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

(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, 2007
                                       OR

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

                        COMMISSION FILE NUMBER:  0-21802


                                [GRAPHIC OMITTED]

                        N-VIRO INTERNATIONAL CORPORATION
                 (NAME OF SMALL BUSINESS ISSUER 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)
        ISSUER'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

Check  whether the issuer is not required to file reports pursuant to Section 13
or  15(d)  of  the  Exchange  Act.      ___

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

Check  if  there  is  no disclosure of delinquent filers pursuant to Item 405 of
Regulation  S-B  contained  herein,  and  will  not be contained, to the best of
registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this  Form  10-KSB.  [  ]

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

Yes  No   X
        ---

State  registrant's  revenues  for  its  most  recent fiscal year:    $4,100,000

The  aggregate  market  value  of the voting stock held by non-affiliates of the
registrant,  computed  by reference to the closing sales price of such shares on
the  Over  The  Counter  Bulletin  Board  as of March 17, 2008 was approximately
$11,162,000.

The  number  of shares of Common Stock of the registrant outstanding as of March
17,  2008  was  4,217,509.

The  number  of  shares  of  Preferred Stock of the registrant outstanding as of
March  17,  2008  was  -0-.

Transitional  Small  Business  Disclosure  Format  (Check  One):  Yes  No   X
        ---
                       DOCUMENTS INCORPORATED BY REFERENCE
     Certain  information  contained  in  Part  III  of  this  Form  10-KSB  is
incorporated  by  reference  from  the registrant's Proxy Statement for the 2008
Annual  Meeting  of  Stockholders,  which proxy statement will be filed with the
Securities  and  Exchange  Commission  on  or  before  April  29,  2008.

<PAGE>

   INDEX

<TABLE>
<CAPTION>


                                                                   PAGE
                                                                   ----


<S>       <C>                                                      <C>
          PART I
          ------


Item 1.   Business                                                    2


Item 2.   Properties                                                 10


Item 3.   Legal Proceedings                                          11


Item 4.   Submission of Matters to a Vote of Security Holders        12



          PART II
          -------


Item 5.   Market for Registrant's Common Equity, Related             13
          Stockholder Matters and Small Business Issuer Purchases
          of Equity Securities


Item 6.   Management's Discussion and Analysis or                    14
          Plan of Operations


Item 7.   Financial Statements                                       26


Item 8.   Changes in and Disagreements with Accountants              27
          on Accounting and Financial Disclosure


Item 8A (T).  Disclsoure Controls and Procedures                     27


Item 8B.  Other Information                                          27



          PART III
          --------


Item 9.   Directors and Executive Officers of the Registrant         27


Item 10.  Executive Compensation                                     27


Item 11.  Security Ownership of Certain Beneficial Owners            28
          and Management and Related Stockholder Matters


Item 12.  Certain Relationships and Related Transactions             28


Item 13.  Exhibits                                                   28


Item 14.  Principal Accountant Fees and Services                     30
</TABLE>

<PAGE>
                                     PART I

FORWARD-LOOKING  STATEMENTS

     This  10-KSB  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-KSB,  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-KSB; however, this list is not exhaustive
and  many other factors could impactour 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-KSB 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-KSB 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 Form10-KSB. 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,
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.  See  "The  N-Viro
Process,"  below.

     Our  business strategy is to market our N-Viro Technologies  which produces
an  "exceptional  quality"  sludge  product,  as  defined in the 40 CFR Part 503
Sludge Regulations under the Clean Water Act of 1987 (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 build own
and  operate  N-Viro  facilities.  Currently  the company operates two bio solid
process  facilities  located in Toledo Ohio and Daytona Florida.  Our goal is to
continue  to  operate these facilities and aggressively market our N-Viro SoilTM
product.

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  SOILTM

     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  PROCESS  FACILITIES

     Our  earliest  facility  is  in Toledo, Ohio and is managed by us through a
Contract  Management  Agreement  with  the  City  of Toledo since 1990.  Revenue
generated from and related to the Toledo operation accounts for about 39% of our
total revenue.  We process a majority of Toledo's wastewater sludge and sell the
resulting  N-Viro  SoilTM  product.  In  2004,  the City exercised its option to
renew  the  contract  for an additional five years through 2009.  Currently, the
contract  is  in its nineteenth year of operation.  We consider our relationship
with  the  City  of  Toledo  to  be  satisfactory.

     In  December  2006,  we  acquired  Headwaters  Inc.'s ownership interest in
Florida  N-Viro L.P. (Florida N-Viro), which 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 and Volusia
County.  Headwaters  Resources,  Inc.  (HRI),  an  affiliate  of  VFL,  under  a
contractual arrangement, is at this time the sole source supplier of by-products
to  Florida  N-Viro's  operating  facility,  unless  HRI can not supply the full
requirements  of  Florida  N-Viro  for  such  by-products.

     Including the facilities in Toledo, Ohio and Volusia County, Florida, there
are  currently more than 30 wastewater treatment facilities throughout the world
treating sludge using the N-Viro Process.  We estimate that these facilities are
treating and recycling sludge at an annualized rate of over 120,000 dry 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.

     We  have  licensed  four  treatment  facilities  to  use  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"
sludge  product under the Part 503 Regs.  Royalty payments from sludge processed
at  the four facilities using such earlier technology currently account for less
than  two  percent of total royalty payments to us and we do not actively market
the  use  of  this  process.

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  and  N-Viro  Fuel
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  2007,
approximately 88% of our revenue is from management operations, 10.5% from other
domestic  operations,  1.5%  from  foreign operations and -0-% from 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 7
hereof.

     RISKS  OF  DOING BUSINESS IN OTHER COUNTRIES.  We conduct a 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 N-Viro SoilTM 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  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, 2008. Our research and development expenses were
under  $10,000  in  2007  and  $82,600  in  2006.

     In addition, in 2006 we received a grant of $90,000 for process and product
research,  the  last  year  of  this grant contract.  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.  Our BioBlend , which uses N-Viro SoilTM as a
reagent  to accelerate and deodorize yard waste composting, is being utilized to
produce  topsoil  at  the  Englewood,  Ohio N-Viro facility and at several other
licensed  facilities.  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  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  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  can be land applied as a fertilizer or lime agent
without  regulation  in  most  states.

     "Exceptional  quality"  products  are  treated  by  the  EPA  as fertilizer
material,  thereby  exempting  these products from federal restrictions on their
agricultural  use  or land application.  N-Viro Soil  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 the following factors:

<TABLE>
<CAPTION>


SEGMENT                    Management Operations             Other Domestic Operations               Foreign Operations
                     ----------------------------------  ----------------------------------  ----------------------------------
<S>                  <C>                                 <C>                                 <C>
-------------------- ----------------------------------  ----------------------------------  ----------------------------------
COMPETITIVE FACTORS  Price                               Price                               Price

                     Reliability                         Reputation                          Product quality and specifications

                     Product quality and specifications  Product quality and specifications  Custom design

                     Responsiveness to customer          Technical support                   Equipment financing assistance

                     Technical support                   Custom design                       Technical support

                     Reputation                          Equipment financing assistance      Reputation

</TABLE>


     Competitive  pressures,  including those described above, 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 its 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  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  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 itself tests N-Viro Soil  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  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  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  for agricultural use, and may
require  a  site-specific  permit  by the user of N-Viro Soil .  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.

EMPLOYEES

     As  of  December  31, 2007, we had 24 employees.  Six of our employees were
engaged  in  sales  and  marketing; three were in finance and administration and
fifteen  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.

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 will provide incentives for the use of renewable biomass fuels, such
as  N-Viro  FuelTM.

     We  also hold several patents relating to N-Viro Fuel .  In the N-Viro Fuel
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 any intellectual property that is being 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  process was one-quarter of one
percent ( %) of technical revenues until expiration of those patents.  UT rights
to  BioBlend  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, 2007 were approximately $65,000, a negligible
amount  expensed  during  2007.

     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
http://www.sec.gov.

     We  maintain  a  corporate  Web  site  at  http://www.nviro.com,  on  which
investors  may access free of charge our annual report on Form 10-KSB, quarterly
reports  on Form 10-QSB 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  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.  Our  lease  expired on February 28, 2007, and we have not renewed
it  at  this  time.  We  have  no  minimum rental commitment for the year ending
December  31,  2008.  The total rental expense for this location included in the
statements  of operations for each of the years ended December 31, 2007 and 2006
is  approximately  $37,500.  We also lease various equipment on a month-to-month
basis.

     On  December  28,  2006,  we  purchased the remaining ownership interest in
Florida N-Viro and operate its facility in Volusia County, Florida.  We maintain
an  office  in  Daytona  Beach under a lease with the County of Volusia, Florida
renewed  in April, 2005 for five years.  The total minimum rental commitment for
the  years  ending December 31, 2008 and 2009 is $48,000 each year, and for 2010
is  $12,000.  The  total rental expense included in the statements of operations
for  each  of  the  years  ended December 31, 2007 and 2006 is $48,000 and zero,
respectively,  as  this  property  commitment was acquired pursuant to the Share
Purchase  Agreement  with  VFL Technology Corporation, signed December 28, 2006,
but  effective  on  December  31,  2006.  We  also  lease various equipment on a
month-to-month  basis  at  our  Florida  operation.

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


ITEM  3.          LEGAL  PROCEEDINGS.

     In  January  2006,  J.  Patrick  Nicholson applied to the Delaware Chancery
Court  for  an  order  to  compel the Company to allow him access to inspect our
corporate  and business books and records and our stockholder list.  No monetary
relief is sought in this action.  The Company contends that the documents sought
by  Mr.  Nicholson  in this action far exceed those to which he is entitled, and
principally  relate to his claims in the now-concluded arbitration.  The Company
is  vigorously  defending  this  action and has filed a response in the Delaware
Chancery  Court,  but  no  discovery  has been conducted, and no relief has been
granted  as  of  the  date  of  this  Form  10-KSB.

     In  July 2006, J. Patrick Nicholson and N-Viro Energy Systems, Inc. filed a
Complaint  with Jury Demand in the United States District Court for the Northern
District  of  Ohio,  against  the Company, Ophir Holdings, Inc., Strategic Asset
Management,  Inc.,  Robert  A.  Cooke,  the Cooke Family Trust and the following
current  and  former  members  of  our Board of Directors:  Daniel J. Haslinger,
Phillip  Levin,  R.  Francis  DiPrete  and Terry J. Logan.  The Complaint sought
undeterminable damages and other relief from the named defendants.  N-Viro filed
a motion to dismiss the lawsuit in August 2006.  Mr. Nicholson requested several
extensions  to amend his complaint, and then filed an amended complaint alleging
mostly  the  same  claims  as  the  original complaint.  The Company renewed its
motion  to  dismiss.  On  October  12,  2007,  the  Court granted all motions to
dismiss,  including  N-Viro's  Motion,  and dismissed with prejudice the Amended
Complaint  in  its  entirety.

     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.          SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

     There  were  no  matters submitted to a vote of security holders during the
fourth  quarter  of  the  fiscal  year  ending  December  31,  2007.


<PAGE>
                                     PART II

ITEM  5.          MARKET  FOR  REGISTRANT'S  COMMON  EQUITY, RELATED STOCKHOLDER
       MATTERS  AND SMALL  BUSINESS  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  price  range  per share of the Common Stock since January 1,
2006,  was  as  follows:


<TABLE>
<CAPTION>


Quarter      High    Low
-----------  -----  -----
<S>          <C>    <C>
First 2006   $1.75  $1.12
Second 2006  $1.40  $0.64
Third 2006   $1.51  $0.60
Fourth 2006  $2.21  $1.20
First 2007   $3.31  $2.30
Second 2007  $3.50  $2.35
Third 2007   $3.10  $2.45
Fourth 2007  $3.00  $2.40
</TABLE>


Our  stock  price  closed  at  $3.40  per  share  on  March  17,  2008.

HOLDERS

     As  of  March 17, 2008, the number of holders of record of our Common Stock
was  approximately  160.

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>

                                                                                           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 . . . .               851,125  $                2.15                       148,875

Equity compensation plans not
    approved by security holders 1                     270,000  $                1.93                           -0-
                                        ----------------------  ---------------------   ---------------------------
Total                                                1,121,125  $                2.10                       148,875

<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, 150,000
     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  $2.00  per  share.


</TABLE>


RECENT  SALES  OF  UNREGISTERED  SECURITIES

     There were no sales of unregistered securities during the fiscal year ended
December  31,  2007  that have not been previously disclosed by the company in a
Quarterly  Report  on  Form  10-QSB.

     On  February  6, 2008, we issued 50,000 shares of unregistered Common Stock
to  SLD  Capital  Corporation,  as  compensation for general business consulting
services  to  be  provided  by  SLD to the Company under a Consulting Agreement,
dated as of January 31, 2008.  The agreement is for a term of two years from the
effective  date.   The  shares issued to SLD were issued in a transaction exempt
from  registration  pursuant  to  Section 4(2) of the Securities Act of 1933, as
amended  (the  "Securities  Act"),  which  exemption  was  based  in part on the
representations  and  warranties  of  SLD.

     On February 7, 2008, we issued 30,000 unregistered shares of stock to Diane
Cooke  upon  the  exercise  for cash of warrants originally issued in 2004 at an
exercise price of $1.85 per share.  The shares issued to Diane Cooke were issued
in  a  transaction  exempt  from  registration  pursuant  to Section 4(1) of the
Securities  Act  and  Rule  144  promulgated  thereunder.

     On  February 11, 2008, we issued 50,000 shares of unregistered Common Stock
to  Weil Consulting Corporation, as compensation for general business consulting
services  to  be  provided  by Weil to the Company under a Consulting Agreement,
dated  as  of January 31, 2008.  The agreement is for a period of two years from
the  effective  date.  The  shares  issued  to Weil were issued in a transaction
exempt  from  registration pursuant to Section 4(2) of the Securities Act, which
exemption  was  based  in  part  on  the representations and warranties of Weil.


ITEM  6.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  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
"Selected  Financial  Data"  and the Financial Statements and Supplementary Data
appearing  elsewhere  in  this  Form  10-KSB.  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.

     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,
                        2007    2006
                       ------  ------
<S>                    <C>     <C>
Technology fees          5.5%   13.5%
Facility management     55.6%   30.8%
Products and services   38.9%   55.7%
                       ------  ------
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 either revenue
received from sales of N-Viro SoilTM sold by N-Viro facilities, or through sales
of  N-Viro SoilTM sold directly 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,
                                         2007                Change              2006
                                       ----------         -------------      -----------
<S>                                    <C>                 <C>               <C>

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

Revenues. . . . . . . . . . . . . . .  $4,085             12.8%               $320

Cost of revenues. . . . . . . . . . .   3,380             40.8%                2,401
                                       ------                                --------

Gross profit. . . . . . . . . . . . .     705            (42.1%)               1,219

Operating expenses. . . . . . . . . .   2,146            (26.0%)               2,901
                                       ------                                --------

                                       (1,441)                *               (1,682)

Other income (expense). . . . . . . .     (59)                *                   (8)
                                       ------                                --------

Loss before income tax expense. . . .  (1,500)                *               (1,690)

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

Net loss. . . . . . . . . . . . . . . $(1,500)                *              $(1,690)
                                       =======                                =======

</TABLE>


<TABLE>
<CAPTION>


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

Cost of revenues. . . . . . . . . . .   82.7                                    66.3
                                       ------                                --------

Gross profit. . . . . . . . . . . . .   17.3                                    33.7

Operating expenses. . . . . . . . . .   52.5                                    80.1
                                       ------                                --------

                                       (35.2)                                  (46.4)

Other income (expense). . . . . . . .  ( 1.5)                                  ( 0.3)
                                       ------                                --------

Loss before income tax expense. . . .  (36.7)                                  (46.7)

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

Net loss. . . . . . . . . . . . . . .  (36.7%)                                 (46.7%)
                                       =======                                 ======

</TABLE>

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


<PAGE>

COMPARISON  OF  YEAR  ENDED  DECEMBER 31, 2007 WITH YEAR ENDED DECEMBER 31, 2006
     Revenues  increased  $465,000,  or approximately 13%, to $4,085,000 for the
year  ended  December  31,  2007 from $3,620,000 for the year ended December 31,
2006.  The  increase  in  revenue  was  due  to  a  net increase in revenue from
existing  on-line  facilities,  primarily  due  to  the  following  factors:

     a)  Sales  of  alkaline  admixture  decreased $705,000 from the same period
ended  in  2006;

     b)  Revenue  from the service fees for the management of alkaline admixture
increased  $302,000  from  the  same  period  ended  in 2006, primarily from the
addition  of  the  Florida  N-Viro  location  purchased  in  late  2006;

c)  Our  processing revenue, including facility management revenue, showed a net
increase  of  $973,000  over  the  same period ended in 2006, primarily from the
addition  of  the  Florida  N-Viro  location  purchased  in  late  2006;

d)  Territorial fees showed a net increase of $16,000 from the same period ended
in  2006:

e)  Research  and  development  revenue  decreased  $90,000 from the same period
ended  in  2006;  and,

f)  Miscellaneous revenues decreased $32,000 from the same period ended in 2006.

     The decrease in the sales the alkaline admixture was from a net volume loss
of  tonnage  at  facilities  no longer using the N-Viro process as their primary
disposal  technology.  A licensee that represented approximately 18% of our 2006
gross  revenue  stopped  using our process in 2007.  This represented a total of
approximately  $641,000  of revenues in 2006 and $200,000 in 2007, a decrease of
approximately  $441,000.

     The  increase  in service fees for the management of alkaline admixture was
entirely  from  the addition of the Florida location at the very end of 2006 and
our  contract  with  VFL  to market a portion of their alkaline admixture.  This
represented  a  total  of  $306,000  in  2007.

     The  increase  in  processing  revenue  of  $973,000  was primarily from an
increase  in processing volume of facility management revenue, representing over
$1,150,000  of  the  increase.  This  increase  was  also due to the addition of
Florida  N-Viro  for  2007.  Offsetting the facility management revenue increase
was  a  decrease  in royalties received for processing licenses, a decrease from
2006  to 2007 of almost $191,000.  Included in this royalty revenue decrease was
a  one-time  realization  of  $66,000  for  past royalties from an international
licensee  received  in  2006.

     Our gross profit decreased $514,000, or 42%, to $705,000 for the year ended
December  31, 2007 from $1,219,000 for the year ended December 31, 2006, and the
gross  profit  margin  decreased  to  17%  from  34%  for the same periods.  The
decrease in gross profit margin is primarily due to the additional percentage of
gross revenue from facility management fee operations, discussed in the previous
paragraph.  The  percentage  of our gross revenue from management fee operations
went  from  31%  in  2006  to  56%  in  2007.  Management  fee  operations  have
historically operated at lower profit margin than other types of N-Viro revenue.
Also contributing to the gross profit margin decrease is the decrease in royalty
revenue  of  $191,000,  which  generally  has  marginal  costs  of  revenue.

     Our  operating  expenses  decreased $755,000, or 26%, to $2,146,000 for the
year  ended  December  31,  2007 from $2,901,000 for the year ended December 31,
2006.  The  decrease  was  primarily  due  to  a  net  decrease of approximately
$326,000  in  employee payroll and expenses, $218,000 in director-related costs,
$141,000  for  legal  fees  and  $105,000  in bad debt expense.  Included in the
decrease  for  employee  payroll  was  $532,000  for  the value of stock options
granted  in  late  2006  to  three  officers, offset partially by $70,000 for an
option  grant  to a new officer in mid-2007 - events now required to be expensed
under  accounting  rules  which  began  in  2006.

Included  in  the decrease for director-related costs was $225,000 for the value
of  warrants  issued in late 2006 to four directors for services rendered - this
issuance  did  not  recur  in  2007.

Of  our  total  operating expenses in 2007 of $2,146,000, approximately $426,000
were  non-cash  expenses for stock options, warrants and stock issued during the
year  and  $374,000  in  amortization  and  depreciation  expense.  Included  in
amortization  expense  is  a  write-down of approximately $290,000 of intangible
assets  deemed  by  management  to  be  impaired.  We  had  recorded  a  similar
write-down  in  2006  of  approximately  $209,000.

     Our  nonoperating  income  (expense)  increased  by  $51,000  to expense of
$59,000 for the year ended December 31, 2007 from expense of $8,000 for the year
ended December 31, 2006.  The increase in nonoperating expense was primarily due
to  an  increase  in  interest  expense of approximately $48,000, primarily as a
result  of  interest  expense  of  $32,000  for financing the acquisition of the
Florida  operation in December 2006, and an increase in borrowing on the line of
credit.

     We  recorded  a  net  loss  of  approximately $1,500,000 for the year ended
December  31,  2007  compared  to a net loss of approximately $1,690,000 for the
year  ended December 31, 2006, a decrease in the loss of approximately $190,000.


LIQUIDITY  AND  CAPITAL  RESOURCES

     We  had  a  working capital deficit of approximately $1,006,000 at December
31,  2007 compared to a deficit of $350,000 at December 31, 2006, an increase in
the  deficit  of  approximately  $656,000.  Current  assets at December 31, 2007
include  cash of $198,000, a decrease of approximately $96,000 from December 31,
2006,  and  of  which approximately $135,500 is restricted under our Bank credit
agreement  to  secure  the credit facility.  The decrease in working capital was
principally  due  to  the  operating  loss  in  2007, offset by the issuance and
expensing  of  stock,  stock  options  and warrants issued during the year.  The
operating  losses  were  funded  primarily  from  increased draws to the line of
credit  and  extending  out  payments  on  trade  payables.

     In  2007  our  cash  flow  used by operations was approximately $144,000, a
decrease of approximately $137,000 from 2006.  This decrease was principally due
to  the  positive change in working capital of approximately $350,000, decreased
by  $640,000  in the amount of stock, warrants and stock options issued for fees
and  services  from  2006  and decreased by $38,000 in other non-cash charges to
earnings,  increased by $190,000 for the decrease in the net loss.  The positive
change  in  working  capital  of  $350,000  was  primarily  an  increase in cash
collected  on  accounts  receivable  exceeding  sales  by approximately $539,000
compared  to  the  similar  period  in  2006.

     Through  the  first quarter of 2007, we had a $695,000 credit facility with
Monroe  Bank  +  Trust,  or  the  Bank.  This  senior  debt  credit facility was
comprised  of  a  $295,000  four  year  term note at 7.5% interest and a line of
credit  up  to $400,000 at the prime rate (7.25% at December 31, 2007) plus 1.5%
and  secured  by  a  first lien on all assets of the Company.  The term note was
paid off in March 2007, leaving the line of credit as the remaining debt on this
original  credit  facility.  Two  certificates of deposit totaling $135,506 from
the Bank are held as a condition of maintaining the facility.  As announced in a
Form  8-K  filing  on  November  7,  2007, we renewed the line of credit through
October  2008.  At December 31, 2007, we had $36,000 of borrowing capacity under
the  credit  facility.  We  expect  to extend or restructure our credit facility
prior  to  maturity.   While  we  expect  to  extend  or  restructure our credit
facility  prior to maturity, there can be no assurance we will be able to extend
or  refinance  our credit facility upon commercially reasonable terms if at all.

     During  2007,  our  wholly-owned subsidiary, Bio-Mineral Transportation LLC
("BMT"), borrowed a total of $319,081 from three lenders to purchase trucks that
were  placed  into  service  during  the year.  A total of three term notes were
issued,  ranging  from  8.1%  to  9.4% interest for five years, monthly payments
totaling  $6,586  and  each  secured by the truck.  The total amount owed on all
notes  by  BMT  as of December 31, 2007 was approximately $472,000 and all notes
are  expected  to  be  paid in full on the applicable maturity date, the last of
which  is  July  2012.

     During  2007,  our  wholly-owned subsidiary, Florida N-Viro LP ("Florida"),
borrowed a total of $69,225 from three lenders to purchase trucks and processing
equipment  that  were  placed in service during the year.  A total of three term
notes  were  issued,  ranging  from 8.6% to 9.8% interest for terms ranging from
three  to  five  years, monthly payments totaling $1,747 and each secured by the
property.  Florida also financed a total of $6,600 for property insurance during
2007,  which was fully paid off at year end.  The total amount owed on all notes
by  Florida  as of December 31, 2007 was approximately $60,000 and all notes are
expected  to  be paid in full on the applicable maturity date, the last of which
is  May  2012.

     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 to
the  seller,  VFL  Technology  Corporation.  The  note  is at 8% interest for 10
years,  to  be  paid in annual installments of $59,612, subject to an offset for
royalties  due  us  under  a  patent license agreement from the same party.  The
amount  owed  on the note as of December 31, 2007 was approximately $399,000 and
the  first installment of $27,338 was paid on time in early 2008, which reflects
the  offset  of  2007  royalties  earned  of  $32,274.  For 2007, cash flow from
continuing  operations  of Florida N-Viro has been positive, and we believe that
Florida  N-Viro  will be able to generate enough funds to finance its operations
through  2008.

     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.  In response to a decrease in the amount
of  past due accounts, we decreased the reserve for bad debts by $130,000 during
2007,  to  a  reserve  of  $40,000.

     For  2008,  we  expect  to  continue  improvements  in operating results by
focusing  on  existing  and expected new sources of revenue, especially from our
N-Viro  Fuel  technology,  and  cash  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  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, 2007, 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.


<PAGE>
CONTRACTUAL OBLIGATIONS

     The following table summarizes our contractual cash obligations at December
31, 2007, and the effect these obligations are expected to have on liquidity and
cash  flow  in  future  periods:

<TABLE>
<CAPTION>

                                                                         Payments Due By Period
                                                 Total     Less than 1 year   1 - 3 years   4 - 5 years   after 5 years
                                               ----------  -----------------  ------------  ------------  --------------
<S>                                 <C>        <C>         <C>                <C>           <C>           <C>
Purchase obligations . . . . . . .        (1)  $   36,400  $          36,400  $          -  $          -  $            -
Long-term debt obligations . . . .        (2)   1,208,829            244,599       591,600       134,183         238,447
Operating leases . . . . . . . . .        (3)     182,519             83,808        96,245         2,466               -
Capital lease obligations                               -                  -             -             -               -
Line of credit obligations                        364,000            364,000             -             -               -
Other long-term debt obligations                        -                  -             -             -               -
                                               ----------  -----------------  ------------  ------------  --------------
Total contractual cash obligations             $1,791,748  $         728,807  $    687,845  $    136,649  $      238,447
                                               ==========  =================  ============  ============  ==============
<FN>

(1)  Purchase  obligations  include  agreements  to  purchase  services  that  are  enforceable  and  legally
binding  on  the  Company  and  that  specify  all  significant  terms  and  the  approximate  timing  of  the
transaction.  Purchase  obligations  exclude  agreements  that  are  cancelable  without  penalty.

(2)  Amounts  represent  the  expected  cash  payments  of  our  long-term  obligations.

(3)  Amounts  represent  the  expected  cash  payments  of  our  operating  lease  obligations.
</TABLE>

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, 2007 and 2006 is $40,000 and $170,000, respectively.
This  balance  was  reduced during 2007 primarily as the result of accounts with
some  of our customers who were part of a related group were written off as part
of  a  settlement  agreement  to  discontinue  licensing arrangements with them.

     Property  and  Equipment/Long-Lived  Assets  -  Property  and  equipment is
reviewed  for  impairment  pursuant  to the provisions of Statement of Financial
Accounting  Standards  (or  SFAS)  No.  144,  "Accounting  for the Impairment or
Disposal  of  Long-Lived  Assets."  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. At
December  31,  2007, we determined that certain territory agreements and patents
had  remaining  lives  shorter  than currently recorded, and expensed additional
amortization  of  $290,000  in  2007 and $209,000 in 2006. We also amortized the
capitalized cost of obtaining our credit facility, for the additional collateral
required  and  evidenced  by  a  warrant to purchase 50,000 shares of our common
stock.  We estimated this cost at February 26, 2003 to be $30,000, and amortized
this  over  4 years by the straight-line method. The cost was fully amortized at
the  end  of  the  first  quarter  2007.

     Fair  Value  of  Financial  Instruments - The fair values of cash, accounts
receivable,  accounts payable and other short-term obligations approximate their
carrying  values  because  of the short maturity of these financial instruments.
The  carrying  values  of  the Company's long-term obligations approximate their
fair  value.  In  accordance  with SFAS No. 107, "Disclosure About Fair Value of
Financial  Instruments,"  rates  available at balance sheet dates to the Company
are  used  to  estimate  the  fair  value  of  existing  debt.

     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 February 2007, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 159, "The Fair Value Option for Financial Assets and
Financial Liabilities - including an amendment of FASB Statement No. 115".  This
Statement  permits  entities to choose to measure many financial instruments and
certain  other  items  at  fair  value.  The  objective  is to improve financial
reporting  by  providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without  having  to  apply  complex hedge accounting provisions.  This Statement
applies to all entities, including not-for-profit organizations, and most of the
provisions  apply  only  to  entities  that  elect  the fair value option.  This
Statement is effective as of the beginning of an entity's first fiscal year that
begins after November 15, 2007.  Early adoption is permitted as of the beginning
of a fiscal year that begins on or before November 15, 2007, provided the entity
also  elects  to  apply  the  provisions  of FASB Statement No. 157, "Fair Value
Measurements."  No  entity  is permitted to apply this Statement retrospectively
to  fiscal  years  preceding  the effective date unless the entity chooses early
adoption.  The  choice  to  adopt  early  should  be made after issuance of this
Statement  but  within 120 days of the beginning of the fiscal year of adoption,
provided  the entity has not yet issued financial statements, including required
notes  to  those financial statements, for any interim period of the fiscal year
of  adoption.  Adoption  of  this  Statement  is not expected to have a material
impact  on  our  financial  statements.

     In December 2007, the Financial Accounting Standards Board issued Statement
of  Accounting  Standards No. 141 (revised 2007), "Business Combinations".  This
Statement  replaces  previously-issued  Statement  No.  141,  and applies to all
transactions  or  other events in which an entity obtains control of one or more
businesses,  including those sometimes referred to as "true mergers" or "mergers
of  equals" and combinations achieved without the transfer of consideration, for
example,  by  contract alone or through the lapse of minority veto rights.  This
Statement  applies  to  all  business  entities,  including mutual entities that
previously  used the pooling-of-interests method of accounting for some business
combinations.  It  does  not  apply  to:  the  formation of a joint venture; the
acquisition  of  an  asset  or  a  group  of  assets  that does not constitute a
business;  a  combination between entities or businesses under common control; a
combination  between  not-for-profit  organizations  or  the  acquisition  of  a
for-profit  business  by  a not-for-profit organization.  This Statement applies
prospectively  to  business combinations for which the acquisition date is on or
after  the  beginning of the first annual reporting period beginning on or after
December  15,  2008.  An  entity may not apply it before that date.  Adoption of
this  Statement  is  not  expected  to  have  a material impact on our financial
statements.

     In December 2007, the Financial Accounting Standards Board issued Statement
of  Accounting  Standards  No.  160,  "Noncontrolling  Interests in Consolidated
Financial  Statements  -  an amendment of ARB No. 51". This Statement applies to
all  entities  that  prepare  consolidated  financial  statements,  except
not-for-profit  organizations,  but will affect only those entities that have an
outstanding  noncontrolling  interest  in  one  or  more  subsidiaries  or  that
deconsolidate a subsidiary. This Statement amends ARB 51 to establish accounting
and  reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest
in  a subsidiary is an ownership interest in the consolidated entity that should
be  reported  as  equity  in  the consolidated financial statements. It requires
consolidated  net  income  to  be  reported  at amounts that include the amounts
attributable  to  both  the  parent  and  the  noncontrolling  interest. It also
requires disclosure, on the face of the consolidated statement of income, of the
amounts  of  consolidated  net  income  attributable  to  the  parent and to the
noncontrolling  interest.  This  Statement  also  establishes a single method of
accounting  for changes in a parent's ownership interest in a subsidiary that do
not  result in deconsolidation, and clarifies that all of those transactions are
equity  transactions if the parent retains its controlling financial interest in
the  subsidiary.  This Statement also requires that a parent recognize a gain or
loss  in net income when a subsidiary is deconsolidated. A parent deconsolidates
a  subsidiary  as  of the date the parent ceases to have a controlling financial
interest  in  the  subsidiary.  If  a  parent  retains  a  noncontrolling equity
investment  in  the  former  subsidiary, that investment is measured at its fair
value.  The  gain  or  loss on the deconsolidation of the subsidiary is measured
using  the  fair  value  of the noncontrolling equity investment. This Statement
does  not  change  ARB  51's  provisions  related  to  consolidation  purpose or
consolidation  policy  or the requirement that a parent consolidate all entities
in  which  it  has a controlling financial interest. This Statement is effective
for fiscal years, and interim periods within those fiscal years, beginning on or
after  December  15,  2008 (that is, January 1, 2009, for entities with calendar
year-ends).  Earlier  adoption  is prohibited. Adoption of this Statement is not
expected  to  have  a  material  impact  on  our  financial  statements.

     In March 2008, the Financial Accounting Standards Board issued Statement of
Accounting  Standards  No.  161,  "Disclosures  about Derivative Instruments and
Hedging  Activities  -  an  amendment of FASB Statement No. 133". This Statement
requires  enhanced  disclosures  about  an  entity's  derivative  and  hedging
activities  and  thereby  improves the transparency of financial reporting. This
Statement  is  effective  for  financial  statements issued for fiscal years and
interim  periods  beginning  after  November  15,  2008,  with early application
encouraged.  This  Statement  encourages,  but  does  not  require,  comparative
disclosures  for earlier periods at initial adoption. Adoption of this Statement
is  not  expected  to  have  a  material  impact  on  our  financial statements.

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


RISK  FACTORS

WE HAVE A HISTORY OF LOSSES AND THERE CAN BE NO ASSURANCES REGARDING IF AND WHEN
WE  WILL  AGAIN  GENERATE  POSITIVE  EARNINGS.

     Since  2000,  we  have  experienced  losses  and  we  have  not  yet  been
consistently profitable on an annual basis.  We believe this is primarily due to
our  inability  to add new sources of revenue, decreasing business from existing
sources  of  revenue,  anticipated  new  revenues  not  materializing  at a rate
budgeted,  and, much higher than planned expenditures for stock-related fees and
compensation,  legal  costs  surrounding  litigation  and  the  direct  time  of
management, staff and our Board in dealing with this litigation.  Therefore, our
overall  gross  profit  has  been  reduced  and  our  selling,  general  and
administrative  costs  have not decreased at a rate concurrent with our decrease
in  gross  profit, both contributing significantly to the overall losses that we
have  incurred.  If  these  trends  continue, such losses may continue to occur,
unless  we  are  able  to  continue  to  make  cost  cutting measures, including
improvements  to the gross profit of the business.  There can be no assurance if
and  when  we  will  return  to  profitability.

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.

     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,
2007  and  2006, our single largest customer accounted for approximately 38% and
47%,  respectively,  of  our  revenues and our top three customers accounted for
approximately  54%  and  68%,  respectively,  of  our  revenues.

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  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 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  have  entered  into  employment  agreements  with  our  Chief Executive
Officer,  Timothy Kasmoch, and our V.P. of Development and Chief Counsel, Robert
Bohmer,  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.


<PAGE>

ITEM  7.          FINANCIAL  STATEMENTS



                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

<S>                                                            <C>

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-26

</TABLE>


<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), as of December 31, 2007 and 2006,
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,  2007.  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  as of December 31, 2007 and 2006, and the results of its operations
and  its  cash flows for each of the years in the two year period ended December
31,  2007,  in  conformity  with accounting principles generally accepted in the
United  States  of  America.

As  discussed  in  Note  1 to the consolidated financial statements, the Company
adopted  FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes -
an Interpretation of FASB No. 109 as of January 1, 2007.  As discussed in Note 1
to  the  consolidated  financial  statements,  the  Company adopted Statement of
Financial Accounting Standards No. 123(R), Share-Based Payment, as of January 1,
2006.



 /s/  UHY LLP
-------------
UHY LLP
Southfield, Michigan

March 31, 2008


<PAGE>


<TABLE>
<CAPTION>

                        N-VIRO INTERNATIONAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                           December 31, 2007 and 2006
                           --------------------------




                                      2007        2006
                                   ----------  ----------
ASSETS
---------------------------------
<S>                                <C>         <C>
CURRENT ASSETS
Cash and cash equivalents:
Unrestricted                       $   62,321  $  162,633
Restricted                            135,506     131,498
Trade receivables, net                440,958     667,617
Prepaid expenses and other assets     185,330     250,590
                                   ----------  ----------
Total current assets                  824,115   1,212,338

PROPERTY AND EQUIPMENT, NET         1,300,428     931,820

INTANGIBLE AND OTHER ASSETS, NET      318,523     801,972
                                   ----------  ----------


                                   $2,443,066  $2,946,130
                                   ==========  ==========
</TABLE>





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

<PAGE>



<TABLE>
<CAPTION>

                               N-VIRO INTERNATIONAL CORPORATION

                                 CONSOLIDATED BALANCE SHEETS

                                  December 31, 2007 and 2006
                                  --------------------------


                                                                     2007           2006
                                                                 -------------  -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------------
<S>                                                              <C>            <C>
CURRENT LIABILITIES
Current maturities of long-term debt                             $    174,253   $    106,673
Line-of-credit                                                        364,000        205,000
Accounts payable                                                    1,055,268      1,048,094
Accrued liabilities                                                   236,175        202,295
                                                                 -------------  -------------
Total current liabilities                                           1,829,696      1,562,062

LONG-TERM DEBT, LESS CURRENT MATURITIES                               772,374        554,437
                                                                 -------------  -------------

Total liabilities                                                   2,602,070      2,116,499

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value
  Authorized - 7,000,000 shares
  Issued - 4,145,359 shares in 2007 and 3,864,059 shares in 2006       41,454         38,641
  Preferred stock, $.01 par value
  Authorized - 2,000,000 shares
  Issued - -0- shares in 2007 and 2006                                      -              -
Additional paid-in capital                                         16,962,134     16,453,119
Accumulated deficit                                               (16,477,702)   (14,977,239)
                                                                 -------------  -------------
                                                                      525,886      1,514,521

Less treasury stock, at cost, 123,500 shares                          684,890        684,890
                                                                 -------------  -------------
Total stockholders' equity (deficit)                                 (159,004)       829,631
                                                                 -------------  -------------

                                                                 $  2,443,066   $  2,946,130
                                                                 =============  =============
</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, 2007 and 2006
                           --------------------------------------

                                                                     2007          2006
                                                                 ------------  ------------
<S>                                                              <C>           <C>
REVENUES                                                         $ 4,085,131   $ 3,620,342

COST OF REVENUES                                                   3,379,741     2,401,105
                                                                 ------------  ------------

GROSS PROFIT                                                         705,390     1,219,237

OPERATING EXPENSES
Selling, general and administrative                                2,145,910     2,901,115
                                                                 ------------  ------------

OPERATING LOSS                                                    (1,440,520)   (1,681,878)

OTHER INCOME (EXPENSE)
Interest income                                                        5,642         9,440
Interest expense                                                     (65,585)      (17,992)
                                                                 ------------  ------------
                                                                     (59,943)       (8,552)
                                                                 ------------  ------------

LOSS BEFORE INCOME TAXES                                          (1,500,463)   (1,690,430)

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

NET LOSS                                                         $(1,500,463)  $(1,690,430)
                                                                 ============  ============


Basic and diluted loss per share                                 $     (0.38)  $     (0.46)
                                                                 ============  ============

Weighted average common shares outstanding - basic and diluted     3,958,475     3,713,470
                                                                 ============  ============
</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, 2007 and 2006

                                                    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, 2006        3,814,059  $38,141  $15,290,831  $(13,286,809)  $(684,890)  $ 1,357,273

Net loss                               -        -            -    (1,690,430)          -    (1,690,430)
Issuance of stock options              -        -      632,251             -           -       632,251
Issuance of stock warrants             -        -      329,112             -           -       329,112
Issuance of common stock          50,000      500      200,925             -           -       201,425
                            ------------  -------  -----------  -------------  ----------  ------------

BALANCE DECEMBER 31, 2006      3,864,059   38,641   16,453,119   (14,977,239)   (684,890)      829,631

Net loss                               -        -            -    (1,500,463)          -    (1,500,463)
Issuance of stock options              -        -      186,700             -           -       186,700
Exercise of stock options        146,300    1,463      251,182             -           -       252,645
Issuance of common stock         135,000    1,350       71,133             -           -        72,483
                            ------------  -------  -----------  -------------  ----------  ------------

BALANCE DECEMBER 31, 2007      4,145,359  $41,454  $16,962,134  $(16,477,702)  $(684,890)  $  (159,004)
                            ============  =======  ===========  =============  ==========  ============
</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, 2007 and 2006
                       --------------------------------------


                                                              2007          2006
                                                          ------------  ------------
<S>                                                       <C>           <C>

Cash Flows From Operating Activities:
Net loss                                                  $(1,500,463)  $(1,690,430)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization                                 674,399       450,176
Provision for bad debts                                      (130,000)      115,000
Issuance of stock for debt and services                       124,828       216,025
Issuance of stock options and warrants for services           309,242       857,663
Loss on the sale of fixed assets                                5,542        16,069
Changes in Operating Assets and Liabilities
Decrease (increase) in trade receivables                      356,658      (182,437)
Decrease (increase) in prepaid expenses and other assets      (20,387)        8,386
Increase in accounts payable and accrued liabilities           36,159       202,832
                                                          ------------  ------------
Net cash used in operating activities                        (144,022)       (6,716)

Cash Flows From Investing Activities:
Increases from restricted cash and cash equivalents            (4,008)       (3,365)
Purchases of property and equipment                          (656,624)     (682,820)
Expenditures for intangible assets                                  -       (62,755)
Proceeds from sale of property and equipment                    7,181         9,800
                                                          ------------  ------------
Net cash used in investing activities                        (653,451)     (739,140)

Cash Flows From Financing Activities:
Net borrowings (repayments) on line-of-credit                 159,000       125,000
Borrowings under long-term obligations                        414,917       759,309
Principal payments on long-term obligations                  (129,401)     (200,267)
Stock options exercised                                       252,645             -
                                                          ------------  ------------
Net cash provided by financing activities                     697,161       684,042
                                                          ------------  ------------

Net Decrease in Cash and Cash Equivalents                    (100,312)      (61,814)

Cash and Cash Equivalents - Beginning                         162,633       224,447
                                                          ------------  ------------

Cash and Cash Equivalents - Ending                        $    62,321   $   162,633
                                                          ============  ============

Supplemental disclosure of cash flows information:
Cash paid during the year for interest                    $   101,648   $    23,783
                                                          ============  ============
</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, 2007 AND 2006
                                      F-25
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.  Credit  is  generally  granted  on  an
unsecured  basis.  Periodic  credit  evaluations  of customers are conducted and
appropriate  allowances  are  established.

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.  Although  the acquisition of the remaining ownership interest in
Florida  N-Viro  occurred  on  December  28,  2006, the effective date occurs at
midnight,  December  31,  2006.  The  consolidated balance sheet at December 31,
2006  includes  the  acquisition  of  Florida  N-Viro  as of the effective date.

D.     Fair  Value  of Financial Instruments - The fair values of cash, accounts
receivable,  accounts payable and other short-term obligations approximate their
carrying  values  because  of the short maturity of these financial instruments.
The  carrying  values  of  the Company's long-term obligations approximate their
fair  value.  In  accordance  with  Statement  of Financial Accounting Standards
("SFAS")  No. 107, "Disclosure About Fair Value of Financial Instruments," rates
available  at  balance  sheet dates to the Company are used to estimate the fair
value  of  existing  debt.

E.     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.

F.     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 $32,343 and $72,774 of net receivables
for  the  years  ended  December 31, 2007 and 2006, 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.

     Management  estimates an allowance for doubtful accounts, which was $40,000
and  $170,000  as  of December 31, 2007 and 2006, respectively.  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, 2007 AND 2006
NOTE  1.     OPERATIONS  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES
(CONTINUED)

G.     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 $275,295
and  $107,215  in 2007 and 2006, 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.

H.     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  16.3  and  15.2  years  at  December 31, 2007 and 2006,
respectively).  Amortization  expense  amounted to $372,166 and $342,961 in 2007
and  2006,  respectively.  Estimated  amortization  expense, based on intangible
assets  at  December 31, 2007, for each of the ensuing five years is as follows:
2008  -  $37,000;  2009  -  $30,000;  2010  -  $27,000;  2011 - $24,000;  2012 -
$19,000.  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.  At December 31, 2007 and 2006,
management  believed that certain territory agreements, trademark agreements and
patents  had remaining lives shorter than currently recorded.  These represented
intangible  assets with a cost basis of $588,593 and $428,989, respectively, and
a  carrying  value  of $298,814 and $209,078, respectively, based upon estimated
future lives.  Subsequently, the Company wrote down those intangible assets to a
zero  carrying  value  and  recorded  a charge to amortization expense, which is
included  in  operating expenses, for $289,779 and $209,078 at December 31, 2007
and  2006, respectively.  In accordance with SFAS No. 142, the Company tests for
impairment  annually.

     The Company is also amortizing the capitalized cost of obtaining its credit
facility,  for  the additional collateral required and evidenced by a warrant to
purchase  50,000  shares  of  the Company's common stock.  The Company estimated
this  cost  at  February  26,  2003 to be $30,000, and is amortizing this over 4
years  by  the straight-line method.  Amortization expense amounted to $1,250 in
2007  (the  last  year)  and  $7,500  in  2006.

     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 $26,940 in 2007 and $-0- in 2006.  Estimated
amortization  expense,  based  on  these  capitalized  license  and contracts at
December  31,  2007,  for  each of the ensuing five years is as follows:  2008 -
$14,000;  2009  -  $7,000;  2010  -  $6,000;  2011  -  $2,000;  2012  -  $2,000.

I.     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.

<PAGE>
                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
NOTE  1.     OPERATIONS  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES
(CONTINUED)

          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.  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.

J.     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, 2007 and 2006, the effects
of the stock options granted are excluded from the diluted per share calculation
because  they  would  be  antidilutive.

K.     Stock Options - The Company follows the provisions of SFAS Statements No.
123R  and  No. 148 which prescribe a fair-value based method of measurement that
results  in  compensation  costs  for  essentially  all  awards  of  stock-based
compensation  to  employees.  SFAS  Statement  No. 123R became effective for the
Company  at  January  1,  2006.

L.     New  Accounting  Standards  -  In February 2007, the Financial Accounting
Standards  Board  issued  Statement  of  Accounting Standards No. 159, "The Fair
Value  Option  for  Financial  Assets  and  Financial Liabilities - including an
amendment of FASB Statement No. 115".  This Statement permits entities to choose
to  measure  many  financial  instruments and certain other items at fair value.
The  objective  is to improve financial reporting by providing entities with the
opportunity  to  mitigate  volatility  in  reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting  provisions.  This  Statement  applies  to  all  entities,  including
not-for-profit  organizations, and most of the provisions apply only to entities
that  elect  the  fair  value  option.  This  Statement  is  effective as of the
beginning  of an entity's first fiscal year that begins after November 15, 2007.
Early  adoption is permitted as of the beginning of a fiscal year that begins on
or  before  November  15,  2007,  provided  the  entity also elects to apply the
provisions  of  FASB Statement No. 157, "Fair Value Measurements."  No entity is
permitted  to apply this Statement retrospectively to fiscal years preceding the
effective  date  unless  the entity chooses early adoption.  The choice to adopt
early should be made after issuance of this Statement but within 120 days of the
beginning of the fiscal year of adoption, provided the entity has not yet issued
financial  statements,  including  required notes to those financial statements,
for  any  interim  period  of  the  fiscal  year  of adoption.  Adoption of this
Statement  is  not expected to have a material impact on the Company's financial
statements.

     In December 2007, the Financial Accounting Standards Board issued Statement
of  Accounting  Standards  No. 141 (revised 2007), "Business Combinations". This
Statement  replaces  previously-issued  Statement  No.  141,  and applies to all
transactions  or  other events in which an entity obtains control of one or more
businesses,  including those sometimes referred to as "true mergers" or "mergers
of  equals" and combinations achieved without the transfer of consideration, for
example,  by  contract  alone or through the lapse of minority veto rights. This
Statement  applies  to  all  business  entities,  including mutual entities that
previously  used the pooling-of-interests method of accounting for some business
combinations.  It  does  not  apply  to:  the  formation of a joint venture; the
acquisition  of  an  asset  or  a  group  of  assets  that does not constitute a
business;  a  combination between entities or businesses under common control; a
combination  between  not-for-profit  organizations  or  the  acquisition  of  a
for-profit  business  by  a  not-for-profit organization. This Statement applies
prospectively  to  business combinations for which the acquisition date is on or
after  the  beginning of the first annual reporting period beginning on or after
December 15, 2008. An entity may not apply it before that date. Adoption of this
Statement  is  not expected to have a material impact on the Company's financial
statements.

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

     In December 2007, the Financial Accounting Standards Board issued Statement
of  Accounting  Standards  No.  160,  "Noncontrolling  Interests in Consolidated
Financial  Statements  -  an amendment of ARB No. 51". This Statement applies to
all  entities  that  prepare  consolidated  financial  statements,  except
not-for-profit  organizations,  but will affect only those entities that have an
outstanding  noncontrolling  interest  in  one  or  more  subsidiaries  or  that
deconsolidate a subsidiary. This Statement amends ARB 51 to establish accounting
and  reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest
in  a subsidiary is an ownership interest in the consolidated entity that should
be  reported  as  equity  in  the consolidated financial statements. It requires
consolidated  net  income  to  be  reported  at amounts that include the amounts
attributable  to  both  the  parent  and  the  noncontrolling  interest. It also
requires disclosure, on the face of the consolidated statement of income, of the
amounts  of  consolidated  net  income  attributable  to  the  parent and to the
noncontrolling  interest.  This  Statement  also  establishes a single method of
accounting  for changes in a parent's ownership interest in a subsidiary that do
not  result in deconsolidation, and clarifies that all of those transactions are
equity  transactions if the parent retains its controlling financial interest in
the  subsidiary.  This Statement also requires that a parent recognize a gain or
loss  in net income when a subsidiary is deconsolidated. A parent deconsolidates
a  subsidiary  as  of the date the parent ceases to have a controlling financial
interest  in  the  subsidiary.  If  a  parent  retains  a  noncontrolling equity
investment  in  the  former  subsidiary, that investment is measured at its fair
value.  The  gain  or  loss on the deconsolidation of the subsidiary is measured
using  the  fair  value  of the noncontrolling equity investment. This Statement
does  not  change  ARB  51's  provisions  related  to  consolidation  purpose or
consolidation  policy  or the requirement that a parent consolidate all entities
in  which  it  has a controlling financial interest. This Statement is effective
for fiscal years, and interim periods within those fiscal years, beginning on or
after  December  15,  2008 (that is, January 1, 2009, for entities with calendar
year-ends).  Earlier  adoption  is prohibited. Adoption of this Statement is not
expected  to  have  a  material  impact  on  the Company's financial statements.

     In March 2008, the Financial Accounting Standards Board issued Statement of
Accounting  Standards  No.  161,  "Disclosures  about Derivative Instruments and
Hedging  Activities  -  an  amendment of FASB Statement No. 133". This Statement
requires  enhanced  disclosures  about  an  entity's  derivative  and  hedging
activities  and  thereby  improves the transparency of financial reporting. This
Statement  is  effective  for  financial  statements issued for fiscal years and
interim  periods  beginning  after  November  15,  2008,  with early application
encouraged.  This  Statement  encourages,  but  does  not  require,  comparative
disclosures  for earlier periods at initial adoption. Adoption of this Statement
is not expected to have a material impact on the Company's financial statements.

M.     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.

     In  June  2006,  the  Financial  Accounting  Standards  Board  issued
Interpretation  No.  48,  "Accounting  for  Uncertainty  in  Income  Taxes,  an
interpretation  of  FASB Statement 109" ("FIN 48"). This statement clarifies the
criteria that an individual tax position must satisfy for some or all of the tax
benefits  of that position to be recognized in a company's financial statements.
FIN  48  prescribes  a  recognition  threshold  of  more-likely-than-not,  and a
measurement  attribute  for all tax positions taken or expected to be taken on a
tax  return,  in order for those tax positions to be recognized in the financial
statements.  The  Company  adopted  the provisions of FIN 48 on January 1, 2007.
There  was  no  material  effect  on  the  financial  statements.


<PAGE>

NOTE  2.     BALANCE  SHEET  DATA

PROPERTY  AND  EQUIPMENT  (AT  COST):

<TABLE>
<CAPTION>


                                                   2007        2006
                                                ----------  ----------
<S>                                             <C>         <C>
Leasehold improvements                          $  117,524  $  110,000
Equipment                                        1,957,568   1,331,139
Furniture, fixtures and computers                   52,280      73,488
                                                ----------  ----------
                                                 2,127,372   1,514,627
Less accumulated depreciation                      826,944     582,807
                                                ----------  ----------

                                                $1,300,428  $  931,820
                                                ==========  ==========
</TABLE>



INVESTMENT  IN  FLORIDA  N-VIRO,  L.P.:

On  December  28, 2006, the Company entered into a Share Purchase Agreement (the
"Agreement")  with  VFL  Technology  Corporation  (VFL),  pursuant  to which the
Company  acquired  VFL's membership interests in Florida N-Viro L.P. and Florida
N-Viro Management, LLC, the general partner of Florida N-Viro L.P.  The purchase
price paid by the Company to VFL for the acquisition of the membership interests
was  $500,000,  with  $100,000  paid at closing and the balance payable over ten
years  at  8%  interest, pursuant to the terms of a promissory note delivered by
the Company at closing.  Pursuant to the Purchase Agreement, the payments on the
Note  are  offset  first  from  annual  royalties  payable by VFL to the Company
pursuant  to  an  existing  license  agreement between the Company and VFL.  Any
remaining  amounts  due  under  the  note are payable in cash within thirty days
after the end of the fiscal year, after a yearly accounting is agreed to between
the  parties.  In  accordance with the Agreement, all Notes due the Company from
Florida  N-Viro  were  cancelled.

During  2007  and 2006, the Partnership's largest customer accounted for 20% and
25%,  respectively,  of  its  revenue.  Additionally,  during 2007 and 2006, the
Partnership's largest customers accounted for 90% (five customers) and 83% (four
customers)  of  total  revenue,  respectively.

Condensed  pro-forma  financial information on Florida N-Viro as of December 31,
2006, assuming the Company purchased the remaining ownership interest at January
1,  2006,  is  as  follows:

<TABLE>
<CAPTION>

                                Year Ended December 31,
                               ------------------------
                                      2006
                                  (unaudited)
                                  ------------
<S>                              <C>
Revenues                          $ 4,956,725

Net loss                          $(1,982,427)

Loss per share                    $     (0.53)
</TABLE>


<PAGE>
                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

NOTE  2.     BALANCE  SHEET  DATA  (CONTINUED)

INTANGIBLE  AND  OTHER  ASSETS:

In  September 2005, the Company executed a Financial Public Relations Agreement,
or  the  SAMI  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.  The
Company  recorded  this amount as deferred costs, with the short-term portion in
current  assets  and  the  long-term  portion in Intangibles and other assets as
deferred  costs.

In  December  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 2006,  the Company executed an Investor Relations Agreement, or the
IA  Agreement,  with  Institutional  Analyst,  or IA.  The Company engaged IA to
provide  services as an investor relations consultant for the Company for a term
of  one year from the date of the Agreement.  For its services, the Company paid
IA $10,000 cash and issued 100,000 common stock purchase warrants to purchase an
equal  number  of  shares  of the Company's common stock at an exercise price of
$2.00 per share.  Total valuation of the services to be performed as part of the
IA Agreement was estimated to be $113,700, and was fully amortized in 2007.  The
Company  recorded  this  amount  as  deferred costs in 2006, with the short-term
portion  in  current  assets  and the long-term portion in Intangibles and other
assets  as  deferred  costs.

In  April  2007,  the  Company  executed  a  Consulting  Agreement,  or the Weil
Agreement,  with Weil Consulting Corporation, or Weil.  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 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.  The
Company  recorded  this amount as deferred costs, with the short-term portion in
current  assets  and  the  long-term  portion in Intangibles and other assets as
deferred  costs.

<PAGE>

NOTE  2.     BALANCE  SHEET  DATA  (CONTINUED)

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


<TABLE>
<CAPTION>


                                                               2007      2006
                                                             --------  --------
<S>                                                          <C>       <C>
Patents and related intangibles, less accumulated
amortization (2007 - $500,557;  2006 - $594,019)             $192,173  $400,216

Territory rights, less accumulated amortization
(2007 - $4,706;  2006 - $127,671)                               5,294   169,417

Customer List, less accumulated amortization
(2007 - $26,940;  2006 - $-0-)                                 35,815    62,755

Deferred costs, less accumulated amortization
(2007 - $438,482;  2006 - $207,829)                            77,549   164,171

Loan costs, less accumulated amortization ($32,950 in 2007
and $31,577 in 2006)                                                -     1,373

Other                                                           7,692     4,040
                                                             --------  --------

                                                             $318,523  $801,972
                                                             ========  ========
</TABLE>



ACCRUED  LIABILITIES:

<TABLE>
<CAPTION>

                                         2007      2006
                                       --------  --------
<S>                                    <C>       <C>
Accrued payroll and employee benefits  $ 29,097  $ 13,807
Sales tax payable                       177,360   186,780
Deferred revenue                         28,000         -
Interest payable                          1,718     1,708
                                       --------  --------

                                       $236,175  $202,295
                                       ========  ========
</TABLE>

<PAGE>


                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006


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

Through  the  first  quarter of 2007, the Company had a $695,000 credit facility
with  Monroe  Bank  +  Trust, or the Bank.  This senior debt credit facility was
comprised  of  a  $295,000  four  year  term note at 7.5% interest and a line of
credit  up  to $400,000 at the prime rate (7.25% at December 31, 2007) plus 1.5%
and  secured  by  a  first lien on all assets of the Company.  The term note was
paid off in March 2007, leaving the line of credit as the remaining debt on this
original  credit  facility.  Two  certificates of deposit totaling $135,506 from
the Bank are held as a condition of maintaining the facility.  As announced in a
Form  8-K  filing  on  November  7,  2007, we renewed the line of credit through
October  2008.  At  December  31,  2007,  the  Company  had $36,000 of borrowing
capacity  under  the  credit  facility.

Long-term debt at December 31, 2007 and 2006 is as follows:


<TABLE>
<CAPTION>


                                     2007      2006
                                   --------  --------
<S>                                <C>       <C>
Notes payable - banks              $300,313  $261,110
Notes payable - equipment vendors   246,588         -
Note payable - VFL                  399,726   400,000
                                   --------  --------
                                    946,627   661,110
Less current maturities             174,253   106,673
                                   --------  --------

                                   $772,374  $554,437
                                   ========  ========
</TABLE>



During  2007,  the Company's wholly-owned subsidiary, Bio-Mineral Transportation
LLC  ("BMT"), borrowed a total of $319,081 from three lenders to purchase trucks
that  were placed into service during the year. A total of three term notes were
issued,  ranging  from  8.1%  to  9.4% interest for five years, monthly payments
totaling  $6,586  and  each  secured  by the truck. The total amount owed on all
notes  by  BMT  as of December 31, 2007 was approximately $472,000 and all notes
are  expected  to  be  paid in full on the applicable maturity date, the last of
which  is  July  2012.

Also  during  2007,  the  Company's  wholly-owned  subsidiary, Florida N-Viro LP
("Florida"),  borrowed  a total of $69,225 from three lenders to purchase trucks
and processing equipment that were placed in service during the year. A total of
three  term  notes  were  issued,  ranging  from 8.6% to 9.8% interest for terms
ranging  from  three  to  five  years, monthly payments totaling $1,747 and each
secured  by  the  property.  The total amount owed on all notes by Florida as of
December  31,  2007  was  approximately $60,000 and all notes are expected to be
paid  in  full  on  the applicable maturity date, the last of which is May 2012.

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 to
the  seller,  VFL  Technology  Corporation.  The  note  is 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.  The  amount  owed  on  the  note  as of December 31, 2007 was
approximately  $399,000 and the first installment of $27,338 was paid on time in
early  2008.

Approximate  aggregate maturities of long-term debt, including interest, for the
years  ending  December  31  are as follows:  2008 - $244,000;  2009 - $211,000;
2010  -  $205,000;  2011  -  $176,000;  2012  and  after  -  $373,000.


<PAGE>

NOTE 4.     RELATED PARTY TRANSACTIONS

During  the  year  ended December 31, 2007, the Company contracted for trucking,
repair  parts  and  labor  for  repair services with Tri-State Garden Supply dba
Gardenscape,  a  company  that the Company's Chief Executive Officer, Timothy R.
Kasmoch,  was  also  the  former  President and CEO.  The Company also paid Carl
Richard,  a  member of the Board, fees for consulting services.  These fees were
exclusive  of  director  fees and expenses paid for with cash and stock options.
The  Company also paid Nicholas Lynn, Mr. Kasmoch's son, consulting fees for the
development  and  redesign  of  the  Company's  web  site.

The  following  table  summarizes  these payments and the balance to each of any
monies  owed  as  of  December  31,  2007:


<TABLE>
<CAPTION>


Payee          Trucking, repairs and services   Consulting fees   Account payable balance at 12/31/07
-------------  -------------------------------  ----------------  ------------------------------------
<S>            <C>                              <C>               <C>
Gardenscape    $                        14,235  $              -  $                                  -
Carl Richard                                 -             4,848                                     -
Nicholas Lynn                                -             2,500                                     -
</TABLE>


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 for directors and key employees under
which  1,000,000  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 can not be exercised until six months from
the  date  of  grant.  Options  were granted in 2007 and 2006 at the approximate
market  value of the stock at date of grant.  Approximately 310,000 options were
granted  during  2006 that may be exercised immediately.  In connection with the
option grants to Timothy Kasmoch, CEO (250,000), and James McHugh, CFO (50,000),
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  Messrs.  Kasmoch  and  McHugh.

In  May 2004, 50,000 stock options were granted to Michael G. Nicholson pursuant
to  his employment agreement dated June 2003.  In the third quarter of 2004, the
Company and Mr. Nicholson renegotiated primarily the stock option portion of the
employment  agreement,  and changed the vesting of the 50,000 options as well as
the  pricing.  This  amended agreement states the first 30,000 options are fully
vested  at  an  option price of $0.90, and the balance of 20,000 options vest on
the  third  and  fourth  anniversary of the original agreement, June 6, 2005 and
2006,  but  priced  at  $1.95.  Because these options were priced lower than the
fair market value as of the amended agreement date, the Company took a charge to
earnings  totaling  approximately $68,400 ratably through June, 2007, the ending
date  of  his  employment agreement.  This charge was $8,842 and $21,221 for the
years  ended  December  31,  2007  and  2006,  respectively.

In January 2007, the Company executed an Investor Relations Agreement, or the IA
Agreement,  with  Institutional  Analyst,  or IA.  For its services, the Company
paid  IA  $10,000  cash  and  issued  100,000  common stock purchase warrants to
purchase  an equal number of shares of the Company's common stock at an exercise
price  of  $2.00  per  share.  To  reflect  the value of the consulting services
provided,  the  Company  took  a  charge to earnings of $113,700 ratably through
December,  2007,  the  ending date of the IA Agreement.  As of the conclusion of
the  IA  Agreement,  the  warrants  had  not  been  exercised  and  expired.

<PAGE>

NOTE 5.     EQUITY TRANSACTIONS (CONTINUED)

In  April  2007,  the  Company  executed  a  Consulting  Agreement,  or the Weil
Agreement,  with  Weil  Consulting  Corporation, or Weil.  For its services, the
Company  issued  Weil  35,000 shares of the Company's unregistered common stock.
To  reflect  the value of the stock issued for the consulting services provided,
the  Company  is  taking  a  charge  to  earnings totaling approximately $61,000
ratably through April, 2009, the ending date of the Weil Agreement.  This charge
was  approximately  $21,000  for  2007.

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 vest
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,  2009,  the ending date of his employment agreement.  This charge
was  $70,000  for  2007.  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.

There  were  146,300  stock options exercised in 2007, none in 2006.  A total of
six  grantees  exercised  at  an  average  weighted  price  of  $1.73.

The  following  summarizes  the  number  of grants and their respective exercise
prices  and  grant  date fair values per option for the years ended December 31,
2007  and  2006  and  the  number  outstanding  and  exercisable at those dates:

<TABLE>
<CAPTION>

                                                         2007                         2006
                                            ---------------------------   --------------------------
                                                           Weighted                     Weighted
                                                            Average                      Average
                                              Shares    Exercise Price     Shares    Exercise Price
                                            ----------  ---------------   ---------  ---------------
<S>                                         <C>         <C>               <C>        <C>
Outstanding, beginning of year              1,031,875   $          2.10    692,575   $          2.33
Granted                                       142,500              2.79    376,600              1.89
Exercised                                    (146,300)             1.73          -                 -
Expired during the year                      (188,150)             2.47    (37,300)             3.68
                                            ----------                    ---------
Outstanding, end of year                      839,925              2.19   1,031,875             2.10
                                            ==========                    =========

Eligible for exercise at end of year          774,925              2.18    975,275              2.16
                                            ==========                    =========

Weighted average fair value per option for
options granted during the year                         $          2.79              $          1.89
                                                        ===============              ===============
</TABLE>


A further summary of stock options follows:

<TABLE>
<CAPTION>

                                         Options Outstanding                    Options Exercisable
                            --------------------------------------------  ------------------------------
                                                   Weighted                    Weighted
                                                   Average     Weighted         Average        Weighted
                                                  Remaining     Average        Remaining        Average
                                                 Contractual   Exercise      Contractual       Exercise
                            Number Outstanding       Life        Price           Life            Price
                            -------------------  ------------  ---------  -------------------  ---------
<S>                         <C>                  <C>           <C>        <C>                  <C>
                                                  2007
-------------------------------------------------------------------------------------------------------
Range of exercise prices:
0.70 - $1.45                            50,875          6.37  $    1.10               50,875  $    1.10
1.50 - $1.99                           120,650          5.76       1.75              120,650       1.75
2.00 - $2.40                           397,750          7.74       2.04              397,750       2.04
2.45 - $3.05                           260,150          7.73       2.83              195,150       2.85
4.00 - $5.19                            10,500          2.36       5.03               10,500       5.03
                            -------------------                           -------------------
                                       839,925                                       774,925

                                                  2006
-------------------------------------------------------------------------------------------------------
Range of exercise prices:
0.70 - $1.45                            89,075          7.48  $    1.03               52,475  $    1.00
1.50 - $1.99                           224,650          5.89       1.69              218,400       1.69
2.00 - $2.40                           527,500          7.26       2.10              513,750       2.11
2.45 - $3.05                           164,150          6.80       2.88              164,150       2.88
4.00 - $5.19                            26,500          3.12       5.00               26,500       5.00
                            -------------------                           -------------------
                                     1,031,875                                       975,275

</TABLE>

<PAGE>


NOTE  6.     REVENUE  AND  MAJOR  CUSTOMERS

Revenues for the years ended December 31, 2007 and 2006 consist of the
following:

<TABLE>
<CAPTION>

                          2007        2006
                       ----------  ----------
<S>                    <C>         <C>
Facility management    $2,272,699  $1,114,494
Technology fees           223,199     488,331
Products and services   1,589,233   2,017,517
                       ----------  ----------

                       $4,085,131  $3,620,342
                       ==========  ==========
</TABLE>

<PAGE>


                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

Revenues  for  the  years ended December 31, 2007 and 2006 include revenues from
one  major  customer,  the  City  of  Toledo,  Ohio  (included  in  the facility
management,  and,  products  and  services  classifications),  which represented
approximately  39%  and  47%, respectively, of total revenues.  In addition, the
Company  had  another  major  customer,  the  City of Raleigh, NC, which totaled
approximately  5%  and  18%  of  total revenues (which is included mainly in the
products  and services classification) for the years ended December 31, 2007 and
2006,  respectively.  The  accounts  receivable  balances  due (all of which are
unsecured) from these customers at December 31, 2007 and 2006 were approximately
$128,000  and  $198,000,  respectively.  The  Company no longer receives revenue
from the City of Raleigh.  The Company has five customers billed through Florida
N-Viro,  each  representing  between  6%-8%  of the consolidated revenue for the
Company  -  total  accounts  receivable  balance  for  these  five customers was
approximately  $143,000.

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>

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  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.

The  Company  maintains an office in Daytona Beach under a lease with the County
of  Volusia, Florida which was renewed in April, 2005 for five years.  The total
minimum rental commitment for the years ending December 31, 2008 through 2009 is
$48,000  each  year, and for 2010 is $12,000.  The total rental expense included
in the statements of operations for the year ended December 31, 2007 and 2006 is
$48,000  and  $-0-,  respectively,  as  this  property  commitment  was acquired
pursuant  to  the  Share  Purchase  Agreement  with  VFL Technology Corporation,
effective  December  31,  2006.  We  also  lease  various  equipment  on  a
month-to-month  basis  at  our  Florida  operation.

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.

The  Company  is  involved in legal proceedings and subject to claims which have
arisen  in  the  ordinary course of business.  These actions, when concluded and
determined,  will  not,  in  the  opinion of management, have a material adverse
effect  upon  the financial position, results of operations or cash flows of the
Company.


<PAGE>

NOTE8.     INCOME TAX MATTERS

The composition of the deferred tax assets and liabilities at December 31, 2007
and 2006 is as follows:

<TABLE>
<CAPTION>

                                                      2007          2006
                                                  ------------  ------------
<S>                                               <C>           <C>
Gross deferred tax liabilities:
Property + equipment depreciation + amortization  $   (49,100)  $  (122,000)
Florida N-Viro book vs. tax loss                            -       (79,200)
Gross deferred tax assets:
Loss carryforwards                                  6,249,000     5,620,900
Section 754 basis step up                             226,800             -
Patent costs                                                -        27,900
Florida N-Viro asset impairment                             -       200,000
Allowance for doubtful accounts                        16,000        68,000
Other                                                   8,200         3,100

Less valuation allowance                           (6,450,900)   (5,718,700)
                                                  ------------  ------------

                                                  $         -   $         -
                                                  ============  ============
</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, 2007 and 2006 and are as follows:


<TABLE>
<CAPTION>

                                                   2007        2006
                                                ----------  ----------
<S>                                             <C>         <C>
Computed "expected" tax (credits)               $(600,200)  $(574,700)
State taxes, net of federal tax benefit           (52,800)    (50,600)
(Decrease) increase in income taxes resulting
from:
Change in valuation allowance                     732,200     228,800
Stock options and warrants                        (17,700)    418,600
Other                                             (61,500)    (22,100)
                                                ----------  ----------

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



The net operating losses available at December 31, 2007 to offset future taxable
income  total  approximately  $15,600,000 and expire principally in years 2009 -
2027.


<PAGE>

NOTE  9.     CASH  FLOWS  INFORMATION

Information relative to the statements of cash flows not disclosed elsewhere for
the  years  ended  December  31,  2007  and  2006  follows:


<TABLE>
<CAPTION>

                              2007     2006
                              -----  --------
<S>                           <C>    <C>
Investment in Florida N-Viro  $   -  $500,000
                              =====  ========
</TABLE>


On  December  28, 2006, the Company acquired its remaining ownership interest in
Florida  N-Viro, for $500,000.  The acquisition was financed with a Note payable
to  VFL  Technologies,  Inc. for $400,000, payable at 8% interest over 10 years.
The  Company  paid  $100,000  toward  the purchase, but realized cash of $80,000
pursuant  to  the  Agreement.


NOTE 10.     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 as
they  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 identified with the Corporate segment.  The Company does
not  allocate  any  selling, general and administrative expenses to any specific
segments.  All  of  the  other  income  (expense)  costs  or  income  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.  These  segments  represent  both a significant amount of
business  generated  as  well as a specific location and unique type of revenue.

The next two segments are divided between domestic and foreign sources, as these
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 three years and are not expected to change in the
near  term.


<PAGE>

NOTE 10.     SEGMENT INFORMATION (CONTINUED)

The  last  segment  is  the  Research  and Development segment.  This segment is
unlike  any other segment in that revenue 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, 2007 and 2006 (dollars in thousands).



<TABLE>
<CAPTION>

                                                Other
                               Management     Domestic    Foreign      Research &
                               Operations   Operations   Operations   Development   Total
                               -----------  -----------  -----------  ------------  ------
<S>                            <C>          <C>          <C>          <C>           <C>
                                                         2007
                               -----------------------------------------------------------
Revenues                       $     3,110  $       959  $        16  $          -  $4,085
Cost of revenues                     2,638          742            -             -   3,380
Segment profits                        472          217           16             -     705
Identifiable assets                  1,196           87            -             -   1,283
Depreciation and Amortization          182          119            -             -     301

                                                         2006
                               -----------------------------------------------------------
Revenues                       $     1,694  $     1,770  $        66  $         90  $3,620
Cost of revenues                       999        1,304           16            82   2,401
Segment profits                        695          466           50             8   1,219
Identifiable assets                    503           99            -             -     602
Depreciation and Amortization           78           27            -             -     105
</TABLE>




<PAGE>

NOTE 10.     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, 2007 and 2006 follows (dollars in thousands):


<TABLE>
<CAPTION>

                                                          2007      2006
                                                        --------  --------
<S>                                                     <C>       <C>
Segment profits:
Segment profits for reportable segments                 $   705   $ 1,219
Corporate selling, general and administrative
expenses and research and development costs              (2,146)   (2,901)
Other income (expense)                                      (59)       (8)
                                                        --------  --------
Consolidated earnings before taxes                      $(1,500)  $(1,690)
                                                        ========  ========

Identifiable assets:
Identifiable assets for reportable segments             $ 1,283   $   602
Corporate property and equipment                             17       330
Current assets not allocated to segments                    824     1,212
Intangible and other assets not allocated to segments       319       802
Consolidated eliminations                                     -         -
                                                        --------  --------
Consolidated assets                                     $ 2,443   $ 2,946
                                                        ========  ========

Depreciation and amortization:
Depreciation and amortization for reportable segments   $   301   $   105
Corporate depreciation and amortization                     373       345
                                                        --------  --------
Consolidated depreciation and amortization              $   674   $   450
                                                        ========  ========
</TABLE>

<PAGE>


                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006


NOTE 11.     401(K) PLAN

     The  Company  has  a 401(k) plan covering substantially all employees which
provides  for  contributions  in  such  amounts  as  the  Board of Directors may
determine  annually.  Participating  employees  may also contribute a portion of
their  annual  compensation.  There were no employer contributions for the years
ended  December  31,  2007  and  2006.



<PAGE>

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

     None


ITEM  8A  (T).     DISCLOSURE  CONTROLS  AND  PROCEDURES

EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES

     We  maintain  disclosure  controls  and  procedures  designed  to  provide
reasonable  assurance that information required to be disclosed in reports filed
under  the  Securities  Exchange  Act  of  1934,  as  amended  (Exchange Act) is
recorded,  processed,  summarized and reported within the specified time periods
and  accumulated  and  communicated  to  our management, including our principal
executive  officer  and  principal  financial  officer,  as appropriate to allow
timely  decisions  regarding  required  disclosure.

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 management concluded that
our internal controls over financial reporting were not effective as of December
31,  2007.

     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.

     Because  of  its  inherent  limitations,  internal  control  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.

     In  our  assessment of the effectiveness of internal control over financial
reporting  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  have  not  yet  developed  a  remediation  plan to address our material
weakness  listed  above, but expect to develop a remediation plan to address the
weakness  in  the  current  fiscal  year.


ITEM  8B.     OTHER  INFORMATION

     None

                                    PART III

ITEM  9.          DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

     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  2008  Annual  Meeting  of  Stockholders.


ITEM  10.          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  2008  Annual  Meeting  of  Stockholders.


ITEM 11.          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 2008
Annual  Meeting  of  Stockholders.


ITEM  12.          CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     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 2008 Annual Meeting of
Stockholders.


ITEM  13.     EXHIBITS

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

3.1     Amended  and  Restated Certificate of Incorporation, dated June 17, 1998
(incorporated  by  reference  to Exhibit 3.2 to Form 10-K filed April 14, 2004).

3.2     Amendment  to  the  Certificate  of  Incorporation of the Company, dated
November  13,  2003 (incorporated by reference to Exhibit 3.4 to Form 10-K filed
April  14,  2004).

3.3     Amendment to the Certificate of Incorporation of the Company, dated June
30,  2005  (incorporated  by  reference to Exhibit 3.4 to Form 8-K filed July 6,
2005).

3.4     Amended  and  Restated  By-Laws  of  the Company, dated January 27, 2006
(incorporated  by  reference to Exhibit 3.2 to Form 8-K filed February 2, 2006).

4.1     Certificate of Designation of Series A Redeemable Preferred Stock, dated
August  27,  2003  (incorporated  by reference to Exhibit 3.3 to Form 10-K filed
April  14,  2004).

10.1     Amended  and Restated Employment Agreement, dated June 6, 2003, between
N-Viro  International  Corporation  and  Michael  G.  Nicholson (incorporated by
reference  to  Exhibit  99.1  to  Form  8-K  filed  June  9,  2003).*

10.2     Business  Loan  Agreement  dated  February  26,  2003,  between  N-Viro
International Corporation and Monroe Bank + Trust;  letter of credit enhancement
dated  February 25, 2003 between N-Viro International Corporation and Messrs. J.
Patrick  Nicholson,  Michael  G.  Nicholson,  Robert P. Nicholson and Timothy J.
Nicholson  (all  incorporated by reference to Exhibits 99.1 through 99.3 to Form
8-K  filed  March  3,  2003).

10.3  Commercial  Line  of  Credit  Agreement  and Note dated 0October 17, 2007,
between  N-Viro  International  Corporation  and  Monroe  Bank  +  Trust.

10.4  Settlement  Agreement  and  Release  dated  August 29, 2003 between N-Viro
International  Corporation  and  Strategic  Asset  Management,  Inc.; Consulting
Agreement  dated August 28, 2003 between N-Viro International Corporation and J.
Patrick  Nicholson  (all  incorporated  by reference to Item 5 to Form 8-K filed
August  29,  2003).

10.5     Financial Public Relations Agreement, dated September 15, 2005, between
Strategic  Asset  Management,  Inc.  and  N-Viro  International  Corporation
(incorporated by reference to Exhibit 10.1 to Form 8-K dated October 12, 2005).*

10.6     Warrant  to Purchase 120,000 Shares of Common Stock dated September 15,
2005  between  Strategic  Asset  Management,  Inc.  and  N-Viro  International
Corporation (incorporated by reference to Exhibit 10.2 to Form 8-K dated October
12,  2005).*

10.7     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).*

10.8  Share  Purchase  Agreement  dated  December  28,  2006  between  N-Viro
International  Corporation  and  VFL  Technology  Corporation  (incorporated  by
reference  to  Exhibit  99.1  to  Form  8-K  filed  January  19,  2007).

10.9     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).*

10.10     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).*

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

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

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-KSB filed electronically with the
Securities  and  Exchange  Commission.

               *     Indicates  a  management  contract  or compensatory plan or
arrangement.


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  2008  Annual  Meeting  of  Stockholders.

<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,  2008

     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-KSB, 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,  2008


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


/s/ James  H.  Hartung*                /s/  R.  Francis  DiPrete*
----------------------                 ----------------------------
James  H.  Hartung,  Director          R. Francis DiPrete, Director
and Chairman of the Board


/s/  Joseph H. Scheib,  Director*      /s/  Mark  D.  Hagans*
---------------------------------      ----------------------
Joseph  H.  Scheib,  Director          Mark  D.  Hagans,  Director


/s/  Carl  Richard*                    /s/ Thomas  L.  Kovacik*
-------------------                    -------------------------
Carl  Richard,  Director               Thomas  L.  Kovacik,  Director