  TO GROW OUR REVENUES AND OPERATIONS MAY BE LIMITED BY COMPETITION.

     We  provide  a variety of technology and services relating to the treatment
of  wastewater  residuals.  We are in direct and indirect competition with other
businesses  that  provide  some  or  all of the same services including regional
residuals  management  companies  and  national  and  international  water  and
wastewater  operations/privatization  companies, technology suppliers, municipal
solid  waste  companies  and  farming operations.  Many of these competitors are
larger  and  have  significantly  greater  capital  resources.

     We derive a substantial portion of our revenue from services provided under
municipal  contracts,  and many of these are subject to competitive bidding.  We
also  intend  to  bid on additional municipal contracts, however, and may not be
the  successful  bidder.  In  addition, some of our contracts will expire in the
future  and  those  contracts  may  not  be  renewed  or  may be renewed on less
attractive  terms.  If  we  are not able to replace revenues from contracts lost
through competitive bidding or from the renegotiation of existing contracts with
other  revenues  within  a reasonable time period, the lost revenue could have a
material  and adverse effect on our business, financial condition and results of
operation.

OUR  CUSTOMER CONTRACTS MAY BE TERMINATED PRIOR TO THE EXPIRATION OF THEIR TERM.

     A  substantial  portion  of  our  revenue is derived from services provided
under  contracts  and  agreements  with  existing  licensees.  Some  of  these
contracts,  especially  those  contracts  with large municipalities, provide for
termination  of  the contract by the customer after giving relative short notice
(in  some  cases  as  little as ten days).  In addition, some of these contracts
contain  liquidated  damages clauses, which may or may not be enforceable in the
event  of early termination of the contracts.  If one or more of these contracts
are  terminated  prior  to  the  expiration  of its term, and we are not able to
replace  revenues  from  the  terminated  contract or receive liquidated damages
pursuant  to  the  terms of the contract, the lost revenue could have a material
and  adverse  effect  on  our  business,  financial  condition  and  results  of
operations.

A  SIGNIFICANT  AMOUNT  OF OUR BUSINESS COMES FROM A LIMITED NUMBER OF CUSTOMERS
AND  OUR REVENUE AND PROFITS COULD DECREASE SIGNIFICANTLY IF WE LOST ONE OR MORE
OF THEM AS CUSTOMERS.  FURTHER, THE AGREEMENT WITH OUR MOST SIGNIFICANT CUSTOMER
EXPIRES  IN SEPTEMBER 2010, AND OUR FAILURE TO RENEW THAT AGREEMENT ON FAVORABLE
TERMS  WOULD  LIKELY  HAVE  A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
CONDITIONS  AND  RESULTS  OF  OPERATIONS.

     Our  business  depends  on  provision  of  services  to a limited number of
customers.  One  or  more  of  these customers may stop contracting for services
from us or may substantially reduce the amount of services we provide them.  Any
cancellation, deferral or significant reduction in the services we provide these
principal customers or a significant number of smaller customers could seriously
harm  our  business  and  financial condition.  For the years ended December 31,
2009  and  2008, our single largest customer accounted for approximately 32% and
39%,  respectively,  of  our  revenues and our top three customers accounted for
approximately  65%  and  62%, respectively, of our revenues.  Our agreement with
our  largest  customer  - which represented approximately 32% of our revenues in
2009  -  is  due  to  expire at the end of September 2010.  We are attempting to
negotiate  a renewal of that agreement, but we cannot assure you that we will be
able  to  secure  such a renewal at all or on terms that are as favorable as the
current agreement.  Our failure to renew that agreement on favorable terms would
likely  have a material adverse effect on our business, financial conditions and
results  of  operations.

THE  CURRENT ECONOMIC DOWNTURN MAY CAUSE US TO EXPERIENCE DELAYS OF PAYMENT FROM
OUR  CUSTOMERS.

     Our  accounts  receivable  are  derived  primarily  from municipal or local
governments.  Although our collection history has been good, from time to time a
customer  may not pay us on a timely basis because of adverse market conditions.
In  light  of  the  current  economic  downturn,  we  may experience larger than
expected  delays  in  receiving  payments on our accounts receivable.  Given our
history  of  losses and our limited cash resource, any significant payment delay
by  one  of our customers, may force us to delay payment to our creditors, which
may  have a material and adverse effect on our business, financial condition and
results  of  operations.

WE  ARE  AFFECTED  BY  UNUSUALLY  ADVERSE  WEATHER  CONDITIONS.

     Our  business  is  adversely  affected  by  unusual  weather conditions and
unseasonably  heavy  rainfall  which  can temporarily reduce the availability of
land  application  sites  in  close  proximity  to our operations.  In addition,
revenues  and  operational  results  are  adversely  affected  during  months of
inclement  weather  which  limits  the  level  of  land  application that can be
performed.  Long  periods  of  adverse  weather  could  have a material negative
effect  on  our business and financial condition.  For example, our Toledo, Ohio
operation  is  affected  by unusually adverse weather conditions by lowering the
demand  for  N-Viro  Soil(TM)  distribution to the local agricultural community.

FUEL  COST  VARIATION COULD ADVERSELY AFFECT OUR OPERATING RESULTS AND EXPENSES.

     The  price  and  supply  of  fuel  is unpredictable and fluctuates based on
events  outside  our  control, including demand for oil and gas, actions by OPEC
and  other  oil  and gas producers, and war in oil producing countries.  Because
fuel  is  needed  for  the  trucks  that  transport the processing materials and
supplies  for  our  customers,  price escalations or reductions in the supply of
fuel could increase operating expenses and have a negative impact on the results
of  operations.  We  are  not  always  able  to  pass through all or part of the
increased  fuel  costs  due to the terms of certain customers' contracts and the
inability  to  negotiate  such  pass  through  costs  in  a  timely  manner.

WE  ARE HIGHLY DEPENDENT ON THE SERVICES OF OUR MANAGEMENT TEAM, THE LOSS OF ANY
OF  WHOM  MAY  HAVE  A  MATERIAL  ADVERSE  EFFECT  ON OUR BUSINESS AND FINANCIAL
CONDITION.

     We recently entered into new employment agreements with our Chief Executive
Officer, Timothy Kasmoch, our Executive Vice President and Chief Counsel, Robert
Bohmer  and  our  Chief  Financial Officer, James McHugh, each of which contains
non-compete  and other provisions.  The laws of each state differ concerning the
enforceability  of non-competition agreements.  We cannot predict with certainty
whether  or  not  a  court  will  enforce  a  non-compete  covenant in any given
situation  based on the facts and circumstances at that time.  If one of our key
executive  officers  were  to leave our employ and the courts refused to enforce
the  non-compete  covenant,  we might be subject to increased competition, which
could  have  a  material  and  adverse  effect  on  our  business  and financial
condition.

OUR  INTELLECTUAL  PROPERTY  MAY  BE  MISAPPROPRIATED  OR  SUBJECT  TO CLAIMS OF
INFRINGEMENT.

     We  attempt  to  protect  our  intellectual  property  rights  through  a
combination  of  patent,  trademark, and trade secret laws, as well as licensing
agreements.  Our  failure  to  obtain  or  maintain  adequate  protection of our
intellectual property rights for any reason could have a material adverse effect
on  our  business  and  financial  condition.

     Our competitors, many of whom have substantially greater resources and have
made  substantial investments in competing technologies, may have applied for or
obtained,  or may in the future apply for and obtain, patents that will prevent,
limit  or  otherwise  interfere  with  our  ability  to  offer  services.

     We  also  rely  on  unpatented proprietary technology.  It is possible that
others  will  independently  develop the same or similar technology or otherwise
obtain  access  to  our unpatented technology.  If we are unable to maintain the
proprietary  nature  of  our  technologies,  we  could  be  materially adversely
affected.

VOLATILITY  IN THE TRADING PRICE OF OUR COMMON STOCK COULD NEGATIVELY IMPACT THE
PRICE  OF  OUR COMMON STOCK, AND MAY ELIMINATE A SOURCE OF OUR POTENTIAL REVENUE
FROM  EXERCISES  OF  STOCK  OPTIONS  AND  STOCK  PURCHASE  WARRANTS.

     During  the  period from January 1, 2008 through March 19, 2010, our common
stock  closing price fluctuated between a high of $4.25 and a low of $1.20.  The
trading  price  of  our  common  stock  could be subject to wide fluctuations in
response  to  many  factors,  some  of  which  are beyond our control, including
general  economic  conditions,  the thinly-traded nature of our common stock and
the  outlook  of  analysts  and investors on our industry.  Further, significant
market  fluctuations, such as over the past six months, may adversely affect the
trading  price of our common stock.  Over the past several years, we have relied
on,  in  part,  exercises  of  stock  options by current and former officers and
directors  and  stock  purchase  warrants by investors for operating cash.  Wide
fluctuations  in  the  price  of  our  common stock or a stock price that is not
significantly above the exercise price of outstanding stock options or warrants,
would  likely  reduce  future  exercises of stock options or warrants, and which
would  reduce  or  eliminate  a  historic  source  of  cash  for our operations.


ITEM 2.     PROPERTIES

     Our executive and administrative offices are located in Toledo, Ohio, under
a  month  to  month  lease.  We  believe  our  relationship  with  our lessor is
satisfactory.  The  total  rental  expense  for  this  location  included in the
statements  of operations for each of the years ended December 31, 2009 and 2008
is  approximately  $37,600  and  $37,500,  respectively.  We  also lease various
equipment  on  a  month-to-month  basis.

     In  June  2009, the Company began to maintain an office in West Unity, Ohio
under  a  lease  with  D&B  Colon Leasing, LLC, for one year.  The total minimum
rental  commitment  for  the year ended December 31, 2010 is $12,500.  The total
rental  expense  included  in the statements of operations for the twelve months
ended  December  31,  2009  and  2008  is  $17,500  and  $-0-,  respectively.

     The  Company  maintains  an  office in Daytona Beach under a lease with the
County  of  Volusia,  Florida,  which was renewed in March, 2009 for five years.
The  total  minimum  rental  commitment  for  the years ending December 31, 2010
through  2013  is  $48,000 each year, and for 2014 is $12,000.  The total rental
expense  included  in the statements of operations for each of the twelve months
ended  December  31,  2009  and  2008  is  $48,000.

     We  also  lease processing equipment at the Florida location which began in
2006  under  a  four year contract.  The total minimum rental commitment for the
year  ended  December  31, 2010 is $3,000.  The total rental expense included in
the  statements  of  operations for each of the twelve months ended December 31,
2009  and  2008  is  approximately  $31,000.

     The  Company also leases other processing equipment at its Florida location
which began in February 2008 under a three-year lease.  The total minimum rental
commitment  for  the  following  years ended December 31 are as follows:  2010 -
$46,200;  2011 - $4,000.  The total rental expense included in the statements of
operations  for  the  twelve  months  ended  December  31,  2009  and  2008  is
approximately  $46,200  and  $42,300,  respectively.

     Management  believes  that  all of our properties are adequately covered by
insurance.


ITEM 3.     LEGAL PROCEEDINGS

     The  Company's  facility in Toledo, Ohio, utilizes patented technologies to
stabilize and disinfect municipal biosolids pursuant to a permit to install from
the  Ohio EPA that requires emissions be vented to a scrubber.  In July 2008, an
inspection  of  the  facility  by  local  regulatory officials revealed that the
scrubber  was  not  in operation.  In February 2009, the Company agreed to enter
into  an  administrative  consent  decree with the Ohio Environmental Protection
Agency  ("Ohio EPA") that resolved, without any admission of fact, violation, or
liability,  Ohio  EPA's  claims  that  the Company operated the scrubber, an air
contaminant  source,  in  violation  of  its permit to install.  Pursuant to the
terms  of  the  consent decree, the Company agreed to pay a civil penalty in the
amount  of  $20,000.  Payment  of  the  penalty  will  be made in five quarterly
installments of $4,000 over a 15-month period.  The first four installments were
paid  on  time  from  April  2009  to  January  2010.

     From  time to time we are involved in legal actions arising in the ordinary
course  of business.  With respect to these matters, we believe we have adequate
legal defenses and/or provided adequate accruals for related costs such that the
ultimate outcome will not have a material adverse effect on our future financial
position  or  results  of  operations.


ITEM  4.     (REMOVED  AND  RESERVED)



                                    PART II


ITEM  5.     MARKET  FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND  ISSUER  PURCHASES  OF  EQUITY  SECURITIES

MARKET INFORMATION

     Our  shares  of Common Stock are quoted on the OTC Bulletin Board under the
symbol  "NVIC.OB".  The prices quoted below reflect inter-dealer prices, without
retail  mark-up,  mark-down  or  commission  and  may  not  represent  actual
transactions.  The  closing  price  range  per  share  of the Common Stock since
January  1,  2008,  was  as  follows:

<TABLE>
<CAPTION>

Quarter      High    Low
------------ -----   ----
<S>          <C>    <C>
First 2008   $4.25  $2.60
Second 2008  $3.99  $2.80
Third 2008   $3.75  $2.40
Fourth 2008  $3.50  $2.50
First 2009   $2.85  $1.20
Second 2009  $2.70  $1.65
Third 2009   $2.75  $1.91
Fourth 2009  $2.80  $1.95

</TABLE>


Our  stock  price  closed  at  $3.25  per  share  on  March  19,  2010.

HOLDERS

     As  of  March 19, 2010, the number of holders of record of our Common Stock
was  approximately  173.

DIVIDENDS

     We  have never paid dividends with respect to our Common Stock.  Payment of
dividends  is  within the discretion of our Board of Directors and would depend,
among other factors, on our earnings, capital requirements and our operating and
financial  condition.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

<TABLE>
<CAPTION>

                                                   (a)                   (b)                       (c)
                                                                                            Number of securities
                                          Number of securities                            remaining available for
                                              to be issued         Weighted-average        future issuance under
                                            upon exercise of       exercise price of        equity compensation
                                          outstanding options,   outstanding options,   plans (excluding securities
Plan category                             warrants and rights     warrants and rights     reflected in column (a))
---------------------------------------   --------------------   ---------------------  ----------------------------
<S>                                       <C>                    <C>                    <C>

Equity compensation plans
    approved by security holders . . . .             1,279,825   $              $2.24                     1,061,675 2

Equity compensation plans not
    approved by security holders                       258,270 1 $              $1.95                           -0-
                                        ----------------------   ---------------------   ---------------------------
Total                                                1,538,095   $              $2.19                     1,061,675

<FN>

     1.  Represents  120,000  warrants  to  purchase our Common Stock, issued to
Strategic  Asset  Management,  Inc.,  in 2005 as part of an agreement to provide
consulting  services,  issued  at  $1.84  per  share.  And,  138,270 warrants to
purchase  our  Common Stock, issued to certain members of the Board of Directors
in  December 2006 in payment for services rendered, issued at a weighted average
of  $2.04  per  share.

     2.  The  available  number  of shares to issue under our Second Amended and
Restated 2004 Stock Option Plan was increased to 2,500,000 shares as approved by
the  stockholders  on  August 5, 2009.

</TABLE>


RECENT  SALES  OF  UNREGISTERED  SECURITIES

     There were no sales of unregistered securities during the fiscal year ended
December  31,  2009  that have not been previously disclosed by the company in a
Quarterly  Report  on  Form  10-Q.


ITEM  6.     SELECTED  FINANCIAL  DATA

     As  a  smaller  reporting  company  we  are  not  required  to provide this
information  under  Item  301  of  Regulation  S-K.


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

OVERVIEW
     The  following  is  a discussion of our results of operations and financial
position for the periods described below, and should be read in conjunction with
our Financial Statements and Supplementary Data appearing elsewhere in this Form
10-K.  The  discussion  includes  various  forward-looking  statements about our
markets,  products,  services  and  our  results.  These statements are based on
certain  assumptions that we consider reasonable.  Our actual results may differ
materially  from  these  indicated  forward-looking  statements.  Please  see
"Cautionary  Statement  with  Respect  to  Forward-Looking  Comments"  and "Risk
Factors"  elsewhere  in  this  annual  report  on  Form  10-K.

     The  following  table sets forth, as a percentage of total revenues for the
periods  presented,  revenues  related  to  each  of  (i)  technology fees, (ii)
facility  management,  (iii)  products  and  services:

<TABLE>
<CAPTION>
               For the Year Ended December 31,
                        2009    2008
                       ------  ------
<S>                    <C>     <C>
Technology fees          1.1%    0.7%
Facility management     68.4%   63.8%
Products and services   30.5%   35.5%
                       ------  ------
Totals                 100.0%  100.0%
                       ======  ======
</TABLE>

     Technology  fee  revenue  is  defined as:  royalty revenue, which represent
ongoing  amounts received from licensees for continued use of the N-Viro Process
and  are  typically based on volumes of sludge processed;  license and territory
fees,  which  represent  non-recurring  payments for the right to use the N-Viro
Process  in  a  specified  geographic  area  or at a particular N-Viro facility;
research  & development revenue, which represent payments from federal and state
agencies  awarded  to  us  to  fund ongoing site-specific research utilizing the
N-Viro  technology.

     Facility management revenues are recognized under contracts where we manage
the  N-Viro  Process  ourselves  to  treat  sludge,  pursuant  to  a fixed price
contract.

     Product  and  service  revenue  is defined as:  alkaline admixture revenue,
which  represent  ongoing  payments  from  licensees  arising  from the sale and
distribution  of  alkaline  admixture by us and our Agents to N-Viro facilities;
service  fee  revenue  for the management of alkaline admixture, which represent
fees  charged  by  us  to  manage and sell the alkaline admixture on behalf of a
third  party  customer;  N-Viro  SoilTM  sales, which represent revenue received
from  sales  of  N-Viro  SoilTM  sold  by  us;  commissions  earned  on sales of
equipment  to  an  N-Viro facility;  rental of equipment to a licensee or agent;
equipment  sales,  which  represent  the  price  charged  for equipment held for
subsequent  sale.

     Our  policy  is to record the revenues payable to us pursuant to agency and
license  agreements  when  we  have fulfilled our obligations under the relevant
contract,  except  when it pertains to a foreign license agreement.  In the case
of  foreign licenses, revenue is recorded when cash is received and when we have
fulfilled  our  obligations  under  the  relevant  foreign  license  agreement.


<PAGE>

RESULTS  OF  OPERATIONS

     The  following  tables  set  forth,  for the periods presented, (i) certain
items  in  the  Combined  Statement of Operations, (ii) the percentage change of
each such item from period to period and (iii) each such item as a percentage of
total  revenues  in  each  period  presented.

<TABLE>
<CAPTION>

                                       Year Ended        Period to Period     Year Ended
                                       December 31,       Percentage         December 31,
                                         2009                Change              2008
                                       ----------         -------------      -----------
<S>                                    <C>                 <C>               <C>

(Dollars in thousands)
-------------------------------------
COMBINED STATEMENT OF
    OPERATIONS DATA:

Revenues. . . . . . . . . . . . . . .  $5,021              0.4%               $5,002

Cost of revenues. . . . . . . . . . .   3,912             (8.2%)               4,260
                                       ------                                --------

Gross profit. . . . . . . . . . . . .   1,109             49.5%                  742

Operating expenses. . . . . . . . . .   3,583             85.7%                1,930
                                       ------                                --------

                                       (2,474)                *               (1,188)

Other income (expense). . . . . . . .      60             89.8%                   31
                                       ------                                --------

Loss before income tax expense. . . .  (2,414)                *               (1,157)

Federal and state income tax expense.       0                 *                    0
                                       ------                                --------

Net loss. . . . . . . . . . . . . . . $(2,414)                *              $(1,157)
                                       =======                                =======

</TABLE>


<TABLE>
<CAPTION>


PERCENTAGE OF REVENUES:
<S>                                    <C>                                    <C>
Revenues. . . . . . . . . . . . . . .  100.0%                                  100.0%

Cost of revenues. . . . . . . . . . .   77.9                                    85.2
                                       ------                                --------

Gross profit. . . . . . . . . . . . .   22.1                                    14.8

Operating expenses. . . . . . . . . .   71.4                                    38.5
                                       ------                                --------

                                       (49.3)                                  (23.7)

Other income (expense). . . . . . . .    1.2                                     0.6
                                       ------                                --------

Loss before income tax expense. . . .  (48.1)                                  (23.1)

Federal and state income tax expense.    0.0                                     0.0
                                       ------                                --------

Net loss. . . . . . . . . . . . . . .  (48.1%)                                 (23.1%)
                                       =======                                 ======

</TABLE>

*     Period  to  period percentage change comparisons have only been calculated
for  positive  numbers.


<PAGE>


COMPARISON  OF  YEAR  ENDED  DECEMBER 31, 2009 WITH YEAR ENDED DECEMBER 31, 2008

     Revenues  increased  $19,000,  or approximately 0.4%, to $5,021,000 for the
year  ended  December  31,  2009 from $5,002,000 for the year ended December 31,
2008.  The  increase  in  revenue  was  due  to  a  net increase in revenue from
existing  company-managed  facilities,  primarily  due to the following factors:

     a)  Sales  of  alkaline  admixture  decreased  $79,000 from the same period
ended  in  2008;

     b)  Revenue  from the service fees for the management of alkaline admixture
showed  a  net decrease of $59,000 from the same period ended in 2008, primarily
from  decreased  sales of $144,000 into the Toledo location, partially offset by
an  increase  of  $89,000  into  the  Florida  N-Viro  location;

     c)  Our processing revenue, including facility management revenue, showed a
net  increase  of  $127,000  over  the same period ended in 2008, primarily from
increased  municipal  sludge processing at the Florida N-Viro location partially
offset  by  a  decrease  in  N-Viro  Soil  revenue  from  the  Toledo  location;

     d)  Territorial  fees  showed  an  increase of $30,000 from the same period
ended  in  2008:

     The  decrease  in  the  sales  of  alkaline  admixture  was  primarily from
facilities  no longer procuring their alkaline admixture through us, all located
in  the  midwestern  United  States.

     The  net  decrease in service fees for the management of alkaline admixture
was  primarily  from  the reduction in alkaline admixture marketed at the Toledo
location, which represented a decrease of $144,000.  The Florida N-Viro location
showed  an increase of $89,000 in fees for the management of alkaline admixture.

     The  net  increase  in processing revenue of $127,000 was primarily from an
increase  in  sludge  processing  volume  at  our  Florida  N-Viro  location,
representing  over $245,000 of the increase.  Offsetting the facility management
were  sales  of  the  N-Viro  Soil  product which showed a decrease of $107,000,
primarily  from  our  Toledo  location,  over  2008.

     Our  gross  profit  increased  $367,000, or 50%, to $1,109,000 for the year
ended  December 31, 2009 from $742,000 for the year ended December 31, 2008, and
the  gross  profit  margin  increased to 22% from 15% for the same periods.  The
increase  in  gross  profit  margin  is  primarily due to the reduction in costs
associated  with  our facility management fee operations.  These cost reductions
were primarily the cost of fuel, the continued transition to using company-owned
trucking  from third-party vendors for sludge and ash shipments, and a reduction
in  the  cost  of  shipping  N-Viro  Soil  negotiated  with  our  soil customers
purchasing  from  the  Toledo  location.

     Our  operating expenses increased $1,653,000, or 86%, to $3,583,000 for the
year  ended  December  31,  2009 from $1,930,000 for the year ended December 31,
2008.  The increase was primarily due to an increase of approximately $1,134,000
in  payroll  and  related  costs,  $359,000  in  consulting  fees,  $63,000  in
director-related  costs,  $28,000  in  office  and  $18,000  in  travel-related
expenses.

Of  the  increase  of  $1,134,000  in payroll and related costs, $1,122,000 were
non-cash  costs  relating  to the issuance of stock options to officers.  Of the
increase  of $359,000 in consulting fees, $324,000 were non-cash costs for stock
given  as compensation for the agreements entered into in 2009.  Of the increase
of  $63,000  in  director-related costs, $75,000 were non-cash costs relating to
the issuance of stock options.  Of the total increase of $1,556,000 in all three
of  these  categories  from  2008  to  2009, $1,521,000 were for non-cash costs.

Of  our total operating expenses in 2009 of $3,583,000, approximately $2,166,000
were  non-cash  expenses  for stock and stock options issued during the year and
$492,000  in  amortization  and  depreciation expense, or a total of $2,658,000.

     Our nonoperating income (expense) increased by $28,000 to income of $60,000
for  the  year ended December 31, 2009 from income of $32,000 for the year ended
December 31, 2008.  The increase in nonoperating income was primarily due to the
extinguishment  of  $147,000  of  certain liabilities no longer due during 2009.

     We  recorded  a  net  loss  of  approximately $2,414,000 for the year ended
December  31,  2009  compared  to a net loss of approximately $1,157,000 for the
year  ended  December  31,  2008,  an  increase  in  the  loss  of approximately
$1,257,000.

LIQUIDITY  AND  CAPITAL  RESOURCES

     We  had  working  capital  of  $57,000  at December 31, 2009, compared to a
working  capital  deficit  of  $1,287,000  at December 31, 2008, resulting in an
increase  in working capital of $1,344,000.  Current assets at December 31, 2009
included  cash  and  cash  equivalents of $202,000 (including restricted cash of
$140,000),  which  is  an  increase  of $48,000 from December 31, 2008.  The net
positive  change in working capital from December 31, 2008 to 2009 was primarily
from  an  increase  to  the  deferred current asset of $966,000 for common stock
given pursuant to consulting contracts entered into during the year, an increase
in cash provided by operating activities of $233,000 for the year ended December
31, 2009, further increased by $706,000 of cash from the issuance of convertible
debentures (net of issuance costs), offset negatively by an increase in payments
over  advances  from  short  and  long-term  debt  obligations  of  $547,000.

     In  2009  our  cash  flow  provided by operating activities was $26,000, an
increase  of  $233,000  over  the  same  period  in 2008.  The components of the
increase in cash flow provided by operating activities from 2008 was principally
due  to  a  $1,520,000  increase  in stock and stock options issued for fees and
services  and  an  increase  in  other  non-cash  items of $82,000, offset by an
increase of $40,000 in trade accounts receivable, a decrease of $22,000 in trade
accounts  payable and an increase of $50,000 in prepaid and other assets and, an
increase  in  the  net  loss  of  $1,257,000.

     We  have modified our business model and have been evolving away from sales
of  alkaline  admixture  and  royalty-based  revenue  agreements  that typically
generate  a  higher  gross  profit  margin, to long-term and sustainable revenue
based on integrated N-Viro technology and operations, but typically generating a
lower  gross  profit  margin.  From  2006  to  2009,  the percentage of combined
revenues  generated from our owned and operated facilities in Toledo and Volusia
County was:  2006 - 46%;  2007 - 77%;  2008 - 94%;  2009 - 95%.  We believe this
shift  will  allow  us  to  enhance  future  revenue and profits through growth,
efficiency  and  revenue  optimization.

     The normal collection period for accounts receivable is approximately 30-60
days  for  the  majority  of  customers.  This  is a result of the nature of the
license  contracts,  type  of customer and the amount of time required to obtain
the  information  to  prepare  the  billing.  For  2008 and throughout 2009, our
customers  slowed the overall payment rate on our outstanding receivables, which
in  turn  contributed  to  us  extending  payment  times  to  our vendors on our
payables.  We make no assurances that payments from our customers or payments to
our  vendors  will  become  shorter  and  this may have an adverse impact on our
continuing  operations.

     During  2009,  we  had  a  line  of credit up to $400,000 at the prime rate
(3.25%  at  December  31, 2009) plus 0.75% and secured by a first lien on all of
our  assets,  with  Monroe  Bank  +  Trust, or the Bank, with a maturity date of
October  15,  2009.  Two certificates of deposit totaling $140,161 from the Bank
are  held  as  a condition of maintaining the line of credit.  In October, 2009,
the  line  of credit was renewed through October 2010.  At December 31, 2009, we
had  $75,000  of  borrowing  capacity  under  the  credit  facility.

     During  2009,  we borrowed a total of $139,849 from two lenders to purchase
insurance  policies  for  general,  property and directors & officers' insurance
coverage  during  the year.  A total of two term notes were issued, ranging from
3.8%  to  5.3%  interest  for  a  term  not more than one year, monthly payments
totaling  $14,312 and each are unsecured.  The total amount owed on all notes as
of  December 31, 2009 was approximately $54,800 and all notes are expected to be
paid  in full on the applicable maturity date, the last of which is August 2010.

     On  December  28,  2006,  we  purchased the remaining ownership interest in
Florida  N-Viro  for  $500,000  and financed $400,000 of it by delivering a note
(the  "Note")  to  the  seller,  VFL Technology Corporation.  The Note was at 8%
interest for 10 years, to be paid in annual installments, including interest, of
$59,612,  subject  to  an  offset  for  royalties  due us under a patent license
agreement  from  the  same party.  On September 28, 2009, we remitted payment in
full  satisfaction  of  the  Note, as announced in a Form 8-K filing in October,
2009.

     On May 18, 2009, we approved an offering of up to $1,000,000 of Convertible
Debentures  (the  "Debentures"),  convertible  at any time into our unregistered
common  stock  at  $2.00  per  share.  The  Debentures  mature at June 30, 2011.
During  2009  we  issued  $765,000  of  Debentures  to  a  total  of twenty (23)
accredited  investors.  The Debentures are issuable in $5,000 denominations, are
unsecured and have a stated interest rate of 8%, payable quarterly to holders of
record.  In  July  and  October 2009 and in January 2010, we timely paid accrued
interest to all Debenture holders of record as of the quarter-end dates.  At any
time,  we  may  redeem all or a part of the Debentures at face value plus unpaid
interest.  During  2009,  one accredited investor redeemed $10,000 of Debentures
into  unregistered  common  stock.

     For  2010, we expect to improve operating results and have adequate cash or
access  to  cash  to  adequately  fund  operations  by  focusing on existing and
expected new sources of revenue, especially from our N-Viro Fuel technology, and
cash  generated  from equity issuances and exercises of outstanding warrants and
options.  We  expect that market developments favoring cleaner burning renewable
energy sources and ongoing discussions with companies in the fuel and wastewater
industries could provide enhanced liquidity and have a positive impact on future
operations.  We continue to pursue opportunities with strategic partners for the
development  and  commercialization  of the patented N-Viro Fuel technology.  In
addition,  we  are  focusing on the development of regional biosolids processing
facilities,  and are currently in negotiations with potential partners to permit
and  develop  independent,  regional  facilities.

     There can be no assurance these discussions will be successful or result in
new  revenue  or  cash  funding sources for the company.  Our failure to achieve
improvements  in operating results, including through these potential sources of
revenue, or in our ability to adequately finance or secure additional sources of
funds  would likely have a material adverse effect on our continuing operations.

OFF-BALANCE  SHEET  ARRANGEMENTS

     At  December 31, 2009, we did not have any material commercial commitments,
including  guarantees  or  standby  repurchase obligations, or any relationships
with unconsolidated entities or financial partnerships, including entities often
referred  to  as  structured  finance  or  special  purpose entities or variable
interest  entities,  which  would  have  been  established  for  the  purpose of
facilitating  off-balance  sheet  arrangements  or other contractually narrow or
limited  purposes.

     From  time  to  time,  during  the  normal  course of business, we may make
certain  indemnities,  commitments and guarantees under which we may be required
to  make  payments  in  relation  to  certain  transactions.  These include: (i)
indemnities  to  vendors and service providers pertaining to claims based on our
negligence  or willful misconduct and (ii) indemnities involving the accuracy of
representations  and warranties in certain contracts.  Pursuant to Delaware law,
we  may  indemnify  certain  officers  and  directors  for  certain  events  or
occurrences  while the officer or director is, or was, serving at our request in
such capacity.  We also have director and officer insurance coverage that limits
our  exposure  and enables us to recover a portion of any future amounts that we
may  pay  for  indemnification  purposes.  We  believe  the applicable insurance
coverage  is  generally  adequate to cover any estimated potential liability for
which  we  may  provide  indemnification.  The  majority  of  these indemnities,
commitments  and  guarantees  do  not  provide for any limitation of the maximum
potential  for  future  payments  we  could  be  obligated to make.  We have not
recorded  any  liability for these indemnities, commitments and other guarantees
in  the  accompanying  Consolidated  Balance  Sheets.

CRITICAL  ACCOUNTING  POLICIES,  ESTIMATES  AND  ASSUMPTIONS

     In  preparing financial statements in conformity with accounting principles
generally  accepted  in  the  United  States,  management  makes  estimates  and
assumptions  that  affect  the  reported  amounts  of assets and liabilities and
disclosures  of  contingent  assets and liabilities at the date of the financial
statements,  as well as the reported amounts of revenues and expenses during the
reporting  period.  Actual  results  could  differ  from  those  estimates.  The
following  are  the significant estimates and assumptions made in preparation of
the  financial  statements:

          Non-domestic  license and territory fees - We do not recognize revenue
     on  any  non-domestic  license or territory fee contracts until the cash is
     received,  assuming  all other tests of revenue recognition are met. Canada
     is  excluded  from  this  definition  of  non-domestic.

          Allowance for Doubtful Accounts - We estimate losses for uncollectible
     accounts  based  on the aging of the accounts receivable and the evaluation
     and  the likelihood of success in collecting the receivable. The balance of
     the  allowance  at  December  31,  2009  and  2008  is  $50,000.

          Property  and  Equipment/Long-Lived Assets - Property and equipment is
     reviewed  for  impairment.  The  carrying  amount  of  an  asset (group) is
     considered  impaired  if  it  exceeds  the  sum  of  our  estimate  of  the
     undiscounted future cash flows expected to result from the use and eventual
     disposition  of  the  asset  (group), excluding interest charges. Property,
     machinery  and  equipment are stated at cost less accumulated depreciation.
     We  believe the carrying amount is not impaired based upon estimated future
     cash  flows.

          Intangible  Assets - Intangible assets deemed to have indefinite lives
     are  tested  for  impairment  by comparing the fair value with its carrying
     value.  Significant  estimates  used  in  the  determination  of fair value
     include  estimates  of  future  cash  flows.  As  required  under  current
     accounting  standards, we test for impairment when events and circumstances
     indicate  that the assets might be impaired and the carrying value of those
     assets  may  not  be  recoverable.

          Income  Taxes - We assume the deductibility of certain costs in income
     tax filings and estimate the recovery of deferred income tax assets, all of
     which  is  fully  reserved.

          New  Accounting  Standards - The Financial Accounting Standards Board,
     or FASB, has issued the following new accounting and interpretations, which
     may  be  applicable  in  the  future  to  us:

               In  June  2009,  the  Financial Accounting Standards Board (FASB)
          issued  its  final  Statement of Financial Accounting Standards (SFAS)
          No. 168 - The FASB Accounting Standards Codification and the Hierarchy
          of  Generally  Accepted  Accounting  Principles  a replacement of FASB
          Statement  No.  162.  SFAS  No. 168 made the FASB Accounting Standards
          Codification (the Codification) the single source of U.S. GAAP used by
          nongovernmental  entities  in the preparation of financial statements,
          except  for rules and interpretive releases of the SEC under authority
          of  federal  securities  laws,  which  are  sources  of  authoritative
          accounting  guidance for SEC registrants. The Codification is meant to
          simplify  user  access  to  all  authoritative  accounting guidance by
          reorganizing  U.S.  GAAP  pronouncements  into  roughly  90 accounting
          topics within a consistent structure; its purpose is not to create new
          accounting  and  reporting  guidance.  The Codification supersedes all
          existing  non-SEC accounting and reporting standards and was effective
          for  the  company  beginning July 1, 2009. Following SFAS No. 168, the
          FASB  will  not  issue  new  standards in the form of Statements, FASB
          Staff  Positions, or Emerging Issues Task Force Abstracts; instead, it
          will  issue  Accounting  Standards Updates. The FASB will not consider
          Accounting  Standards  Updates  as  authoritative  in their own right;
          these  updates  will  serve  only  to update the Codification, provide
          background  information  about the guidance, and provide the bases for
          conclusions  on  the change(s) in the Codification. In the description
          of  Accounting Standards Updates that follows, references in "italics"
          relate  to  Codification  Topics  and Subtopics, and their descriptive
          titles,  as  appropriate.

               In  June  2009,  the  FASB  amended  its  guidance on determining
          whether  an  entity's  variable  interests  constitute  controlling
          financial interests in a variable interest entity. Among other things,
          the  updated  guidance  replaces the calculation for determining which
          entities,  if any, have a controlling financial interest in a variable
          interest  entity  (VIE)  from  a  quantitative based risks and rewards
          calculation,  to  a  qualitative  approach that focuses on identifying
          which  entities  have  the  power  to  direct the activities that most
          significantly impact the VIE's economic performance and the obligation
          to  absorb losses of the VIE or the right to receive benefits from the
          VIE.  The  update  also  requires ongoing assessments as to whether an
          entity  is  the  primary  beneficiary  of  a  VIE  (previously,
          reconsideration  was  only  required  upon  the occurrence of specific
          events),  modifies  the  presentation  of  consolidated VIE assets and
          liabilities,  and  requires  additional  disclosures about a company's
          involvement  in  VIEs.  This update will be effective for us beginning
          January  1, 2010. We are currently evaluating the effect that adoption
          of  this  update  will  have,  if  any,  on our financial position and
          results  of  operations  when  it  becomes  effective  in  2010.

               In  October  2009  the  FASB  issued  an  update  to  its revenue
          recognition  standards  that  (1)  removes  the
          objective-and-reliable-evidence-of-fair-value  criterion  from  the
          separation criteria used to determine whether an arrangement involving
          multiple  deliverables  contains more than one unit of accounting, (2)
          replaces  references  to  "fair  value"  with  "selling  price"  to
          distinguish from other fair value measurement guidance, (3) provides a
          hierarchy  that  entities  must use to estimate the selling price, (4)
          eliminates  the  use  of  the  residual method for allocation, and (5)
          expands  the  ongoing  disclosure  requirements.  The  new standard is
          effective  for  us  beginning  January  1,  2011  and  can  be applied
          prospectively  or  retrospectively.  We  are  currently evaluating the
          effect  that  adoption  of  this  update  will  have,  if  any, on our
          financial position and results of operations when it becomes effective
          in  2011.

     Other  Accounting  Standards Updates not effective until after December 31,
2009,  are  not  expected  to  have  a  significant  effect  on  the  Company's
consolidated  financial  position  or  results  of  operations.

     Actual  results  could differ materially from the estimates and assumptions
that  we  use  in  the  preparation  of  our  financial  statements.


ITEM  7A.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

     As  a  smaller  reporting  company  we  are  not  required  to provide this
information  under  Item  305  of  Regulation  S-K.


<PAGE>


ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA


                         INDEX TO FINANCIAL STATEMENTS


                                                                           Page
                                                                           ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                     F-1

FINANCIAL STATEMENTS
     CONSOLIDATED BALANCE SHEETS                                      F-2 - F-3
     CONSOLIDATED STATEMENTS OF OPERATIONS                                  F-4
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)              F-5
     CONSOLIDATED STATEMENTS OF CASH FLOWS                                  F-6
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                      F-7 - F-25



<PAGE>



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors
N-Viro International Corporation


We  have  audited  the  accompanying  consolidated  balance  sheets  of  N-Viro
International  Corporation  (a  Delaware entity) and Subsidiaries as of December
31,  2009  and  2008,  and  the  related  consolidated statements of operations,
stockholders'  equity  (deficit),  and  cash  flows for each of the years in the
two-year period ended December 31, 2009. These consolidated financial statements
are  the  responsibility  of  the Company's management. 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  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated financial statements are free of material misstatement. The Company
is  not  required  to  have,  nor  were  we  engaged to perform, an audit of its
internal  control  over financial reporting. Our audit included consideration of
internal  control  over  financial  reporting  as  a  basis  for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing  an  opinion  on  the effectiveness of the company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes  examining,  on  a  test  basis,  evidence  supporting  the amounts and
disclosures  in  the consolidated 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 N-Viro International
Corporation  and  Subsidiaries as of December 31, 2009 and 2008, and the results
of  their  operations and their cash flows for each of the years in the two-year
period  ended  December  31,  2009,  in  conformity  with  accounting principles
generally  accepted  in  the  United  States  of  America.


/s/  UHY LLP
------------
UHY LLP
Southfield, Michigan
March 31, 2010


<PAGE>


<TABLE>
<CAPTION>

                        N-VIRO INTERNATIONAL CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                           December 31, 2009 and 2008
                           --------------------------


                                                 2009        2008
                                              ----------  ----------
<S>                                           <C>         <C>
ASSETS
------------------------------------------

CURRENT ASSETS
Cash and cash equivalents:
  Unrestricted                                $   61,380  $   14,869
  Restricted                                     140,161     138,812
Receivables, net:
  Trade                                          597,035     494,141
  Related party - Mahoning Valley N-Viro          15,325           -
Deferred costs - stock issued for services       966,354           -
Prepaid expenses and other assets                108,138      64,331
                                              ----------  ----------
Total current assets                           1,888,393     712,153

PROPERTY AND EQUIPMENT, NET                    1,363,476   1,781,290

INTANGIBLE AND OTHER ASSETS, NET                 211,457     189,328
                                              ----------  ----------


                                              $3,463,326  $2,682,771
                                              ==========  ==========

</TABLE>

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


<PAGE>

<TABLE>
<CAPTION>

                              N-VIRO INTERNATIONAL CORPORATION

                                 CONSOLIDATED BALANCE SHEETS

                                 December 31, 2009 and 2008
                                 --------------------------


                                                                       2009           2008
                                                                   -------------  -------------
<S>                                                                <C>            <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------------

CURRENT LIABILITIES
  Current maturities of long-term debt                             $    353,800   $    360,501
  Line-of-credit                                                        325,000        398,000
  Accounts payable                                                      932,831      1,047,364
  Accrued liabilities                                                   219,910        193,425
                                                                   -------------  -------------
Total current liabilities                                             1,831,541      1,999,290

LONG-TERM DEBT, LESS CURRENT MATURITIES                                 500,808      1,135,364

LONG-TERM DEBT - Convertible debentures, net of discount                610,840              -
                                                                   -------------  -------------

Total liabilities                                                     2,943,189      3,134,654

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)
  Preferred stock, $.01 par value
    Authorized - 2,000,000 shares
    Issued - -0- shares in 2009 and 2008                                      -              -
  Common stock, $.01 par value
    Authorized - 25,000,000 shares in 2009 and 15,000,000 in 2008
    Issued - 5,269,553 shares in 2009 and 4,468,025 shares in 2008       52,696         44,680
  Additional paid-in capital                                         21,453,168     17,822,744
  Accumulated deficit                                               (20,300,837)   (17,634,417)
                                                                   -------------  -------------
                                                                      1,205,027        233,007

Less treasury stock, at cost, 123,500 shares                            684,890        684,890
                                                                   -------------  -------------
Total stockholders' equity (deficit)                                    520,137       (451,883)
                                                                   -------------  -------------

                                                                   $  3,463,326   $  2,682,771
                                                                   =============  =============
</TABLE>


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



<PAGE>

<TABLE>
<CAPTION>

                             N-VIRO INTERNATIONAL CORPORATION

                           CONSOLIDATED STATEMENTS OF OPERATIONS

                          Years Ended December 31, 2009 and 2008
                          --------------------------------------


                                                                     2009          2008
                                                                 ------------  ------------
<S>                                                              <C>           <C>
REVENUES                                                         $ 5,021,169   $ 5,001,774

COST OF REVENUES                                                   3,912,310     4,260,290
                                                                 ------------  ------------

GROSS PROFIT                                                       1,108,859       741,484

OPERATING EXPENSES
  Selling, general and administrative                              3,582,979     1,929,777
                                                                 ------------  ------------

OPERATING LOSS                                                    (2,474,120)   (1,188,293)

OTHER INCOME (EXPENSE)
  Interest income                                                      1,354         3,306
  Gain on extinguishment of liabilities                              147,201        88,785
  Amortization of discount on convertible debentures                 (24,315)            -
  Interest expense                                                   (64,313)      (60,513)
                                                                 ------------  ------------
                                                                      59,927        31,578
                                                                 ------------  ------------

LOSS BEFORE INCOME TAXES                                          (2,414,193)   (1,156,715)

Federal and state income taxes                                             -             -
                                                                 ------------  ------------

NET LOSS                                                         $(2,414,193)  $(1,156,715)
                                                                 ============  ============


Basic and diluted loss per share                                 $     (0.51)  $     (0.27)
                                                                 ============  ============

Weighted average common shares outstanding - basic and diluted     4,688,928     4,274,877
                                                                 ============  ============
</TABLE>



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


<PAGE>

<TABLE>
<CAPTION>

                                             N-VIRO INTERNATIONAL CORPORATION

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                          Years Ended December 31, 2009 and 2008

                                                                        Additional
                                                Shares of     Common     Paid-in     Accumulated   Treasury
                                                Common Stock   Stock     Capital       Deficit       Stock        Total
                                                ------------  -------  -----------  -------------  ----------  ------------
<S>                                             <C>           <C>      <C>          <C>            <C>         <C>
BALANCE JANUARY 1, 2008                            4,145,359  $41,454  $16,962,134  $(16,477,702)  $(684,890)  $  (159,004)

Net loss                                                   -        -            -    (1,156,715)          -    (1,156,715)
Issuance of stock options                                  -        -      221,150             -           -       221,150
Exercise of stock options                            109,900    1,099      176,130             -           -       177,229
Exercise of stock warrants                           120,947    1,209      244,559             -           -       245,768
Issuance of common stock                              91,819      918      218,771             -           -       219,689
                                                ------------  -------  -----------  -------------  ----------  ------------

BALANCE DECEMBER 31, 2008                          4,468,025   44,680   17,822,744   (17,634,417)   (684,890)     (451,883)

Net loss                                                   -        -            -    (2,414,193)          -    (2,414,193)
Deemed dividend on extension of stock warrants             -        -      252,227      (252,227)          -             -
Issuance of stock options                                  -        -    1,371,921             -           -     1,371,921
Exercise of stock options                             21,400      214       29,823             -           -        30,037
Exercise of stock warrants                            13,672      137       29,015             -           -        29,152
Conversion of debentures to stock                      5,024       50        9,999             -           -        10,049
Discount on convertible debentures issued                  -        -      183,897             -           -       183,897
Issuance of common stock                             761,432    7,615    1,753,542             -           -     1,761,157
                                                ------------  -------  -----------  -------------  ----------  ------------

BALANCE DECEMBER 31, 2009                          5,269,553  $52,696  $21,453,168  $(20,300,837)  $(684,890)  $   520,137
                                                ============  =======  ===========  =============  ==========  ============
</TABLE>


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


<PAGE>

<TABLE>
<CAPTION>

                        N-VIRO INTERNATIONAL CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                     Years Ended December 31, 2009 and 2008
                     --------------------------------------


                                                          2009          2008
                                                      ------------  ------------
<S>                                                   <C>           <C>

Cash Flows From Operating Activities
  Net loss                                            $(2,414,193)  $(1,156,715)
  Adjustments to reconcile net loss to net
    cash from operating activities:
  Depreciation and amortization                           467,990       447,365
  Amortization of discount and costs of debentures         37,345             -
  Provision (reduction) for bad debts                           -        10,000
  Issuance of stock for debt and services                 793,646       470,628
  Issuance of stock options and warrants for services   1,371,962       174,483
  (Gain) loss on the sale of fixed assets                   1,161       (32,890)
Changes in Operating Assets and Liabilities
  Increase in trade receivables                          (102,894)      (63,182)
  Increase in prepaid expenses and other assets           (55,693)       (5,112)
  Decrease in accounts payable and accrued liabilities    (73,050)      (50,960)
                                                      ------------  ------------
Net cash provided by (used in) operating activities        26,274      (206,383)

Cash Flows From Investing Activities
  Proceeds from sale of property and equipment              3,006        79,773
  Increase in investments                                       -          (125)
  Increases from restricted cash and cash equivalents      (1,348)       (3,306)
  Advances to related parties                             (15,300)            -
  Purchases of property and equipment                     (17,360)     (923,673)
                                                      ------------  ------------
Net cash used in investing activities                     (31,002)     (847,331)

Cash Flows From Financing Activities
  Proceeds from convertible debentures issued             765,000             -
  Issuance costs of convertible debentures issued         (58,666)            -
  Borrowings under long-term obligations                  139,848       862,228
  Stock options exercised                                  30,037       177,112
  Stock warrants exercised                                 29,152       245,912
  Net borrowings (repayments) on line-of-credit           (73,000)       34,000
  Principal payments on long-term obligations            (781,132)     (312,990)
                                                      ------------  ------------
Net cash provided by financing activities                  51,239     1,006,262
                                                      ------------  ------------

Net Increase (Decrease) in Cash and Cash Equivalents       46,511       (47,452)

Cash and Cash Equivalents - Beginning                      14,869        62,321
                                                      ------------  ------------

Cash and Cash Equivalents - Ending                    $    61,380   $    14,869
                                                      ============  ============

Supplemental disclosure of cash flows information:
Cash paid during the year for interest                $   125,460   $   125,857
                                                      ============  ============
</TABLE>


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


<PAGE>


                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 1.     OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The  following  is  a  summary  of  certain  accounting policies followed in the
preparation  of  these  financial statements.  The policies conform to generally
accepted  accounting  principles  and  have  been  consistently  applied  in the
preparation  of  the  financial  statements:

A.     Nature  of Business - The Company owns and licenses the N-Viro Process, a
patented  technology  to  treat  and  recycle  wastewater  sledges  and  other
bio-organic  wastes,  utilizing  certain  alkaline  by-products  produced by the
cement,  lime, electric utilities and other industries.  Revenue and the related
accounts  receivable  are  due  from  companies  acting as independent agents or
licensees,  principally  municipalities.

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

C.     Principles  of  Consolidation  -  The  consolidated  financial statements
include  the  accounts  of  the  Company and its wholly-owned subsidiaries.  All
significant  intercompany  accounts  and  transactions  have  been eliminated in
consolidation.

D.     Cash  and  Cash  Equivalents  -  The  Company  has cash on deposit in one
financial  institution  which,  at  times,  may  be  in excess of FDIC insurance
limits.

          For  purposes  of  the statements of cash flows, the Company considers
     all  certificates  of deposit with initial maturities of 90 days or less to
     be  cash  equivalents.

          Restricted  cash  consists  of  two  certificates  of  deposit  and
     corresponding  accrued  interest  which  are held as collateral against the
     Company's  line-of-credit.

E.     Accounts  Receivable  - The Company extends unsecured credit to customers
under  normal  trade agreements, which require payment within 30 days.  Accounts
greater than 90 days past due amounted to $30,979 and $50,940 of receivables for
the  years ended December 31, 2009 and 2008, respectively.  The Company's policy
is  not to accrue and record interest income on past due trade receivables.  The
Company  does bill the customer finance charges on past due accounts and records
the interest income when collected.  Credit is generally granted on an unsecured
basis.  Periodic  credit  evaluations of customers are conducted and appropriate
allowances  are  established.

     Management  estimates an allowance for doubtful accounts, which was $50,000
as  of  December  31,  2009  and  2008.  The estimate is based upon management's
review  of  delinquent  accounts  and  an assessment of the Company's historical
evidence  of  collections.

<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE  1.     OPERATIONS  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES
(CONTINUED)

F.     Property  and Equipment - Property, machinery and equipment are stated at
cost less accumulated depreciation.  Depreciation has been computed primarily by
the  straight-line  method  over  the  estimated  useful  lives  of  the assets.
Generally,  useful  lives are five to fifteen years.  Leasehold improvements are
capitalized  and  amortized  over  the  lesser  of  the life of the lease or the
estimated  useful  life of the asset.  Depreciation expense amounted to $431,007
and  $395,928  in 2009 and 2008, respectively.  Management has reviewed property
and  equipment  for  impairment  when events and circumstances indicate that the
assets  might  be  impaired  and  the carrying values of those assets may not be
recoverable.  Management believes the carrying amount is not impaired based upon
estimated  future  cash  flows.

G.     Intangible  Assets  -  Patent  costs and territory rights are recorded at
cost  and then amortized by the straight-line method over their estimated useful
lives  (periods  ranging  from  one  and  one-half  to  seventeen  years;
weighted-average  amortization  periods  for  patents/related  intangibles  and
territory  rights  were  16.0  and  16.1  years  at  December 31, 2009 and 2008,
respectively).  Amortization expense amounted to $30,369 and $37,015 in 2009 and
2008, respectively.  Estimated amortization expense, based on these patent costs
and territory rights at December 31, 2009, for each of the ensuing five years is
as  follows:  2010 - $27,000;  2011 - $24,000;  2012 - $19,000;  2013 - $15,000;
2014  -  $14,000.  Management has reviewed intangible assets for impairment when
events  and  circumstances  indicate  that  the assets might be impaired and the
carrying  values  of  those  assets  may  not  be  recoverable.

     The Company has capitalized the cost of acquiring certain customer licenses
and contracts as part of the acquisition of Florida N-Viro on December 31, 2006.
Amortization  expense amounted to $6,613 in 2009 and $14,422 in 2008.  Estimated
amortization  expense,  based  on  these  capitalized  license  and contracts at
December  31,  2009,  for  each of the ensuing five years is as follows:  2010 -
$6,000;  2011  -  $2,000;  2012  -  $2,000;  2013  -  $2,000;  2014  -  $2,000.

H.     Revenue  Recognition  -  Facility  management  revenue, sludge processing
revenue  and  royalty  fees  are recognized under contracts where the Company or
licensees  utilize  the  N-Viro  Process  to  treat sludge, either pursuant to a
fixed-price  contract  or  based  on  volumes  of  sludge processed.  Revenue is
recognized  as  services  are  performed.

          Alkaline  admixture  sales,  alkaline  admixture  management  service
revenue, equipment sales and N-Viro SoilTM revenue are recognized upon shipment.

          License  and  territory  fees  are  generated  by selling the right to
market or use the N-Viro Process in a specified territory.  The Company's policy
is  to  record  revenue  for  the  license agreements when all material services
relating to the revenue have been substantially performed, conditions related to
the  contract  have  been  met  and  no material contingencies exist.  We do not
recognize  revenue  on any non-domestic license or territory fee contracts until
the  cash  is received, assuming all other tests of revenue recognition are met.
Canada  is  excluded  from  this  definition  of  non-domestic.  Research  and
development  revenue  is  recognized  as  work  is  performed  and billed to the
contracting  entity  in  accordance  with  the  contract.

          The  Company  records the amount of shipping and handling costs billed
to  customers  as revenue.  The cost incurred for shipping and handling has been
included  in  the  cost  of  sales.

<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE  1.     OPERATIONS  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES
(CONTINUED)

I.     Loss  Per  Common  Share - Loss per common share has been computed on the
basis  of  the  weighted-average number of common shares outstanding during each
period  presented.  For  the years ended December 31, 2009 and 2008, the effects
of  1,279,825  stock  options  outstanding,  724,950 warrants to purchase common
stock,  and,  debentures  that are convertible to 377,500 shares of common stock
are  excluded  from  the  diluted  per  share  calculation because they would be
antidilutive.

J.     Stock  Options  -  The  Company  records share-based compensation expense
using  a  fair-value  based  method  of measurement that results in compensation
costs  for  essentially  all  awards  of  stock-based compensation to employees.

K.     New  Accounting  Standards  -  In  June  2009,  the  Financial Accounting
Standards  Board  (FASB)  issued  its  final  Statement  of Financial Accounting
Standards  (SFAS)  No. 168 -  The FASB Accounting Standards Codification and the
Hierarchy  of  Generally  Accepted  Accounting  Principles a replacement of FASB
Statement No. 162.  SFAS No. 168 made the FASB Accounting Standards Codification
(the  Codification)  the  single  source  of  U.S.  GAAP used by nongovernmental
entities  in  the  preparation  of  financial  statements,  except for rules and
interpretive  releases  of  the  SEC under authority of federal securities laws,
which are sources of authoritative accounting guidance for SEC registrants.  The
Codification  is  meant  to simplify user access to all authoritative accounting
guidance  by  reorganizing  U.S.  GAAP pronouncements into roughly 90 accounting
topics  within  a  consistent  structure;  its  purpose  is  not  to  create new
accounting  and  reporting  guidance.  The  Codification supersedes all existing
non-SEC  accounting  and  reporting  standards and was effective for the company
beginning  July  1,  2009.  Following  SFAS No. 168, the FASB will not issue new
standards  in  the  form of Statements, FASB Staff Positions, or Emerging Issues
Task  Force Abstracts; instead, it will issue Accounting Standards Updates.  The
FASB  will  not  consider Accounting Standards Updates as authoritative in their
own  right;  these  updates  will serve only to update the Codification, provide
background information about the guidance, and provide the bases for conclusions
on  the  change(s)  in  the  Codification.  In  the  description  of  Accounting
Standards  Updates  that follows, references in "italics" relate to Codification
Topics  and  Subtopics,  and  their  descriptive  titles,  as  appropriate.

In  June  2009, the FASB amended its guidance on determining whether an entity's
variable  interests  constitute  controlling  financial  interests in a variable
interest  entity.  Among  other  things,  the  updated  guidance  replaces  the
calculation for determining which entities, if any, have a controlling financial
interest in a variable interest entity (VIE) from a quantitative based risks and
rewards calculation, to a qualitative approach that focuses on identifying which
entities  have the power to direct the activities that most significantly impact
the VIE's economic performance and the obligation to absorb losses of the VIE or
the  right  to  receive  benefits from the VIE. The update also requires ongoing
assessments  as  to  whether  an  entity  is  the  primary  beneficiary of a VIE
(previously,  reconsideration  was only required upon the occurrence of specific
events),  modifies  the presentation of consolidated VIE assets and liabilities,
and  requires  additional  disclosures  about  a company's involvement in VIE's.
This  update  will  be  effective  for  the  company  beginning January 1, 2010.
Management  is currently evaluating the effect that adoption of this update will
have, if any, on the Company's financial position and results of operations when
it  becomes  effective  in  2010.

In  October  2009 the FASB issued an update to its revenue recognition standards
that  (1)  removes  the  objective-and-reliable-evidence-of-fair-value criterion
from  the separation criteria used to determine whether an arrangement involving
multiple  deliverables  contains  more than one unit of accounting, (2) replaces
references  to  "fair value" with "selling price" to distinguish from other fair
value  measurement  guidance, (3) provides a hierarchy that entities must use to
estimate  the  selling  price, (4) eliminates the use of the residual method for
allocation,  and  (5)  expands  the  ongoing  disclosure  requirements.  The new
standard  is  effective  for  the  company  beginning January 1, 2011 and can be
applied  prospectively  or  retrospectively.  Management is currently evaluating
the  effect  that  adoption  of  this update will have, if any, on the Company's
financial  position and results of operations when it becomes effective in 2011.


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


Other  Accounting Standards Updates not effective until after December 31, 2009,
are  not  expected  to  have  a significant effect on the Company's consolidated
financial  position  or  results  of  operations.

L.     Income  Taxes  -  Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and  liabilities that will result in taxable or deductible amounts in the future
based  on  enacted  tax  laws  and  rates applicable to the periods in which the
differences  are  expected  to  affect taxable income.  Valuation allowances are
established  when necessary to reduce deferred tax assets to the amount expected
to  be  realized.  Income  tax  expense is the tax payable or refundable for the
current period plus or minus the change during the period in deferred tax assets
and  liabilities.

The accounting for uncertain tax positions requires the Company to evaluate each
income  tax  position using a two step process which includes a determination as
to  whether  it  is  more  likely  than not that the income tax position will be
sustained,  based  upon  technical  merit  and  upon  examination  by the taxing
authorities.  At  December  31,  2009  and  2008,  there  were  no uncertain tax
positions  that required accrual.  None of the Company's federal or state income
tax  returns  are  currently  under  examination by the Internal Revenue Service
("IRS")  or  state  authorities.  However,  fiscal  years  2006 and later remain
subject  to  examination  by  the  IRS  and  respective  states.


NOTE  2.     BALANCE  SHEET  DATA

PROPERTY  AND  EQUIPMENT  (AT  COST):

<TABLE>
<CAPTION>


                                      2009        2008
                                   ----------  ----------
<S>                                <C>         <C>
Leasehold improvements             $  122,979  $  116,458
Equipment                           2,763,211   2,779,103
Furniture, fixtures and computers      54,275      48,216
                                   ----------  ----------
                                    2,940,465   2,943,777
Less accumulated depreciation       1,576,989   1,162,487
                                   ----------  ----------

                                   $1,363,476  $1,781,290
                                   ==========  ==========
</TABLE>


DEFERRED  COSTS:

In  2005,  the  Company  executed  a  financial  public relations agreement with
Strategic  Asset  Management,  Inc., or SAMI.  The Company appointed SAMI as its
non-exclusive  financial  public  relations counsel for a term of two years from
the  date  of  the  SAMI  Agreement.  For  its services, the Company issued SAMI
120,000  shares  of  the Company's unregistered common stock, and 120,000 common
stock  purchase  warrants to purchase an equal number of shares of the Company's
common  stock  at  an exercise price of $1.84 per share.  Total valuation of the
services  to  be  performed  as  part  of the SAMI Agreement was estimated to be
$321,800,  to  be  amortized  over  the  two  year period, and was recorded as a
deferred  cost.  In  2006, the Company extended the SAMI Agreement for two years
to September 2009, and in consideration issued SAMI an additional 100,000 shares
of the Company's unregistered common stock.  Total valuation of these additional
services  to  be  performed  was  estimated to be $146,300, to be amortized from
January  2007 to September 2009.  Total consideration for the SAMI Agreement for
the entire four year period was estimated to be $468,100.  In December 2008, the
Company  cancelled the SAMI Agreement and recorded to expense the balance of the
unamortized  costs  on  the remaining agreement, or a total of $164,171 in 2008.

<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


NOTE  2.     BALANCE  SHEET  DATA  (CONTINUED)

In  2007,  the  Company  executed  a  Consulting  Agreement with Weil Consulting
Corporation,  or  the  Weil  Agreement.  The  Company  engaged  Weil  to provide
services  as  a consultant in general business affairs of the Company for a term
of two years from the date of the Weil Agreement.  For its services, the Company
issued  Weil  35,000  shares  of the Company's unregistered common stock.  Total
valuation  of  the  services  to  be performed as part of the Weil Agreement was
estimated  to  be  $61,000,  to  be  amortized over the two year period, and was
recorded  as  a deferred cost.  In December 2008, the Company cancelled the Weil
Agreement  and  recorded  to expense the balance of the unamortized costs on the
remaining  agreement,  or  a  total  of  $39,809  in  2008.

In  January  2008,  the Company executed a second Consulting Agreement with Weil
Consulting  Corporation,  or the Weil Agreement #2.  The Company engaged Weil to
provide  services as a consultant in general business affairs of the Company for
a  term  of two years from the date of the Weil Agreement #2.  For its services,
the  Company  issued  Weil  50,000  shares  of the Company's unregistered common
stock.  Total  valuation  of  the  services  to be performed as part of the Weil
Agreement  #2  was  estimated  to be $133,000, to be amortized over the two year
period,  and  was  recorded  as a deferred cost.  In December, 2008, the Company
cancelled  the  Weil  Agreement  #2  and  recorded to expense the balance of the
unamortized  costs  on  the remaining agreement, or a total of $133,000 in 2008.

In  January  2008,  the Company executed a Consulting Agreement with SLD Capital
Corporation,  or the SLD Agreement.  The Company engaged SLD to provide services
as  a  consultant  in  general business affairs of the Company for a term of two
years  from the date of the SLD Agreement.  For its services, the Company issued
SLD  50,000  shares of the Company's unregistered common stock.  Total valuation
of the services to be performed as part of the SLD Agreement was estimated to be
$133,000,  to  be  amortized  over  the  two  year period, and was recorded as a
deferred  cost.  In  December  2008, the Company cancelled the SLD Agreement and
recorded  to  expense  the  balance  of  the  unamortized costs on the remaining
agreement,  or  a  total  of  $133,000  in  2008.

In  July  2009,  the  Company executed a Consulting Agreement, or the Agreement,
effective  July  14,  2009, with Investor Relations Services, Inc. of New Smyrna
Beach,  FL,  or  IRSI.  The  Company  appointed  IRSI as its non-exclusive stock
promotion  and  strategic communications counsel for a term of one year from the
date of the Agreement.  For its services, the Company issued IRSI 500,000 shares
of  the  Company's  unregistered  common  stock.  Pursuant to the Agreement, the
Company entered into a Designation and Appointment agreement with Summit Trading
Limited  of New Smyrna Beach, FL, to designate Summit Trading as the third party
appointee  to  be  paid  the shares of stock under the Consulting Agreement with
IRSI.  The  Company  accounted  for  this  transaction  by  recording a deferred
current  asset  of $1,135,000 that is amortized ratably over the 12 month period
the services are to be rendered.  The cost amortized for the year ended December
31,  2009  was $520,200.  The amount deferred at December 31, 2009 was $614,800.


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


NOTE  2.     BALANCE  SHEET  DATA  (CONTINUED)

In  July  2009,  the  Company  executed  a  Finder's  Fee  and Non-Circumvention
Agreement  with  Summit  Trading  to  locate  possible  merger  and  acquisition
candidates  as  well as sources of financing for the Company for a period of one
year,  effective  July  20,  2009.  For  its services, the Company issued Summit
Trading  250,000 shares of the Company's unregistered common stock.  The Company
accounted for this transaction by recording a deferred current asset of $625,000
that  is  amortized  ratably  over  the  12  month period the services are to be
rendered.  The cost amortized for the year ended December 31, 2009 was $273,400.
The  amount  deferred  at  December  31,  2009  was  $351,600.

The  following  is  a  summary  of  Deferred  Costs - capitalized stock value on
contracts,  net  as  of  December  31:

<TABLE>
<CAPTION>

                                                            2009    2008
                                                          --------  -----
<S>                                                       <C>       <C>
Deferred costs - Investor Relations, less accumulated
   amortization (2009 - $520,208;  2008 - $-0-)           $614,792  $   -

Deferred costs - Summit Trading, Ltd., less accumulated
   amortization (2009 - $273,437;  2008 - $-0-)            351,562      -
                                                          --------  -----

                                                          $966,354  $   -
                                                          ========  =====
</TABLE>



INTANGIBLE  AND  OTHER  ASSETS:

The  following  is  a summary of intangible and other assets, net as of December
31:

<TABLE>
<CAPTION>

                                                            2009      2008
                                                          --------  --------
<S>                                                       <C>       <C>
Patents and related intangibles, less accumulated
   amortization (2009 - $320,905;  2008 - $376,150)       $125,952  $155,733

Territory rights, less accumulated amortization
   (2009 - $5,882;  2008 - $5,294)                           4,118     4,706

Customer list, less accumulated amortization
   (2009 - $47,975;  2008 - $41,362)                        14,780    21,393

Debenture issuance costs, less accumulated amortization
   (2009 - $13,031;  2008 - $-0-)                           43,136         -

Other                                                       23,471     7,496
                                                          --------  --------

                                                          $211,457  $189,328
                                                          ========  ========
</TABLE>


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE  2.     BALANCE  SHEET  DATA  (CONTINUED)


ACCRUED  LIABILITIES:
<TABLE>
<CAPTION>

                                         2009      2008
                                       --------  --------
<S>                                    <C>       <C>
Accrued payroll and employee benefits  $ 26,768  $ 14,386
Sales tax payable                       177,470   177,455
Interest payable                         15,672     1,584
                                       --------  --------

                                       $219,910  $193,425
                                       ========  ========
</TABLE>



NOTE  3.     PLEDGED  ASSETS,  LINE-OF-CREDIT  AND  LONG-TERM  DEBT

During  2009,  the Company had a line of credit up to $400,000 at the prime rate
(3.25%  at  December  31,  2009)  plus  0.75% and secured by a first lien on all
assets  of  the  Company, with Monroe Bank + Trust, or the Bank, with a maturity
date of October 15, 2009. Two certificates of deposit totaling $140,161 from the
Bank  are  held as a condition of maintaining the line of credit. The Company is
permitted  to  borrow up to 80% of its outstanding trade accounts receivable not
over  90  days.  In October 2009, the line of credit was renewed through October
2010.  At December 31, 2009, the Company had $75,000 of borrowing capacity under
the  credit  facility.

Long-term debt at December 31, 2009 and 2008 is as follows:

<TABLE>
<CAPTION>

                                            2009        2008
                                         ----------  ----------
<S>                                      <C>         <C>
Notes payable - banks                    $  704,384  $  938,970
Notes payable - equipment vendors           150,224     183,481
Note payable - VFL                                -     373,414
Convertible debentures, net of discount     610,840           -
                                         ----------  ----------
                                          1,465,448   1,495,865
Less current maturities                     353,800     360,501
                                         ----------  ----------

                                         $1,111,648  $1,135,364
                                         ==========  ==========
</TABLE>

During  2009,  the  Company  borrowed  a  total  of $139,849 from two lenders to
purchase  insurance  policies  for  general,  property and directors & officers'
insurance  coverage  during  the  year.  A  total of two term notes were issued,
ranging  from  3.8%  to 5.3% interest for a term not more than one year, monthly
payments  totaling  $14,312  and  each  are unsecured.  The total amount owed on
these  notes  as  of December 31, 2009 was approximately $54,800 and these notes
are  expected  to  be  paid in full on the applicable maturity date, the last of
which  is  August  2010.

Prior to 2009, the Company has borrowed a total of $1,345,700 from seven lenders
to purchase processing and automotive equipment.  A total of fourteen term notes
have  been issued, ranging from 7.1% to 9.9% interest for terms ranging three to
five years, monthly payments totaling approximately $29,700 and all are secured.
The  total  amount  owed  on all notes as of December 31, 2009 was approximately
$799,800  and  all  notes  are  expected  to  be  paid in full on the applicable
maturity  date,  the  last  of  which  is  October  2013.


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


NOTE  3.     PLEDGED  ASSETS,  LINE-OF-CREDIT  AND  LONG-TERM  DEBT  (CONTINUED)

On  December 28, 2006, the Company purchased the remaining ownership interest in
Florida  N-Viro  for  $500,000  and financed $400,000 of it by delivering a note
(the  "Note")  to  the  seller,  VFL Technology Corporation.  The Note was at 8%
interest for 10 years, to be paid in annual installments, including interest, of
$59,612,  subject  to  an  offset  for  royalties due the Company under a patent
license  agreement  from  the  same  party.  On  September 28, 2009, the Company
remitted  payment  in  full satisfaction of the Note, as announced in a Form 8-K
filing  in  October,  2009.

On  May  18,  2009,  the  Company  approved  an  offering of up to $1,000,000 of
Convertible  Debentures  (the  "Debentures"),  convertible  at  any  time  into
unregistered  common  stock  of  the Company at $2.00 per share.  The Debentures
mature  at June 30, 2011.  During 2009 the Company issued $765,000 of Debentures
to a total of twenty three accredited investors.  The Debentures are issuable in
$5,000  denominations,  are  unsecured  and  have  a stated interest rate of 8%,
payable quarterly to holders of record.  In July and October 2009 and in January
2010,  the  Company  timely  paid  accrued  interest to all Debenture holders of
record  as of the quarter-end dates.  At any time, the Company may redeem all or
a  part  of the Debentures at face value plus unpaid interest.  During 2009, one
accredited  investor  redeemed  $10,000  of  Debentures into unregistered common
stock.  Because  the  fair  market  value  of  the  Company's  common stock (the
underlying  security in the Debentures) may have been above the conversion price
of $2.00 per share at the date of issuance, the Company was required to record a
discount  given on each Debenture sold, which totaled $169,475.  The discount is
then  required  to  be amortized as a period expense by the straight-line method
over the remaining periods the Debentures are scheduled to be outstanding, which
averages 20 months.  Amortization expense amounted to $24,315 in 2009, the first
year.

Approximate aggregate maturities of long-term debt for the years ending December
31 are as follows:  2010 - $354,000;  2011 - $893,000;  2012 - $160,000;  2013 -
$57,000;  2014  and  after  -  $1,000.


NOTE 4.     RELATED PARTY TRANSACTIONS

During the year ended December 31, 2009, the Company advanced funds for start-up
and  beginning operating capital totaling $15,325 to their joint venture limited
liability  company,  Mahoning Valley N-Viro. Mahoning Valley N-Viro is owned 50%
by  the  Company  and  50%  by SouthSide Environmental Group of Struthers, Ohio.

Also  during  2009,  the Company paid Terri Kasmoch, the spouse of President and
Chief  Executive  Officer  Timothy  Kasmoch,  consulting  fees  for  business
development,  web  site  and company media marketing and stock promotion efforts
for  the  Company.

During  the year ended December 31, 2008, the Company paid R. Francis DiPrete, a
former  member  of  the Board of Directors, fees for consulting services.  These
fees  were  exclusive of director fees and expenses paid for with cash and stock
options.

The  following table summarizes these payments for 2009 and 2008 and the balance
to  each  of  any  monies  owed  as  of  December  31,  2009  and  2008:

<TABLE>
<CAPTION>

                    Year  Consulting fees   Account payable balance at December 31
                    ----  ----------------  ---------------------------------------
<S>                 <C>   <C>               <C>
Terri Kasmoch       2009  $         11,000  $                                 2,737
R. Francis DiPrete  2008             2,500                                        -

</TABLE>


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 5.     EQUITY TRANSACTIONS

In  addition  to its first stock option plan approved in 1993, the Company has a
stock option plan approved in May 2004, amended in June 2008 and again in August
2009,  for  directors  and  key employees under which 2,500,000 shares of common
stock  may  be  issued.  Unless  otherwise stated in the stock option agreement,
options  are  20%  vested on the date of grant, with the balance vesting 20% per
year  over  the  next  four  years,  except  for  directors  whose  options vest
immediately,  but  cannot  be exercised until six months from the date of grant.
Options  were  granted  in  2009 and 2008 at the approximate market value of the
stock  at  date  of  grant,  as  defined  by  the  stock  option  plan.

On  June  12,  2007,  100,000  stock  options  were  granted to Robert W. Bohmer
pursuant  to  his  two-year  employment  agreement dated June 2007.  The options
vested  25%  immediately and the balance over three 6-month periods.  To reflect
the value of the stock options granted for the employment services provided, the
Company  is  taking a charge to earnings totaling approximately $280,000 ratably
through  June,  2011,  the  ending date of his employment agreement, extended in
June  2008  for  two  additional  years.  This  charge  was $46,667 for 2009 and
$93,333  for 2008.  In connection with the option grant to Mr. Bohmer, the Board
of  Directors  adopted  a  waiver  of certain provisions of the plan which would
otherwise  limit  the  number  of  options that any participant may receive.  In
particular,  the  plan  provides  that  a participant may not receive options to
purchase  more that 25,000 shares of common stock during any calendar year.  The
Board  adopted  a  limited  amendment  of these limitations in order to make the
grants  to  Mr.  Bohmer.

In  July  2009,  the  Company executed a Consulting Agreement, or the Agreement,
effective  July  14,  2009, with Investor Relations Services, Inc. of New Smyrna
Beach,  FL,  or  IRSI.  The  Company  appointed  IRSI as its non-exclusive stock
promotion  and  strategic communications counsel for a term of one year from the
date of the Agreement.  For its services, the Company issued IRSI 500,000 shares
of  the  Company's  unregistered  common  stock.  Pursuant to the Agreement, the
Company entered into a Designation and Appointment agreement with Summit Trading
Limited  of New Smyrna Beach, FL, to designate Summit Trading as the third party
appointee  to  be  paid  the shares of stock under the Consulting Agreement with
IRSI.

In  July  2009,  the  Company  executed  a  Finder's  Fee  and Non-Circumvention
Agreement  with  Summit  Trading  to  locate  possible  merger  and  acquisition
candidates  as  well as sources of financing for the Company for a period of one
year,  effective  July  20,  2009.  For  its services, the Company issued Summit
Trading  250,000  shares  of  the  Company's  unregistered  common  stock.

During  the  year  ended  December  31,  2009, the Company granted stock options
totaling 634,000 shares: 80,000 options to outside directors and 554,000 options
to  officers.  The  options  granted  to  the  directors became fully vested six
months  after the date of grant, and were priced, pursuant to the Second Amended
and Restated 2004 Stock Options Plan, at a weighted average price of $2.13 for a
total  expense  of  approximately $156,000.  The options granted to the officers
vested  immediately and were priced, pursuant to the Second Amended and Restated
2004  Stock  Options  Plan,  at  a  weighted  average price of $2.19 for a total
expense  of  approximately  $1,214,000.

The following summarizes the stock options activity for the years ended December
31,  2009  and  2008:

<TABLE>
<CAPTION>

                                                            2009                    2008
                                                    ----------------------  ---------------------
                                                                 Weighted               Weighted
                                                                  Average                Average
                                                                 Exercise               Exercise
                                                      Shares       Price      Shares      Price
                                                    -----------  ---------  ----------  ---------
<S>                                                 <C>          <C>        <C>         <C>
Outstanding, beginning of year                         746,025   $    2.28    839,925   $    2.19
   Granted                                             634,000        2.18     22,500        3.61
   Exercised                                           (21,400)       1.43   (109,900)       2.14
   Expired during the year                             (78,800)       2.36     (6,500)       2.31
                                                    -----------             ----------
Outstanding, end of year                             1,279,825        2.24    746,025        2.28
                                                    ===========             ==========

Eligible for exercise at end of year                 1,222,325        2.24    746,025        2.28
                                                    ===========             ==========

Weighted average fair value per option for
    options granted during the year                 $     2.09              $    3.38
                                                    ===========             ==========

Options expected to vest over the life of the Plan   1,279,825                746,025
                                                    ===========             ==========
</TABLE>


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE  5.     EQUITY  TRANSACTIONS  (CONTINUED)

The  Company  records  compensation  expense  for  stock  options  based  on the
estimated fair value of the options on the date of grant using the Black-Scholes
valuation  model.  The  Company  uses  historical  data  among  other factors to
estimate  the  expected  price  volatility,  the  expected  option  term and the
expected  forfeiture  rate.  The  risk-free  rate  is based on the U.S. Treasury
yield  curve in effect at the date of grant for the expected term of the option.

The following assumptions were used to estimate the fair value of options
granted:
<TABLE>
<CAPTION>

                                 Year Ended December 31,
                              ----------------------------
                                        2009         2008
                              --------------------  ------
<S>                           <C>                   <C>
Expected dividend yield                      0.00%   0.00%
Weighted average volatility                  79.4%  112.2%
Risk free interest rate                 2.9 - 3.5%    4.2%
Expected term (in years)                       10      10
</TABLE>


In  October 2009, the Company approved a plan to extend to all holders of N-Viro
International Corporation warrants, a choice to extend their respective exercise
periods  if  they  complete  the transaction by December 31, 2009, by either (1)
exercising  at  least  1%  of  the  existing  number of warrants and receive the
balance  of  warrants with a 1-year extended date at the original exercise price
and date based on the original agreement, or, (2) choosing a 1:1 exercise of any
warrants  held  and  receive  a  new  warrant for a 5-year term at a new "strike
price"  of  $2.52  per  share on the new warrants issued, whereby the holders of
such  warrants  will  also  receive  the  balance  of their unexercised original
warrants  with  their  expiration  date  extended  for one additional year.  The
incremental  fair  value associated with the extension of the warrant expiration
dates  and  issuance  of  replacement  warrants  has  been  determined using the
Black-Scholes  model  and  has  been  recorded  as  a  deemed dividend to common
stockholders  in  the  accompanying Statement of Stockholders' Equity (Deficit).


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


NOTE  6.     REVENUE  AND  MAJOR  CUSTOMERS

Revenues for the years ended December 31, 2009 and 2008 consist of the
following:

<TABLE>
<CAPTION>


                          2009        2008
                       ----------  ----------
<S>                    <C>         <C>
Facility management    $3,431,533  $3,188,539
Technology fees            57,644      36,241
Products and services   1,531,991   1,776,994
                       ----------  ----------

                       $5,021,168  $5,001,774
                       ==========  ==========
</TABLE>


Revenues  for  the  years ended December 31, 2009 and 2008 include revenues from
one  major  customer,  the  City  of  Toledo,  Ohio  (included  in  the facility
management,  and,  products  and  services  classifications),  which represented
approximately  32% for 2009 and 39% for 2008 of total consolidated revenue.  The
accounts  receivable  balance  due  (which  is  unsecured) from this customer at
December  31,  2009  and  2008  was  approximately  $188,000  and  $110,000,
respectively.  The Company's six largest customers billed through Florida N-Viro
each  represent between 5%-19% of the consolidated revenue for the Company, or a
collective  total  of  approximately  57%.  The  accounts receivable balance due
(which  are  unsecured)  for  these six Florida N-Viro customers at December 31,
2009  and  2008  was  approximately  $314,000  and  $229,000,  respectively.

A substantial portion of the Company's revenue is derived from services provided
under  contracts  and  agreements  with  existing  licensees.  Some  of  these
contracts,  especially  those  contracts  with large municipalities, provide for
termination of the contract by the customer after giving relatively short notice
(in  some  cases  as  little as ten days).  In addition, some of these contracts
contain  liquidated  damages clauses, which may or may not be enforceable in the
event  of early termination of the contracts.  If one or more of these contracts
are  terminated prior to the expiration of its term, and the Company is not able
to  replace  revenues from the terminated contract or receive liquidated damages
pursuant  to  the  terms of the contract, the lost revenue could have a material
and  adverse  effect  on  its  business  and  financial  condition.


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


NOTE 7.     COMMITMENTS AND CONTINGENCIES

In June 2007, the Company executed an Employment Agreement with Robert W. Bohmer
as  Vice-President  of Business Development and General Counsel, which commenced
July  1,  2007.  The  Company  and  Mr. Bohmer agreed primarily to enter into an
employment  arrangement  for  a  two-year term at $150,000 per year plus a stock
option  grant  of  100,000  shares.  In  addition, Mr. Bohmer is eligible for an
annual  cash  bonus.  Generally,  the Agreement may be terminated by the Company
with  or  without  cause  or  by the Employee for any reason.  In June 2008, the
Company amended the Agreement and extended the employment term an additional two
years, ending on July 1, 2011.  Except for the extension of the term, there were
no  other  changes  to the Agreement.  Details of this event were announced in a
Form  8-K  filed  June  20,  2008.

In  March  2007, the Company and Mr. Timothy R. Kasmoch, the President and Chief
Executive  Officer,  entered  into  an Employment Agreement dated and commencing
February  13,  2007,  for  a two-year term.  Mr. Kasmoch is to receive an annual
base  salary  of  $150,000,  subject  to  an  annual discretionary increase.  In
addition,  Mr.  Kasmoch  is  eligible  for an annual cash bonus.  Generally, the
Agreement  may  be  terminated  by  the  Company with or without cause or by the
Employee  for  any reason.  In April 2008, the Company amended the Agreement and
extended  the  employment  term  an additional two years, ending on February 12,
2011.  Except  for the extension of the term, there were no other changes to the
Agreement.  Details  of  this  event were announced in a Form 8-K filed April 7,
2008.

The  Company  maintains an office in Daytona Beach under a lease with the County
of  Volusia,  Florida which was renewed in March 2009 for five years.  The total
minimum rental commitment for the years ending December 31, 2010 through 2013 is
$48,000  each  year, and for 2014 is $12,000.  The total rental expense included
in the statements of operations for each of the twelve months ended December 31,
2009  and  2008  is  $48,000.

The  Company  leases processing equipment at its Florida location which began in
2006  under  a  four year contract.  The total minimum rental commitment for the
year  ended  December  31, 2010 is $3,000.  The total rental expense included in
the  statements  of  operations for each of the twelve months ended December 31,
2009  and  2008  is  approximately  $31,000.

The Company also leases other processing equipment at its Florida location which
began  in  February  2008  under  a  three year lease.  The total minimum rental
commitment  for  the  following  years ended December 31 are as follows:  2010 -
$46,200;  2011  - 4,000.  The total rental expense included in the statements of
operations  for  the  twelve  months  ended  December  31,  2009  and  2008  is
approximately  $46,200  and  $42,300,  respectively.

The  Company's  facility  in  Toledo,  Ohio,  utilizes  patented technologies to
stabilize  and  disinfect  municipal  bio-solids pursuant to a permit to install
from  the  Ohio EPA that requires emissions be vented to a scrubber.  In July of
2008,  an inspection of the facility by local regulatory officials revealed that
the  scrubber  was not in operation.  In February of 2009, the Company agreed to
enter  into  an  administrative  consent  decree  with  the  Ohio  Environmental
Protection  Agency  ("Ohio  EPA")  that resolved, without any admission of fact,
violation,  or  liability,  Ohio  EPA's  claims  that  the  Company operated the
scrubber,  an  air  contaminant  source,  in violation of its permit to install.
Pursuant  to  the terms of the consent decree, the Company agreed to pay a civil
penalty in the amount of $20,000.  The first four installments were paid on time
from  April  2009  to  January  2010.

The Company operates in an environment with many financial risks, including, but
not  limited  to,  major  customer concentrations, customer contract termination
provisions,  competing  technologies,  infringement  and/or  misappropriation of
intellectual  property  rights,  the  highly competitive and, at times, seasonal
nature  of  the  industry  and  worldwide economic conditions.  Various federal,
state and governmental agencies are considering, and some have adopted, laws and
regulations  regarding environmental protection which could adversely affect the
business  activities of the Company.  The Company cannot predict what effect, if
any,  current  and future regulations may have on the operations of the Company.
     From  time to time the Company is involved in legal proceedings and subject
to  claims  which  may arise in the ordinary course of business.  The Company is
not  aware  of  any  legal  proceedings  or  material  claims  at  this  time.

<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


NOTE 8.     INCOME TAX MATTERS

The composition of the deferred tax assets and liabilities at December 31, 2009
and 2008 is as follows:

<TABLE>
<CAPTION>


                                                      2009          2008
                                                  ------------  ------------
<S>                                               <C>           <C>
Gross deferred tax liabilities:
 Property + equipment depreciation + amortization $   (99,800)  $   (80,700)
Gross deferred tax assets:
 Loss carryforwards                                 4,084,400     5,745,400
 Section 754 basis step up                            149,900       171,300
 Allowance for doubtful accounts                       17,000        17,000
 Other                                                  3,100         2,800

Less valuation allowance                           (4,154,600)   (5,855,800)
                                                  ------------  ------------

                                                  $         -   $         -
                                                  ============  ============
</TABLE>


The  income  tax  provisions  differ from the amount of income tax determined by
applying  the  U.S.  Federal  income  tax rate to pre-tax income from continuing
operations  for  the  years ended December 31, 2009 and 2008 and are as follows:

<TABLE>
<CAPTION>


                                                    2009         2008
                                                ------------  ----------
<S>                                             <C>           <C>
Computed "expected" tax (credits)               $  (820,800)  $(393,300)
State taxes, net of federal tax benefit                   -     (34,600)
(Decrease) increase in income taxes resulting
   from:
    Change in valuation allowance                (1,701,200)    372,500
    Net operating loss carryfoward expiration     2,082,200           -
    Nondeductible stock options and warrants        440,000      59,200
    Other                                              (200)     (3,800)
                                                ------------  ----------

                                                $         -   $       -
                                                ============  ==========
</TABLE>


The net operating losses available at December 31, 2009 to offset future taxable
income  total  approximately  $12,000,000 and expire principally in years 2010 -
2029.  Approximately $1,530,000 will expire if not used to offset taxable income
for  the  2010  tax  year.


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


NOTE 9.     SEGMENT INFORMATION

The Company has determined that its reportable segments are those that are based
on  the Company's method of internal reporting, which segregates its business by
product  category  and  service lines.  The Company's reportable segments are as
follows:

     Management  Operations  -  The  Company  provides  employee  and management
services  to  operate  the  Toledo  Ohio  Wastewater  Treatment Facility and the
Daytona/Volusia  County  Florida  Treatment  Facility.

     Other Domestic Operations - Sales of territory or site licenses and royalty
fees  to  use  N-Viro  technology  in  the  United  States.

     Foreign Operations - Sale of territory or site licenses and royalty fees to
use  N-Viro  technology  in  foreign  operations.

     Research  and  Development  -  The Company contracts with Federal and State
agencies  to  perform  or  assist  in  research and development on the Company's
technology.

The  accounting policies of the segments are the same as those described in Note
1  which  contains  the Company's significant accounting policies.  Fixed assets
generating  specific  revenue  are identified with their respective segments and
are accounted for as such in the internal accounting records.  All other assets,
including  cash  and  other  current assets and all long-term assets, other than
fixed  assets,  are  not  identified with any segments, but rather the Company's
administrative  functions.  All  of  the  net  nonoperating income (expense) are
non-apportionable and not allocated to a specific segment.  The Company accounts
for  and  analyzes  the  operating data for its segments generally by geographic
location,  with  the  exception  of  the  Management Operations and Research and
Development  segments.  The  Management  Operations  segment  represents  both a
significant  amount  of  business  generated  as  well as specific locations and
unique  type  of  revenue.

The  Domestic  and  Foreign operations segments differ in terms of environmental
and  municipal  legal  issues,  nature  of  the  waste  disposal infrastructure,
political  climate  and  availability  of  funds  for investing in the Company's
technology.  These  factors have not changed significantly over the past several
years  and  are  not  expected  to  change  in  the  near  term.


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


NOTE 9.     SEGMENT INFORMATION (CONTINUED)

The  Research  and Development segment is unlike any other revenue in that it is
generated  as  a  result  of a specific project to conduct initial or additional
ongoing  research  into  the  Company's  emerging  technologies.

The table below presents information about the segment profits and segment
identifiable assets used by the chief operating decision makers of the Company
as of and for the years ended December 31, 2009 and 2008 (dollars in thousands).

<TABLE>
<CAPTION>

                                                     Other
                                     Management     Domestic      Foreign     Research &
                                     Operations    Operations   Operations   Development   Total
                                     -----------  ------------  -----------  ------------  ------
<S>                            <C>   <C>          <C>           <C>          <C>           <C>
                                                             2009
                               ------------------------------------------------------------------
Revenues                             $     4,788  $       203   $         -  $         30  $5,021
Cost of revenues                           3,705          207             -             -   3,912
                                     -----------  ------------  -----------  ------------  ------
Segment profits                            1,083           (4)            -            30   1,109

Identifiable assets                        1,348            -             -             -   1,348
Depreciation and Amortization                436            -             -             -     436


                                                             2008
                               ------------------------------------------------------------------
Revenues                             $     4,630  $       372   $         -  $          -  $5,002
Cost of revenues                           3,987          273             -             -   4,260
                                     -----------  ------------  -----------  ------------  ------
Segment profits                              643           99             -             -     742

Identifiable assets                        1,769            -             -             -   1,769
Depreciation and Amortization                285          124             -             -     409

</TABLE>


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008


NOTE 9.     SEGMENT INFORMATION (CONTINUED)

A reconciliation of total segment profits, identifiable assets and depreciation
and amortization to the consolidated financial statements as of and for the
years ended December 31, 2009 and 2008 follows (dollars in thousands):

<TABLE>
<CAPTION>


                                                          2009      2008
                                                        --------  --------
<S>                                                     <C>       <C>
Segment profits:
  Segment profits for reportable segments               $ 1,109   $   742
  Corporate selling, general and administrative
    expenses and research and development costs          (3,583)   (1,930)
  Other income (expense)                                     60        31
                                                        --------  --------
Consolidated earnings before taxes                      $(2,414)  $(1,157)
                                                        ========  ========

Identifiable assets:
  Identifiable assets for reportable segments           $ 1,348   $ 1,769
  Corporate property and equipment                           15        12
  Current assets not allocated to segments                1,888       712
  Intangible and other assets not allocated to segments     212       190
                                                        --------  --------
Consolidated assets                                     $ 3,463   $ 2,683
                                                        ========  ========

Depreciation and amortization:
  Depreciation and amortization for reportable segments $   436   $   409
  Corporate depreciation and amortization                    32        38
                                                        --------  --------
Consolidated depreciation and amortization              $   468   $   447
                                                        ========  ========
</TABLE>


NOTE 10.     401(K) PLAN

     Until  2009,  the  Company  had  a  401(k)  plan covering substantially all
employees  which  provided  for  contributions  in  such amounts as the Board of
Directors  would  determine  annually.  Participating  employees  could  also
contribute  a  portion  of  their  annual  compensation.  There were no employer
contributions  for  the  years  ended  December 31, 2009 and 2008.  In 2009, the
Company terminated the plan and distributed all plan assets to the participants.


NOTE 11.     SUBSEQUENT EVENTS

     The  Company  has  performed  a  review of events subsequent to the balance
sheet  date  and  no  matters  required  disclosure.


<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008



ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL  DISCLOSURE

     None



ITEM  9A(T).     CONTROLS  AND  PROCEDURES

EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES

     We  maintain  disclosure  controls  and  procedures  (as  defined  in  Rule
13a-15(e)  and  15d-15(e)  under  the  Securities Exchange Act of 1934) that are
designed to ensure that information required to be disclosed in our Exchange Act
reports  is recorded, processed, summarized and reported within the time periods
specified  in  the  Commission's  rules  and forms, and that such information is
accumulated  and  communicated  to  our  management,  including  our  principal
executive  officer  and  principal  financial  officer, as appropriate, to allow
timely  decisions  regarding  required disclosures.  In designing and evaluating
the  disclosure controls and procedures, management recognized that any controls
and  procedures,  no  matter  how  well  designed and operated, can provide only
reasonable  assurance  of  achieving  the  desired  control  objectives.

     As  of the end of the period covered by this report, management carried out
an evaluation, under the supervision and with the participation of our principal
executive  officer  and  principal financial officer, of our disclosure controls
and  procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange
Act).  Based  upon the evaluation, our principal executive officer and principal
financial officer concluded that our disclosure controls and procedures were not
effective  at  a  reasonable  assurance  level to ensure that information we are
required  to  disclose  in the reports that we file or submit under the Exchange
Act  is  recorded,  processed,  summarized and reported, within the time periods
specified  in  the  SEC's  rules  and forms.  Our history of losses has severely
limited  our  budget to hire and train enough accounting and financial personnel
needed  to  adequately  provide this function.  Consequently, we lack sufficient
technical  expertise,  reporting  standards  and written policies and procedures
regarding  disclosure  controls  and  procedures.

     Because  of  the inherent limitations in all disclosure control systems, no
evaluation  of  controls  can provide absolute assurance that all control issues
and  instances  of fraud, if any, will be or have been detected.  These inherent
limitations  include  the  realities  that  judgments  in decision-making can be
faulty  and  that  breakdowns  can  occur  because  of  simple error or mistake.
Additionally,  disclosure controls can be circumvented by the individual acts of
some  persons,  by collusion of two or more people and/or by management override
of such controls.  The design of any system of disclosure controls also is based
in  part  upon  certain  assumptions  about the likelihood of future events, and
there  can  be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.  Over time, disclosure controls and
procedures  may  become  inadequate because of changes in conditions, and/or the
degree  of  compliance  with the policies and procedures may deteriorate.  Also,
misstatements  due  to  error  or  fraud  may  occur  and  not  be  detected.

MANAGEMENT'S  ANNUAL  REPORT  ON  INTERNAL  CONTROL  OVER  FINANCIAL  REPORTING

     Our  management  is  responsible  for establishing and maintaining adequate
internal  control over financial reporting.  Our internal control over financial
reporting  is designed to provide reasonable assurance regarding the reliability
of  financial reporting and the preparation of consolidated financial statements
for  external  purposes  in  accordance  with  generally  accepted  accounting
principles.

     Under  the  supervision  and  with  the  participation  of  our management,
including  our Chief Financial Officer and Chief Executive Officer, we conducted
an  evaluation  of  the  effectiveness  of  our  internal control over financial
reporting  based  on  the  framework  established by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) as set forth in Internal Control
-  Integrated  Framework.  Based  on  our  evaluation,  our  principal executive
officer and our principal financial officer concluded that our internal controls
over  financial  reporting  were  not  effective as of December 31, 2009 for the
reasons  described  below.

     As  stated  in  our  Form  10-KSB  for the year ended December 31, 2007, we
reported  that,  based  on the assessment of our principal executive officer and
principal financial officer, our internal controls over financial reporting were
not  effective  as  of  December 31, 2007.  We identified the following material
weakness:

          We  lacked personnel in accounting and financial staff to sufficiently
     monitor  and  process  financial  transactions  in  an efficient and timely
     manner.  Our  history of losses has severely limited our budget to hire and
     train  enough  accounting  and  financial  personnel  needed  to adequately
     provide  this  function.  Consequently,  we  lacked  sufficient  technical
     expertise,  reporting  standards  and written policies and procedures. This
     has  resulted  in  a  significant  number  of  immaterial  out-of-period
     adjustments  to  our  consolidated  financial  statements.  Specifically,
     controls  were  not  effective  to  ensure  that  significant  non-routine
     transactions,  accounting  estimates,  and  other  adjustments  were
     appropriately  reviewed,  analyzed  and  monitored  by competent accounting
     staff  on  a  timely  basis.

     We  continue  to  develop  and  implement a remediation plan to address the
material  weakness.  To  date, our remediation efforts have included adoption of
an  expense  reimbursement policy and the hiring of an employee to assist in the
financial  area  of  our  business.  However,  due  to  our  continuing  lack of
financial  resources  to  hire  and train accounting and financial personnel, we
have  not  yet  fully  remedied  this  material  weakness.

     During  the quarter ended December 31, 2009, there were no material changes
in  the Company's internal control over financial reporting that have materially
affected,  or are reasonably likely to materially affect, the Company's internal
control  over  financial  reporting.

     While  we  are  not  aware of any material errors to date, our inability to
maintain  the  adequate  internal controls may result in a material error in our
financial  statements.  Further,  because  of its inherent limitations, internal
controls  over  financial reporting may not prevent or detect misstatements.  It
should be noted that any system of controls, however well designed and operated,
can  provide only reasonable, and not absolute, assurance that the objectives of
the  system will be met.  In addition, the design of any control system is based
in  part  upon certain assumptions about the likelihood of future events.  Also,
projections  of any evaluation of effectiveness to future periods are subject to
the  risk  that controls may become inadequate because of changes in conditions,
or  that  the  degree  of  compliance  with  the  policies  or  procedures  may
deteriorate.

     This  annual  report does not include an audit or attestation report of our
registered  public accounting firm regarding our internal control over financial
reporting.  Our  management's  report was not subject to audit or attestation by
our  registered  public  accounting  firm pursuant to temporary rules of the SEC
that  permit  us  to  provide  only  management's  report in this annual report.


ITEM  9B.     OTHER  INFORMATION

     None



                                    PART III


ITEM  10.     DIRECTORS,  EXECUTIVE  OFFICERS  AND  CORPORATE  GOVERNANCE

     The  information  required by this Item is incorporated by reference to the
information  under  the  heading  "Election  of  Directors"  and  "Management  -
Directors  and  Executive  Officers"  in  the  definitive proxy statement of the
Company  for  the  2010  Annual  Meeting  of  Stockholders.


ITEM  11.     EXECUTIVE  COMPENSATION

     The  information  required by this Item is incorporated by reference to the
information  under  the heading "Executive Compensation" in the definitive proxy
statement  of  the  Company  for  the  2010  Annual  Meeting  of  Stockholders.


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

     The  information  required by this Item is incorporated by reference to the
information  under  the heading "Security Ownership of Certain Beneficial Owners
and  Management"  in  the definitive proxy statement of the Company for the 2010
Annual  Meeting  of  Stockholders.


ITEM  13.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS,  AND  DIRECTOR
INDEPENDENCE

     The  information  required by this Item is incorporated by reference to the
information  under  the heading "Certain Relationships and Related Transactions"
in  the definitive proxy statement of the Company for the 2010 Annual Meeting of
Stockholders.


ITEM  14.     PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

     The  information  required by this Item is incorporated by reference to the
information  under  the  heading  "Independent Auditors" in the definitive proxy
statement  of  the  Company  for  the  2010  Annual  Meeting  of  Stockholders.


                                    PART IV


ITEM  15.     EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES

Exhibit

No.     Description
---     -----------

3.1  Second Amended and Restated Certificate of Incorporation of the Company,
     dated August 14, 2008 (incorporated by reference to Exhibit 10.1 to Form
     10-Q filed August 14, 2008)

3.2  Second Amended and Restated By-Laws of the Company, effective June 17, 2008
     (incorporated by reference to Exhibit 10.2 to Form 10-Q filed August 14,
     2008).

10.1 Commercial Line of Credit Agreement and Note dated October 15, 2008,
     between N-Viro International Corporation and Monroe Bank + Trust
     (incorporated by reference to Exhibit 99.1 to Form 8-K filed October 27,
     2008).

10.2 First Amendment to Consulting Agreement dated July 1, 2004 between Terry J.
     Logan and N-Viro International Corporation, effective February 13, 2006
     (incorporated by reference to Exhibit 10.3 to Form 8-K filed March 20,
     2006).*

10.3 Employment Agreement, dated February 13, 2007 between Timothy R. Kasmoch
     and N-Viro International Corporation (incorporated by reference to Exhibit
     10.1 to Form 8-K filed March 12, 2007).*

10.4 First Amendment to Employment Agreement, dated April 2, 2008 between
     Timothy R. Kasmoch and N-Viro International Corporation (incorporated by
     reference to Exhibit 10.1 to Form 8-K filed April 7, 2008).

10.5 Employment Agreement, dated June 12, 2007 between Robert W. Bohmer and
     N-Viro International Corporation (incorporated by reference to Exhibit 10.1
     to Form 8-K filed June 20, 2007).*

10.6 First Amendment to Employment Agreement, dated June 19, 2008 between Robert
     W. Bohmer and N-Viro International Corporation (incorporated by reference
     to Exhibit 10.1 to Form 8-K filed June 20, 2008).

10.7 The Amended and Restated N-Viro International Corporation Stock Option Plan
     (incorporated by reference to Form S-8 filed May 9, 2000).*

10.8 The N-Viro International Corporation 2004 Stock Option Plan (incorporated
     by reference to Form S-8 filed December 20, 2004).*

10.9 The N-Viro International Corporation Amended and Restated 2004 Stock Option
     Plan (incorporated by reference to the Proxy Statement on Schedule 14A
     filed May 14, 2008).*

10.10 The N-Viro International Corporation Second Amended and Restated 2004
     Stock Option Plan (incorporated by reference to the Definitive Proxy
     Statement on Schedule 14A filed July 13, 2009).*

14.1     Code  of  Ethics.

21.1     List  of  subsidiaries  of  the  Company.#

23.1     Consent  of  UHY  LLP.

24.1     Power(s)  of  Attorney.#

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

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

32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
     Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
     Sarbanes-Oxley Act of 2002.

               #     Only  included  in  Form 10-K filed electronically with the
Securities  and  Exchange  Commission.

               *     Indicates  a  management  contract  or compensatory plan or
arrangement.


<PAGE>

                                   SIGNATURES


     Pursuant  to  the  requirements of Section 13 or 15(d) of the Exchange Act,
the  registrant  has  duly  caused this report to be signed on its behalf by the
undersigned,  thereunto  duly  authorized.

     N-VIRO  INTERNATIONAL  CORPORATION

Dated:  March  31,  2010

     By:  /s/  Timothy  R.  Kasmoch
        ---------------------------
          Timothy  R.  Kasmoch,  Chief  Executive  Officer  and  President
          (Principal  Executive  Officer)


                               POWER OF ATTORNEY

     Know  all  persons  by  these  presents,  that  each person whose signature
appears  below  constitutes  and  appoints James K. McHugh his attorney-in-fact,
each  with the power of substitution, for him in any and all capacities, to sign
any  amendments  to  this Form 10-K, and to file the same, with exhibits thereto
and  other  documents  in connection therewith, with the Securities and Exchange
Commission,  hereby  ratifying  and  confirming  all  that  each  of  said
attorneys-in-fact,  or  his  substitutes,  may  do or cause to be done by virtue
hereof.

     Pursuant  to  the  requirements  of  the Exchange Act, this report has been
signed  below  by  the  following persons on behalf of the registrant and in the
capacities  and  on  the  date  indicated.

Dated:  March  31,  2010

/s/  Timothy  R.  Kasmoch                         /s/  James  K.  McHugh
-------------------------                         ----------------------
Timothy  R.  Kasmoch,  Chief  Executive  Officer, James  K.  McHugh
President and Director                            Chief Financial Officer,
(Principal  Executive  Officer)                       Secretary and Treasurer
                                                 (Principal  Financial  Officer)


/s/  James  H.  Hartung*                          /s/  Mark  D.  Hagans  *
----------------------                            ------------------------
James  H.  Hartung,  Director                     Mark D. Hagans
    and  Chairman  of  the  Board                 Director


/s/  Joseph H.Scheib,  Director  *                /s/  Thomas  L.  Kovacik*
---------------------------------                --------------------------
Joseph  H.  Scheib,  Director                    Thomas  L.  Kovacik,  Director


/s/  Carl  Richard*                               /s/  Joan  B.  Wills*
-------------------                               ---------------------
Carl  Richard,  Director                          Joan  B.  Wills,  Director