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

(MARK ONE)
    X                ANNUAL REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
                                       OR

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

                        COMMISSION FILE NUMBER:  0-21802

                                [GRAPHIC OMITTED]

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

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

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

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

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

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


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

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

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

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

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

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

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

Yes     No  X

State the aggregate market value of the voting and non-voting common equity held
by  non-affiliates computed by reference to the price at which the common equity
was  last  sold, or the average bid and asked price of such common equity, as of
the  last business day of the registrant's most recently completed second fiscal
quarter:   $9,350,000.

The  number  of shares of Common Stock of the registrant outstanding as of March
20,  2009  was  4,344,775.

                      DOCUMENTS INCORPORATED BY REFERENCE
Certain  information  contained in Part III of this Form 10-K is incorporated by
reference  from  the registrant's Proxy Statement for the 2009 Annual Meeting of
Stockholders,  which  proxy  statement  will  be  filed  with the Securities and
Exchange  Commission  on  or  before  April  30,  2009.

<PAGE>

                                     INDEX

                                                                           PAGE
                                                                           ----

                                     PART I

Item 1.     Business                                                          2

Item 1A.     Risk Factors                                                    10

Item 2.     Properties                                                       13

Item 3.     Legal Proceedings                                                14

Item 4.     Submission of Matters to a Vote of Security Holders              14

                                    PART II

Item 5.     Market for Registrant's Common Equity, Related                   15
     Stockholder Matters and Issuer Purchases of Equity Securities

Item 6.     Selected Financial Data                                          16

Item 7.     Management's Discussion and Analysis of Financial                16
     Condition and Results of Operations

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk      23

Item 8.     Financial Statements and Supplementary Data                      24

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

Item 9A(T).     Controls and Procedures                                      25

Item 9B.     Other Information                                               26

                                    PART III

Item 10.     Directors, Executive Officers and Corporate Governance          26

Item 11.     Executive Compensation                                          26

Item 12.     Security Ownership of Certain Beneficial Owners                 26
     and Management and Related Stockholder Matters

Item 13.     Certain Relationships and Related Transactions, and             26
     Director Independence

Item 14.     Principal Accountant Fees and Services                          27


                                    PART IV

Item 15.     Exhibits, Financial Statement Schedules                         27

<PAGE>

                                     PART I

CAUTIONARY  STATEMENT  WITH  RESPECT  TO  FORWARD-LOOKING  STATEMENTS

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


ITEM 1.          BUSINESS

GENERAL

     We  were  incorporated  in  Delaware  in  April,  1993, and became a public
company in October 1993.  We own and sometimes license various N-Viro Processes,
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.  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  40  CFR  Part 503 Sludge Regulations under the Clean Water Act of 1987 (the
"Part  503  Regs").  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 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 biosolid
process  facilities  located in Toledo Ohio and Daytona Florida.  Our goal is to
continue  to  operate these facilities and aggressively market our N-Viro BioDry
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.

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  FUELTM

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

N-VIRO  PROCESS  FACILITIES

     Our earliest facility is in Toledo, Ohio and has been managed by us through
a  Contract  Management  Agreement  with the City of Toledo since our inception.
Revenue  generated  from  and related to the Toledo operation 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 twentieth 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, the
Tohopekaliga  Water  Authority  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, we
estimate  there  are  currently  more  than  25  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
94,000  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  2008,
approximately  91%  of our revenue was from management operations, 9% from other
domestic  operations  and  nothing  from  foreign  operations  or  research  and
development  grants.  Sales  of  the  N-Viro  technology are affected by general
fluctuations  in  the  business  cycles  in  the  United  States  and worldwide,
instability of economic conditions and interest rates, as well as other factors.
In  addition, operating results of some of our business segments are influenced,
along  with  other factors such as interest rates, by particular business cycles
and  seasonality.  See  Notes  to  the  Financial Statements contained in Item 8
hereof.

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

RESEARCH  AND  DEVELOPMENT

     Research and development on the N-Viro Technologies had been, through 2005,
performed  primarily  by BioCheck Laboratories, a former wholly-owned subsidiary
of  ours,  and Dr. Terry J. Logan.  Dr. Logan, a long-time director who resigned
from  our  Board of Directors in November 2006, continues to direct our research
and  patent  development work under a consulting agreement that became effective
July 1, 2004 and currently runs through June 30, 2009, as extended by a one-year
agreement  signed  in  April  2008.  Our  research and development expenses were
under  $10,000  in  2008  and  2007.

     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.

     In  early  2007 we performed a full scale test of the N-Viro FuelTM product
at  the  T.B.  Simon  Power  Facility  located  on  the campus of Michigan State
University  in conjunction with them.  The results of the test has encouraged us
to  focus  primarily  on  the  development  of  the N-Viro Fuel technology.  Our
efforts  have  been  focused  toward  the development of what could be the first
N-Viro  Fuel  facility  located  on  the  campus  of  Michigan State University.
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 pricing, reliability of
our services provided, product quality and specifications and technical support.
Competitive  pressures  and other factors could cause us to lose market share or
could  result  in  decreases  in  prices,  either of which could have a material
adverse  effect  on  our  financial  position  and  results  of  operations.

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

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

ENVIRONMENTAL  REGULATION

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

     The  Part  503  Regulations.  Historically,  sludge management has involved
either  disposal,  principally  by  landfilling, incineration, ocean dumping and
surface disposal, or land application for beneficial use.  Sewage sludge and the
use  and  disposal  thereof is regulated under the Clean Water Act.  On February
19,  1993,  the  EPA  published  the  Part  503  Regs  under the Clean Water Act
implementing  the  EPA's  "exceptional  quality"  program.  These  regulations
establish  sludge  use and disposal standards applicable to approximately 35,000
publicly  and  privately owned wastewater treatment plants in the United States,
including  approximately  13,000  to  15,000  publicly owned treatment works, or
POTWs.  Under  the  Part  503  Regs, sludge products that meet certain stringent
standards  are  considered  to  be  "exceptional  quality"  products and are not
subject  to  any  federal  restrictions on agricultural use or land application.
N-Viro  Soil  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 it 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.

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

EMPLOYEES

     As  of  December  31, 2008, we had 32 employees.  Six of our employees were
engaged  in  sales  and  marketing; three were in finance and administration and
twenty-three  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  may provide incentives for the use of renewable biomass fuels, such
as  N-Viro  FuelTM.

     We  also hold several patents relating to N-Viro Fuel .  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, 2008 were approximately $65,000, and no amount
was  expensed  during  2008.

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

SECURITIES AND EXCHANGE COMMISSION

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

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


ITEM  1A.     RISK  FACTORS

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

     Since  2000,  we  have  experienced  net  losses  and  we  have  not  been
consistently  profitable on an annual basis. For the fiscal years ended December
31,  2008 and December 31, 2007, we incurred net losses of $1.2 million and $1.5
million, respectively.  We believe our history of net losses is primarily due to
our  inability  to  add  enough  new  sources  of  revenue to replace decreasing
business from existing sources of revenue and, more recently, through a shift of
our  business  toward  lower margin products and services.  Further, through the
year  ended  December  31,  2007,  we  experienced  much  higher  than  expected
expenditures  for  stock-related  fees and compensation, legal costs surrounding
litigation  and  the  direct time of management, staff and our Board relating to
this  litigation,  and  increases  in  our  selling,  general and administrative
expenses  in  excess  of  our  increases  in  gross  revenues.  To  achieve
profitability,  we  must accomplish numerous objectives, including growth in our
business,  the  development  of  new  products and commercial relationships, and
decreasing  our costs.  We can not foresee with any certainty whether we will be
able  to  achieve  these  objectives  in  the  future.  Accordingly,  we may not
generate  sufficient  net  review  to  achieve  profitability.

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

     We  have  evaluated  and  will  continue  to  evaluate our internal control
procedures  in  order  to  satisfy  the  requirements  of  Section  404  of  the
Sarbanes-Oxley Act, which requires an annual management assessment of the design
and  effectiveness  of  our internal controls over financial reporting.  For the
year  ended December 31, 2007, we identified a material weakness in our internal
controls  over  financial  reporting  due to a lack of personnel to sufficiently
monitor  and  process  transactions.  Due  to  our  continuing lack of financial
resources  to hire and train accounting and financial personnel, we have not yet
remedied  this material weakness.  While we are not aware of any material errors
to  date, our inability to maintain the adequate internal controls may result in
a  material  error  in  our financial statements.   Moreover, effective internal
controls,  particularly  those related to revenue recognition, are necessary for
us  to  produce  reliable financial reports and are important to helping prevent
financial  fraud.  If we experience a material error in our financial statements
or  if  we  cannot  provide  reliable  financial  reports  or prevent fraud, our
business  and operating results could be harmed, investors could lose confidence
in  our reported financial information, and the trading price of our stock could
drop  significantly.

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

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

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

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

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

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

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

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

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

A  SIGNIFICANT  AMOUNT  OF OUR BUSINESS COMES FROM A LIMITED NUMBER OF CUSTOMERS
AND  OUR REVENUE AND PROFITS COULD DECREASE SIGNIFICANTLY IF WE LOST ONE OR MORE
OF THEM AS CUSTOMERS.  FURTHER, THE AGREEMENT WITH OUR MOST SIGNIFICANT CUSTOMER
EXPIRES AT THE END OF 2009, AND OUR FAILURE TO RENEW THAT AGREEMENT ON FAVORABLE
TERMS  WOULD  LIKELY  HAVE  A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
CONDITIONS  AND  RESULTS  OF  OPERATIONS.

     Our  business  depends  on  provision  of  services  to a limited number of
customers.  One  or  more  of  these customers may stop contracting for services
from us or may substantially reduce the amount of services we provide them.  Any
cancellation, deferral or significant reduction in the services we provide these
principal customers or a significant number of smaller customers could seriously
harm  our  business  and  financial condition.  For the years ended December 31,
2008  and  2007, our single largest customer accounted for approximately 39% and
38%,  respectively,  of  our  revenues and our top three customers accounted for
approximately  62%  and  54%, respectively, of our revenues.  Our agreement with
our  largest  customer  - which represented approximately 39% of our revenues in
2008  -  is  due to expire at the end of 2009.  We are attempting to negotiate a
renewal  of  that  agreement,  but  we cannot assure you that we will be able to
secure  such  a  renewal at all or on terms that are as favorable as the current
agreement.   Our failure to renew that agreement on favorable terms would likely
have a material adverse effect on our business, financial conditions and results
of  operations.

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

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

WE  ARE  AFFECTED  BY  UNUSUALLY  ADVERSE  WEATHER  CONDITIONS.

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

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

     During  the  period from January 1, 2007 through March 20, 2009, our common
stock  closing price fluctuated between a high of $4.25 and a low of $1.25.  The
trading  price  of  our  common  stock  could be subject to wide fluctuations in
response  to  many  factors,  some  of  which  are beyond our control, including
general  economic  conditions,  the thinly-traded nature of our common stock and
the  outlook  of  analysts  and investors on our industry.  Further, significant
market  fluctuations, such as over the past six months, may adversely affect the
trading  price of our common stock.  Over the past several years, we have relied
on,  in  part,  exercises  of  stock  options by current and former officers and
directors  and  stock  purchase  warrants by investors for operating cash.  Wide
fluctuations  in  the  price  of  our  common stock or a stock price that is not
significantly above the exercise price of outstanding stock options or warrants,
would  likely  reduce  future  exercises of stock options or warrants, and which
would  reduce  or  eliminate  a  historic  source  of  cash  for our operations.


ITEM  2.     PROPERTIES

     Our executive and administrative offices are located in Toledo, Ohio, under
a  month  to  month  lease.  We  believe  our  relationship  with  our lessor is
satisfactory.  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,  2009.  The total rental expense for this location included in the
statements  of operations for each of the years ended December 31, 2008 and 2007
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, 2004 for five years.  The total minimum rental commitment for
the  years  ending  December  31, 2009 through 2013 is $48,000 per year, and for
2014  is  $12,000.  The  total  rental  expense  included  in  the statements of
operations  for  each  of the years ended December 31, 2008 and 2007 is $48,000.

     We  also  lease processing equipment at the Florida location which began in
2006  under  a  four year contract.  The total minimum rental commitment for the
years  ended  December  31,  2009  and 2010 is $31,000 and $3,000, respectively.

     We  also  lease  other  processing  equipment at the Florida location which
began  in  February  2008  under  a  three year lease.  The total minimum rental
commitment  for  the  following  years ended December 31 are as follows:  2009 -
$46,200;  2010  -  $46,200;  2011 - 4,000.  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.

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

     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,  2008.


<PAGE>
                                    PART II

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

MARKET INFORMATION

     Our  shares  of Common Stock are quoted on the OTC Bulletin Board under the
symbol  "NVIC.OB".  The prices quoted below reflect inter-dealer prices, without
retail  mark-up,  mark-down  or  commission  and  may  not  represent  actual
transactions.  The  closing  price  range  per  share  of the Common Stock since
January  1,  2007,  was  as  follows:

<TABLE>
<CAPTION>

Quarter      High    Low
             -----  -----
<S>          <C>    <C>
First 2007   $3.31  $2.30
Second 2007  $3.50  $2.35
Third 2007   $3.10  $2.45
Fourth 2007  $3.00  $2.40
First 2008   $4.25  $2.60
Second 2008  $3.99  $2.80
Third 2008   $3.75  $2.40
Fourth 2008  $3.50  $2.50

</TABLE>


Our  stock  price  closed  at  $2.20  per  share  on  March  20,  2009.

HOLDERS

     As  of  March 20, 2009, 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>

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

Equity compensation plans
    approved by security holders . . . .               746,025   $              $2.28                       793,375 2

Equity compensation plans not
    approved by security holders                       258,700 1 $              $1.93                           -0-
                                        ----------------------   ---------------------   ---------------------------
Total                                                1,004,725   $              $2.19                       793,375

<FN>

          1. Represents 120,000 warrants to purchase our Common Stock, issued to
     Strategic  Asset  Management,  Inc.,  in  2005  as  part of an agreement to
     provide  consulting  services,  issued  at  $1.84  per  share. And, 138,700
     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.

          2. The available number of shares to issue under our Amended and
     Restated 2004 Stock Option Plan was increased to 1,500,000 shares as
     approved by the stockholders on June 17, 2008.

</TABLE>



RECENT  SALES  OF  UNREGISTERED  SECURITIES

     There were no sales of unregistered securities during the fiscal year ended
December  31,  2008  that have not been previously disclosed by the company in a
Quarterly  Report  on  Form  10-Q.


ITEM  6.     SELECTED  FINANCIAL  DATA

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


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

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

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

<TABLE>
<CAPTION>
               For the Year Ended December 31,
                        2008    2007
                       ------  ------
<S>                    <C>     <C>
Technology fees          0.7%    5.5%
Facility management     63.8%   55.6%
Products and services   35.5%   38.9%
                       ------  ------
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,
                                         2008                Change              2007
                                       ----------         -------------      -----------
<S>                                    <C>                 <C>               <C>

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

Revenues. . . . . . . . . . . . . . .  $5,002             22.4%               $4,085

Cost of revenues. . . . . . . . . . .   4,260             26.1%                3,380
                                       ------                                --------

Gross profit. . . . . . . . . . . . .     742              5.1%                  705

Operating expenses. . . . . . . . . .   1,930            (10.5%)               2,207
                                       ------                                --------

                                       (1,188)                *               (1,502)

Other income (expense). . . . . . . .      31          1,766.9%                    2
                                       ------                                --------

Loss before income tax expense. . . .  (1,157)                *               (1,500)

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

Net loss. . . . . . . . . . . . . . . $(1,157)                *              $(1,500)
                                       =======                                =======

</TABLE>


<TABLE>
<CAPTION>


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

Cost of revenues. . . . . . . . . . .   85.2                                    82.7
                                       ------                                --------

Gross profit. . . . . . . . . . . . .   14.8                                    17.3

Operating expenses. . . . . . . . . .   38.5                                    54.0
                                       ------                                --------

                                       (23.7)                                  (36.8)

Other income (expense). . . . . . . .    0.6)                                    0.1
                                       ------                                --------

Loss before income tax expense. . . .  (23.1)                                  (36.7)

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

Net loss. . . . . . . . . . . . . . .  (23.1%)                                 (36.7%)
                                       =======                                 ======

</TABLE>

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

COMPARISON  OF  YEAR  ENDED  DECEMBER 31, 2008 WITH YEAR ENDED DECEMBER 31, 2007
     Revenues  increased  $917,000,  or approximately 22%, to $5,002,000 for the
year  ended  December  31,  2008 from $4,085,000 for the year ended December 31,
2007.  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 $373,000 from the same period
ended  in  2007;

     b)  Revenue  from the service fees for the management of alkaline admixture
increased $156,000 from the same period ended in 2007, primarily from additional
sales  generated  on new municipal sources started in 2008 at the Florida N-Viro
location;

     c)  Our processing revenue, including facility management revenue, showed a
net  increase  of  $1,153,000 over the same period ended in 2007, primarily from
new  municipal  sludge  processing sources started in 2008 at the Florida N-Viro
location;

     d)  Territorial  fees showed a net decrease of $16,000 from the same period
ended  in  2007:

     e)  Miscellaneous  revenues  decreased $3,000 from the same period ended in
2007.

     The  decrease  in  the  sales  of  alkaline  admixture  was  primarily from
facilities  no  longer  procuring  their  alkaline  admixture  through  us.  One
licensee  that  represented  approximately  $200,000,  or  5%  of our 2007 gross
revenue  stopped  contracting  with  us  in  early  2007.

     The  net  increase in service fees for the management of alkaline admixture
was  from  the  additional sources of municipal sludge treatment secured in 2008
and the resulting alkaline admixture marketed to supply these new sources.  They
represented  a  total  increase  of  $276,000  over  2007.

     The  increase  in  processing  revenue  of $1,153,000 was primarily from an
increase  in processing volume of facility management revenue, representing over
$916,000  of the increase.  This increase was also due to an increase in revenue
from  sales  of  the  N-Viro  Soil  product,  an increase of $408,000 over 2007.
Offsetting  the  facility management and product revenue increase was a decrease
in  royalties  received as a result of a loss of tonnage at facilities no longer
using  the  N-Viro  process  as  their  primary  disposal technology. This was a
decrease  from  2007  to  2008  of  approximately  $171,000.

     Our  gross  profit increased $37,000, or 5%, to $742,000 for the year ended
December  31,  2008  from $705,000 for the year ended December 31, 2007, and the
gross  profit  margin  decreased  to  15%  from  17%  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  56%  in  2007  to  64%  in  2008.  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  $171,000,  which  generally  has  marginal  costs  of  revenue.

     Our  operating  expenses  decreased $277,000, or 13%, to $1,930,000 for the
year  ended  December  31,  2008 from $2,207,000 for the year ended December 31,
2007.  The decrease was primarily due to a decrease of approximately $335,000 in
amortization  of  intangibles,  $145,000  for  legal  fees  and  $30,000  in
director-related  costs.  Offsetting  this decrease in operating expenses was an
increase  in  consulting  fees  of  $262,000.

Included in the decrease of amortization of intangibles was a write-down in 2007
of  approximately  $331,000  of  intangible  assets  deemed  by management to be
impaired  that  did  not  recur  for  2008.

Included  in  the  decrease  of  legal  fees  was the disposition in 2007 of two
lawsuits with J. Patrick Nicholson that were both discharged in our favor.  From
2006  to  2008, we decreased our legal fees by a total of approximately $286,000
primlarily  as  a  result  of  the  disposition  of  these  claims.

Included  in  the  increase  of  consulting  fees  was  a  write-off  in 2008 of
approximately  $222,000  that  reflected  the  remaining  stock  value  of three
consulting contracts that were teminated in December 2008.  More details of this
are  provided  in  our  Form  8-K  filed  on  February  10,  2009.

Of  our  total  operating expenses in 2008 of $1,930,000, approximately $645,000
were  non-cash  expenses for stock options, warrants and stock issued during the
year  and  $447,000  in  amortization  and  depreciation  expense.

     Our nonoperating income (expense) increased by $29,000 to income of $31,000
for  the  year  ended December 31, 2008 from income of $2,000 for the year ended
December  31, 2007.  The increase in nonoperating income was primarily due to an
increase  in  the  gain on settlements of debt negotiated by us in both 2008 and
2007.

     We  recorded  a  net  loss  of  approximately $1,157,000 for the year ended
December  31,  2008  compared  to a net loss of approximately $1,500,000 for the
year  ended December 31, 2007, a decrease in the loss of approximately $343,000.

LIQUIDITY  AND  CAPITAL  RESOURCES

     We  had  a  working capital deficit of approximately $1,287,000 at December
31,  2008,  compared  to a working capital deficit of $1,006,000 at December 31,
2007, resulting in a decrease in working capital of $282,000.  Current assets at
December  31,  2008  included  cash  and  investments  of approximately $154,000
(including  restricted  cash  of approximately $139,000), which is a decrease of
$44,000 from December 31, 2007.  The net negative change in working capital from
December  31,  2007  was  primarily  from  cash  received of $423,000 from stock
warrant and option exercises, offset negatively by the cash loss from operations
of  approximately  $548,000  for  the  twelve  months  ended  December 31, 2008.

     In  2008  our  cash  flow  used  in  operating activities was approximately
$206,000,  a  decrease  of approximately $62,000 from same period in 2007.  This
change  from  2007  was  principally  due  to  the increase of $420,000 in trade
accounts  receivable,  a  decrease  of  $87,000 in trade accounts payable and an
increase  in bad debt allowance and other non-cash items of $127,000, offset by:
a  $17,000  decrease  in prepaid and other assets, a decrease in the net loss of
$344,000 and an increase of $211,000 in stock, warrants and stock options issued
for  fees  and  services.

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

     During  2008,  we  had  a  line  of credit up to $400,000 at the prime rate
(3.25%  at  December  31, 2008) plus 1.5% and secured by a first lien on all our
assets,  with  Monroe Bank + Trust, or the Bank, with a maturity date of October
15,  2009.  Two certificates of deposit totaling $138,812 from the Bank are held
as  a  condition  of maintaining the line of credit.  As announced in a Form 8-K
filing on October 27, 2008, the line of credit was renewed through October 2009.
At  December  31,  2008,  we  had  $2,000 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 2008, we borrowed a total of $124,252 from three lenders to purchase
insurance  policies for various insurance coverages during the year.  A total of
three  term  notes were issued, ranging from 5.5% to 10% interest for a term not
more  than  one year, monthly payments totalling $13,930 and each are unsecured.
The  total  amount  owed  on all notes as of December 31, 2008 was approximately
$50,000 and all notes are expected to be paid in full on the applicable maturity
date,  the  last  of  which  is  August  2009.

     During  2008,  our  wholly-owned subsidiary, Bio-Mineral Transportation LLC
("BMT"),  borrowed a total of $552,975 from three lenders to purchase automotive
equipment  that  were placed into service during the year.  A total of four term
notes  were  issued,  ranging  from  7% to 8.8% interest for five years, monthly
payments totaling $11,085 and each are secured by the automotive equipment.  The
total  amount owed on all notes by BMT as of December 31, 2008 was approximately
$857,000  and  all  notes  are  expected  to  be  paid in full on the applicable
maturity  date,  the  last  of  which  is  October  2013.

     Also  during  2008,  our  wholly-owned  subsidiary,  Florida  N-Viro  LP
("Florida"),  borrowed  a total of $185,000 from a lender to purchase processing
equipment that was placed in service during the year.  A term note was issued at
8.8%  interest  for  three  years, monthly payments of $5,867 and secured by the
equipment  The total amount owed on all notes by Florida as of December 31, 2008
was  approximately $216,000 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,  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, 2008 was
approximately  $372,000 and the first installment of $27,338 was paid on time in
early  2008.  The  second installment of approximately $31,000 is expected to be
paid  on  time  in early 2009, subject to expected royalty offsets 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.  For 2008, our customers slowed the
overall payment rate on our outstanding receivables, which in turn contibuted to
us  extending  payment  times  to  our  vendors  on  our  payables.  We  make no
assurances  that  payments  from  our  customer  or payments to our vendors will
become shorter and this may have an adverse impact on our continuing operations.

     For  2009,  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  have  a  material  adverse  effect  on  our continuing operations.

OFF-BALANCE  SHEET  ARRANGEMENTS

     At  December 31, 2008, we did not have any material commercial commitments,
including  guarantees  or  standby  repurchase obligations, or any relationships
with unconsolidated entities or financial partnerships, including entities often
referred  to  as  structured  finance  or  special  purpose entities or variable
interest  entities,  which  would  have  been  established  for  the  purpose of
facilitating  off-balance  sheet  arrangements  or other contractually narrow or
limited  purposes.

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

CRITICAL  ACCOUNTING  POLICIES,  ESTIMATES  AND  ASSUMPTIONS

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

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

Allowance  for Doubtful Accounts - We estimate losses for uncollectible accounts
based  on  the  aging  of  the  accounts  receivable  and the evaluation and the
likelihood  of  success  in  collecting  the  receivable.  The  balance  of  the
allowance  at  December  31, 2008 and 2007 is $50,000 and $40,000, respectively.

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.

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  May  2008,  the  Financial  Accounting  Standards  Board issued Statement of
Accounting  Standards  No.  162, "The Hierarchy of Generally Accepted Accounting
Principles".  This Statement identifies the sources of accounting principles and
the  framework  for  selecting  the  principles to be used in the preparation of
financial  statements  of  nongovernmental  entities  that  are  presented  in
conformity  with  generally  accepted accounting principles (GAAP) in the United
States  (the GAAP hierarchy).  This Statement is effective 60 days following the
SEC's approval of the Public Company Accounting Oversight Board amendments to AU
Section  411,  "The  Meaning  of  Present  Fairly  in  Conformity With Generally
Accepted  Accounting Principles".  Adoption of this Statement is not expected to
have  a  material  impact  on  the  Company's  financial  statements.

In  May  2008,  the  Financial  Accounting  Standards  Board issued Statement of
Accounting  Standards  No.  163,  "Accounting  for Financial Guarantee Insurance
Contracts  -  an  interpretation  of  FASB  Statement  No.  60".  This Statement
requires  that  an  insurance enterprise recognize a claim liability prior to an
event  of  default  (insured  event)  when  there  is  evidence  that  credit
deterioration  has  occurred in an insured financial obligation.  This Statement
also  clarifies  how  Statement  No. 60 applies to financial guarantee insurance
contracts,  including  the recognition and measurement to be used to account for
premium  revenue  and  claim  liabilities.  Those  clarifications  will increase
comparability  in financial reporting of financial guarantee insurance contracts
by  insurance enterprises.  This Statement is effective for financial statements
issued  for  fiscal years and interim periods beginning after December 15, 2008.
Adoption  of  this  Statement  is  not expected to have a material impact on the
Company's  financial  statements.

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


ITEM  7A.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

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


<PAGE>
ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA



                         INDEX TO FINANCIAL STATEMENTS




                                                                           Page
                                                                           ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                     F-1

FINANCIAL STATEMENTS
     CONSOLIDATED BALANCE SHEETS                                      F-2 - F-3
     CONSOLIDATED STATEMENTS OF OPERATIONS                                  F-4
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT                       F-5
     CONSOLIDATED STATEMENTS OF CASH FLOWS                                  F-6
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                      F-7 - F-22



<PAGE>
                                      F-6

<PAGE>






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We  have  audited  the  accompanying  consolidated  balance  sheets  of  N-Viro
International Corporation (a Delaware entity), as of December 31, 2008 and 2007,
and  the  related  consolidated statements of operations, stockholders' deficit,
and  cash  flows for each of the years in the two year period ended December 31,
2008.  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, 2008 and 2007, and the results of its operations
and  its  cash flows for each of the years in the two year period ended December
31,  2008,  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.


/s/  UHY LLP
------------
UHY LLP
Southfield, Michigan
March 31, 2009


<PAGE>

<TABLE>
<CAPTION>

                        N-VIRO INTERNATIONAL CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                           December 31, 2008 and 2007
                           --------------------------

                                      2008        2007
                                   ----------  ----------
<S>                                <C>         <C>
ASSETS
---------------------------------

CURRENT ASSETS
Cash and cash equivalents:
Unrestricted                       $   14,869  $   62,321
Restricted                            138,812     135,506
Trade receivables, net                494,141     440,958
Prepaid expenses and other assets      64,331     185,330
                                   ----------  ----------
Total current assets                  712,153     824,115

PROPERTY AND EQUIPMENT, NET         1,781,290   1,300,428

INTANGIBLE AND OTHER ASSETS, NET      189,328     318,523
                                   ----------  ----------


                                   $2,682,771  $2,443,066
                                   ==========  ==========

</TABLE>












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

<PAGE>


<TABLE>
<CAPTION>

                              N-VIRO INTERNATIONAL CORPORATION

                                CONSOLIDATED BALANCE SHEETS

                                 December 31, 2008 and 2007
                                 --------------------------



                                                                    2008           2007
                                                                -------------  -------------
<S>                                                             <C>            <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
--------------------------------------------------------------

CURRENT LIABILITIES
Current maturities of long-term debt                            $    360,501   $    174,253
Line-of-credit                                                       398,000        364,000
Accounts payable                                                   1,047,364      1,055,268
Accrued liabilities                                                  193,425        236,175
                                                                -------------  -------------
Total current liabilities                                          1,999,290      1,829,696

LONG-TERM DEBT, LESS CURRENT MATURITIES                            1,135,364        772,374
                                                                -------------  -------------

Total liabilities                                                  3,134,654      2,602,070

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
Common stock, $.01 par value
Authorized - 15,000,000 shares in 2008 and 7,000,000 in 2007
Issued - 4,468,025 shares in 2008 and 4,145,359 shares in 2007        44,680         41,454
Preferred stock, $.01 par value
Authorized - 2,000,000 shares
Issued - -0- shares in 2008 and 2007                                       -              -
Additional paid-in capital                                        17,822,744     16,962,134
Accumulated deficit                                              (17,634,417)   (16,477,702)
                                                                -------------  -------------
                                                                     233,007        525,886

Less treasury stock, at cost, 123,500 shares                         684,890        684,890
                                                                -------------  -------------
Total stockholders' deficit                                         (451,883)      (159,004)
                                                                -------------  -------------

                                                                $  2,682,771   $  2,443,066
                                                                ============   ============

</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, 2008 and 2007
                          --------------------------------------

                                                                     2008          2007
                                                                 ------------  ------------
<S>                                                              <C>           <C>
REVENUES                                                         $ 5,001,774   $ 4,085,131

COST OF REVENUES                                                   4,260,290     3,379,741
                                                                 ------------  ------------

GROSS PROFIT                                                         741,484       705,390

OPERATING EXPENSES
Selling, general and administrative                                1,929,777     2,207,545
                                                                 ------------  ------------

OPERATING LOSS                                                    (1,188,293)   (1,502,155)

OTHER INCOME (EXPENSE)
Interest income                                                        3,306         5,642
Gain on settlement of debt                                            88,785        61,635
Interest expense                                                     (60,513)      (65,585)
                                                                 ------------  ------------
                                                                      31,578         1,692
                                                                 ------------  ------------

LOSS BEFORE INCOME TAXES                                          (1,156,715)   (1,500,463)

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

NET LOSS                                                         $(1,156,715)  $(1,500,463)
                                                                 ============  ============


Basic and diluted loss per share                                 $     (0.27)  $     (0.38)
                                                                 ============  ============

Weighted average common shares outstanding - basic and diluted     4,274,877     3,958,475
                                                                 ============  ============


</TABLE>







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

<PAGE>

<TABLE>
<CAPTION>

                                   N-VIRO INTERNATIONAL CORPORATION
                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                Years Ended December 31, 2008 and 2007

                                                   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, 2007        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)

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

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


</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, 2008 and 2007
                          --------------------------------------


                                                                     2008          2007
                                                                 ------------  ------------
<S>                                                              <C>           <C>

Cash Flows From Operating Activities
Net loss                                                         $(1,156,715)  $(1,500,463)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization                                        447,365       674,399
Provision (reduction) for bad debts                                   10,000      (130,000)
Issuance of stock for debt and services                              470,628       124,828
Issuance of stock options and warrants for services                  174,483       309,242
(Gain) Loss on the sale of fixed assets                              (32,890)        5,542
Changes in Operating Assets and Liabilities
Decrease (increase) in trade receivables                             (63,182)      356,658
Increase in prepaid expenses and other assets                         (5,112)      (20,387)
Increase (decrease) in accounts payable and accrued liabilities      (50,960)       36,159
                                                                 ------------  ------------
Net cash used in operating activities                               (206,383)     (144,022)

Cash Flows From Investing Activities
Increases from restricted cash and cash equivalents                   (3,306)       (4,008)
Purchases of property and equipment                                 (923,673)     (656,624)
Increase in investments                                                 (125)            -
Proceeds from sale of property and equipment                          79,773         7,181
                                                                 ------------  ------------
Net cash used in investing activities                               (847,331)     (653,451)

Cash Flows From Financing Activities
Net borrowings on line-of-credit                                      34,000       159,000
Borrowings under long-term obligations                               862,228       414,917
Principal payments on long-term obligations                         (312,990)     (129,401)
Stock warrants exercised                                             245,912             -
Stock options exercised                                              177,112       252,645
                                                                 ------------  ------------
Net cash provided by financing activities                          1,006,262       697,161
                                                                 ------------  ------------

Net Decrease in Cash and Cash Equivalents                            (47,452)     (100,312)

Cash and Cash Equivalents - Beginning                                 62,321       162,633
                                                                 ------------  ------------

Cash and Cash Equivalents - Ending                               $    14,869   $    62,321
                                                                 ============  ============

Supplemental disclosure of cash flows information:
Cash paid during the year for interest                           $   125,857   $   101,648
                                                                 ============  ============

</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, 2008 AND 2007

NOTE 1.     OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

D.     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 $50,940 and $32,343 of net receivables
for  the  years  ended  December 31, 2008 and 2007, respectively.  The Company's
policy  is  not  to  accrue  and  record  interest  income  on  past  due  trade
receivables.  The  Company  does  bill  the customer finance charges on past due
accounts  and  records  the interest income when collected.  Credit is generally
granted  on  an  unsecured  basis.  Periodic credit evaluations of customers are
conducted  and  appropriate  allowances  are  established.

     Management  estimates an allowance for doubtful accounts, which was $50,000
and  $40,000  as  of  December 31, 2008 and 2007, 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, 2008 AND 2007

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 $395,928
and  $275,295  in 2008 and 2007, 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  16.1  and  16.3  years  at  December 31, 2008 and 2007,
respectively).  Amortization  expense  amounted  to $51,437 and $372,166 in 2008
and  2007,  respectively.  Estimated amortization expense, based on these patent
costs  and  territory  rights at December 31, 2008, for each of the ensuing five
years  is as follows:  2009 - $29,000;  2010 - $26,000;  2011 - $23,000;  2012 -
$19,000;  2013  -  $15,000.  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,  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
a  carrying value of $298,814, 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 at December 31, 2007.  In accordance with SFAS No. 142,
the  Company  tests  for  impairment  annually.

     The  Company  was  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 was amortizing this
over  4  years  by  the  straight-line method.  Amortization expense amounted to
$1,250  in  2007,  the  last  year.

     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 $14,422 in 2008 and $26,940 in 2007.  Estimated
amortization  expense,  based  on  these  capitalized  license  and contracts at
December  31,  2008,  for  each of the ensuing five years is as follows:  2009 -
$7,000;  2010  -  $6,000;  2011  -  $2,000;  2012  -  $2,000;  2013  -  $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.

          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.

<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

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

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, 2008 and 2007, 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.

L.     New  Accounting  Standards  -  In  May  2008,  the  Financial  Accounting
Standards Board issued Statement of Accounting Standards No. 162, "The Hierarchy
of  Generally  Accepted  Accounting  Principles".  This Statement identifies the
sources  of accounting principles and the framework for selecting the principles
to  be  used  in  the  preparation  of  financial  statements of nongovernmental
entities  that  are  presented  in conformity with generally accepted accounting
principles  (GAAP) in the United States (the GAAP hierarchy).  This Statement is
effective  60 days following the SEC's approval of the Public Company Accounting
Oversight  Board amendments to AU Section 411, "The Meaning of Present Fairly in
Conformity  With  Generally  Accepted  Accounting Principles".  Adoption of this
Statement  is  not expected to have a material impact on the Company's financial
statements.

In  May  2008,  the  Financial  Accounting  Standards  Board issued Statement of
Accounting  Standards  No.  163,  "Accounting  for Financial Guarantee Insurance
Contracts  -  an  interpretation  of  FASB  Statement  No.  60".  This Statement
requires  that  an  insurance enterprise recognize a claim liability prior to an
event  of  default  (insured  event)  when  there  is  evidence  that  credit
deterioration  has  occurred in an insured financial obligation.  This Statement
also  clarifies  how  Statement  No. 60 applies to financial guarantee insurance
contracts,  including  the recognition and measurement to be used to account for
premium  revenue  and  claim  liabilities.  Those  clarifications  will increase
comparability  in financial reporting of financial guarantee insurance contracts
by  insurance enterprises.  This Statement is effective for financial statements
issued  for  fiscal years and interim periods beginning after December 15, 2008.
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>


                                      2008        2007
                                   ----------  ----------
<S>                                <C>         <C>
Leasehold improvements             $  116,458  $  117,524
Equipment                           2,779,103   1,957,568
Furniture, fixtures and computers      48,216      52,280
                                   ----------  ----------
                                    2,943,777   2,127,372
Less accumulated depreciation       1,162,487     826,944
                                   ----------  ----------

                                   $1,781,290  $1,300,428
                                   ==========  ==========

</TABLE>


                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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,  2008,  the  Company  cancelled the SAMI Agreement and recorded to
expense  the  balance  of the unamortized costs on the remaining agreement, or a
total  of  $164,171  in  2008.

In  December  2006,  the  Company  executed an Investor Relations Agreement with
Institutional  Analyst,  or the IA Agreement.  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 with Weil Consulting
Corporation,  or  the  Weil  Agreement.  The  Company  engaged  Weil  to provide
services  as  a consultant in general business affairs of the Company for a term
of two years from the date of the Weil Agreement.  For its services, the Company
issued  Weil  35,000  shares  of the Company's unregistered common stock.  Total
valuation  of  the  services  to  be performed as part of the Weil Agreement was
estimated  to be $61,000, to be amortized over the two year period.  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)

In  December,  2008,  the  Company  cancelled the Weil Agreement and recorded to
expense  the  balance  of the unamortized costs on the remaining agreement, or a
total  of  $39,809  in  2008.

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

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


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

<TABLE>
<CAPTION>


                                                      2008      2007
                                                    --------  --------
<S>                                                 <C>       <C>
Patents and related intangibles, less accumulated
amortization (2008 - $376,150;  2007 - $500,557)    $155,733  $192,173

Territory rights, less accumulated amortization
(2008 - $5,294;  2007 - $4,706)                        4,706     5,294

Customer list, less accumulated amortization
(2008 - $41,362;  2007 - $26,940)                     21,393    35,815

Deferred costs, less accumulated amortization
(2008 - $794,762;  2007 - $438,482)                        -    77,549

Other                                                  7,496     7,692
                                                    --------  --------

                                                    $189,328  $318,523
                                                    ========  ========

</TABLE>


                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007


<PAGE>

NOTE  2.     BALANCE  SHEET  DATA  (CONTINUED)

ACCRUED  LIABILITIES:

<TABLE>
<CAPTION>


                                         2008      2007
                                       --------  --------
<S>                                    <C>       <C>
Accrued payroll and employee benefits  $ 14,386  $ 29,097
Sales tax payable                       177,455   177,360
Deferred revenue                              -    28,000
Interest payable                          1,584     1,718
                                       --------  --------

                                       $193,425  $236,175
                                       ========  ========

</TABLE>

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

During  2008,  the Company had a line of credit up to $400,000 at the prime rate
(3.25% at December 31, 2008) plus 1.5% and secured by a first lien on all assets
of  the  Company, with Monroe Bank + Trust, or the Bank, with a maturity date of
October  15,  2009.  Two certificates of deposit totaling $138,812 from the Bank
are  held  as  a  condition  of maintaining the line of credit.  At December 31,
2008,  the  Company  had $2,000 of borrowing capacity under the credit facility.

Long-term debt at December 31, 2008 and 2007 is as follows:

<TABLE>
<CAPTION>

                                      2008       2007
                                   ----------  --------
<S>                                <C>         <C>
Notes payable - banks              $  938,970  $300,313
Notes payable - equipment vendors     183,481   246,588
Note payable - VFL                    373,414   399,726
                                   ----------  --------
                                    1,495,865   946,627
Less current maturities               360,501   174,253
                                   ----------  --------

                                   $1,135,364  $772,374
                                   ==========  ========

</TABLE>


                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

During  2008,  the  Company  borrowed  a total of $124,252 from three lenders to
purchase  insurance  policies  for  general,  property  and directors & officers
insurance  coverage  during  the year.  A total of three term notes were issued,
ranging  from  5.5%  to  10% interest for a term not more than one year, monthly
payments totalling $13,930 and each are unsecured.  The total amount owed on all
notes  as  of  December  31,  2008  was  approximately $50,000 and all notes are
expected  to  be paid in full on the applicable maturity date, the last of which
is  August  2009.

During  2008,  the Company's wholly-owned subsidiary, Bio-Mineral Transportation
LLC  ("BMT"),  borrowed  a  total  of  $552,975  from  three lenders to purchase
automotive  equipment that were placed into service during the year.  A total of
four  term  notes  were issued, ranging from 7% to 8.8% interest for five years,
monthly  payments  totaling  $11,085  and  each  are  secured  by the automotive
equipment.  The  total  amount  owed on all notes by BMT as of December 31, 2008
was  approximately $857,000 and all notes are expected to be paid in full on the
applicable  maturity  date,  the  last  of  which  is  October  2013.


<PAGE>

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

Also  during  2008,  the  Company's  wholly-owned  subsidiary, Florida N-Viro LP
("Florida"),  borrowed  a total of $185,000 from a lender to purchase processing
equipment that was placed in service during the year.  A term note was issued at
8.8%  interest  for  three  years, monthly payments of $5,867 and secured by the
equipment  The total amount owed on all notes by Florida as of December 31, 2008
was  approximately $216,000 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, 2008 was
approximately  $373,000 and the first installment of $27,338 was paid on time in
early  2008.  The  second installment of approximately $31,000 is expected to be
paid  on  time  in early 2009, subject to expected royalty offsets through 2008.

Approximate  aggregate maturities of long-term debt, including interest, for the
years  ending  December  31  are as follows:  2009 - $466,000;  2010 - $409,000;
2011  -  $362,000;  2012  -  $226,000;  2013  and  after  -  $338,000.


NOTE 4.     RELATED PARTY TRANSACTIONS

During  the year ended December 31, 2008, the Company paid R. Francis DiPrete, 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.

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 for 2008 and 2007 and the balance
to  each  of  any  monies  owed  as  of  December  31,  2008  and  2007:

<TABLE>
<CAPTION>


  Payee               Year  Trucking, repairs and services   Consulting fees   Account payable balance at December 31
  ------------------  ----  -------------------------------  ----------------  ---------------------------------------
  <C>                 <S>   <C>                              <C>               <C>                                      <C>
  R. Francis DiPrete  2008  $                             -  $          2,500  $                                     -
  Gardenscape         2007                           14,235                 -                                        -
  Carl Richard        2007                                -             4,848                                        -
  Nicholas Lynn       2007                                -             2,500                                        -

</TABLE>


<PAGE>
                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

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 and amended in June 2008 for directors
and  key  employees  under which 1,500,000 shares of common stock may be issued.
Unless otherwise stated in the stock option agreement, options are 20% vested on
the  date  of  grant,  with  the balance vesting 20% per year over the next four
years,  except  for  directors  whose  options  vest immediately, but can not be
exercised until six months from the date of grant.  Options were granted in 2008
and  2007  at  the  approximate  market  value  of  the  stock at date of grant.

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 from 2004 through June, 2007,
the  ending  date  of  his employment agreement.  This charge was $8,842 for the
year  ended  December  31,  2007.

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.

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  was  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.  In December, 2008, the Company cancelled
the  Weil  Agreement  and  took  a  charge  to  earnings  for the balance of the
unamortized  costs  on  the  remaining  agreement,  or  a total of approximately
$40,000  in  2008.

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,  2011,  the  ending date of his employment agreement, extended in
June  2008  for  two  additional  years.  This  charge  was $93,333 for 2008 and
$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.

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

<PAGE>

NOTE 5.     EQUITY TRANSACTIONS (CONTINUED)

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

There were 109,900 stock options exercised in 2008, 146,300 in 2007.  A total of
twelve  grantees  exercised  at  an  average  weighted  price  of  $2.14.

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,
2008  and  2007  and  the  number  outstanding  and  exercisable at those dates:


<TABLE>
<CAPTION>

                                                         2008                         2007
                                            ---------------------------   --------------------------
                                                           Weighted                     Weighted
                                                            Average                      Average
                                              Shares    Exercise Price     Shares    Exercise Price
                                            ----------  ---------------   ---------  ---------------
<S>                                         <C>         <C>               <C>        <C>
Outstanding, beginning of year                839,925   $          2.19   1,031,875  $          2.10
Granted                                        22,500              3.61     142,500             2.79
Exercised                                    (109,900)             2.14    (146,300)            1.73
Expired during the year                      (  6,500)             2.31    (188,150)            2.47
                                            ----------                    ---------
Outstanding, end of year                      746,025              2.28     839,925             2.19
                                            ==========                    =========

Eligible for exercise at end of year          746,025              2.28     774,925             2.18
                                            ==========                    =========

Weighted average fair value per option for
options granted during the year                         $          3.61              $          2.79
                                                        ===============              ===============
</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>
                                                  2008
-------------------------------------------------------------------------------------------------------
Range of exercise prices:
0.70 - $1.45                            37,925          5.19  $    1.15               37,925  $    1.15
1.50 - $1.99                            92,450          4.64       1.71               92,450       1.71
2.00 - $2.40                           350,000          7.42       2.02              350,000       2.02
2.45 - $3.05                           240,150          6.98       2.83              240,150       2.83
4.00 - $5.19                            25,500          6.01       4.36               25,500       4.36
                            -------------------                           -------------------
                                       746,025                                       746,025

                                                  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
3.90 - $5.19                            10,500          2.36       5.03               10,500       5.03
                            -------------------                           -------------------
                                       839,925                                       774,925

</TABLE>



<PAGE>

NOTE  6.     REVENUE  AND  MAJOR  CUSTOMERS

Revenues for the years ended December 31, 2008 and 2007 consist of the
following:

<TABLE>
<CAPTION>


                          2008        2007
                       ----------  ----------
<S>                    <C>         <C>
Facility management    $3,188,539  $2,272,699
Technology fees            36,241     223,199
Products and services   1,776,994   1,589,233
                       ----------  ----------

                       $5,001,774  $4,085,131
                       ==========  ==========

</TABLE>


                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

Revenues  for  the  years ended December 31, 2008 and 2007 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%  for  each  year of total consolidated revenue.  The accounts
receivable  balance  due (which is unsecured) from this customer at December 31,
2008  and  2007  was  approximately  $110,000  and  $128,000, respectively.  The
Company  has  six  customers  billed  through  Florida N-Viro, each representing
between  5%-12%  of  the  consolidated  revenue for the Company - total accounts
receivable  balance  for  these  six customers at December 31, 2008 and 2007 was
approximately  $229,000  and  $143,000,  respectively.

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


<PAGE>

NOTE 7.     COMMITMENTS AND CONTINGENCIES

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

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

The  Company  maintains an office in Daytona Beach under a lease with the County
of Volusia, Florida which was renewed in March, 2009 for five years.   The total
minimum rental commitment for the years ending December 31, 2009 through 2013 is
$48,000  each  year, and for 2014 is $12,000.  The total rental expense included
in the statements of operations for the year ended December 31, 2008 and 2007 is
$48,000.

The  Company leases processing equipment at it's Florida location which began in
2006  under  a  four year contract.  The total minimum rental commitment for the
years  ended  December  31,  2009  and 2010 is $31,000 and $3,000, respectively.

The  Company  also  leases  other  processing equipment at it's Florida location
which began in February 2008 under a three year lease.  The total minimum rental
commitment  for  the  following  years ended December 31 are as follows:  2009 -
$46,200;  2010  -  $46,200;  2011  -  4,000.

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

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

     From  time to time the Company is involved in legal proceedings and subject
to  claims  which  may arise in the ordinary course of business.  The Company is
not  aware  of  any  legal  proceedings  or  material  claims  at  this  time.


<PAGE>

NOTE 8.     INCOME TAX MATTERS

The composition of the deferred tax assets and liabilities at December 31, 2008
and 2007 is as follows:

<TABLE>
<CAPTION>

                                                      2008          2007
                                                  ------------  ------------
<S>                                               <C>           <C>
Gross deferred tax liabilities:
Property + equipment depreciation + amortization  $   (94,900)  $   (49,100)
Gross deferred tax assets:
Loss carryforwards                                  6,687,800     6,249,000
Section 754 basis step up                             201,600       226,800
Allowance for doubtful accounts                        20,000        16,000
Other                                                   3,300         8,200

Less valuation allowance                           (6,817,800)   (6,450,900)
                                                  ------------  ------------

                                                  $         -   $         -
                                                  ============  ============

</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, 2008 and 2007 and are as follows:

<TABLE>
<CAPTION>

                                                   2008        2007
                                                ----------  ----------
<S>                                             <C>         <C>
Computed "expected" tax (credits)               $(462,700)  $(600,200)
State taxes, net of federal tax benefit           (40,700)    (52,800)
(Decrease) increase in income taxes resulting
from:
Change in valuation allowance                     366,900     732,200
Stock options and warrants                         68,800     (17,700)
Other                                              67,700     (61,500)
                                                ----------  ----------

                                                $       -   $       -
                                                ==========  ==========

</TABLE>


The net operating losses available at December 31, 2008 to offset future taxable
income  total  approximately  $16,800,000 and expire principally in years 2009 -
2028.  Approximately $6,124,000 will expire if not used to offset taxable income
for  the  2009  tax  year.


<PAGE>

NOTE 9.     SEGMENT INFORMATION

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

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

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

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

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

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

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


<PAGE>

NOTE 9.     SEGMENT INFORMATION (CONTINUED)

The  Research  and Development segment is unlike any other revenue in that it is
generated  as  a  result  of a specific project to conduct initial or additional
ongoing  research into the Company's emerging technologies.  The Company has not
recorded  any  revenue  from  this  source  since  2006.

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, 2008 and 2007 (dollars in thousands).

<TABLE>
<CAPTION>

                                                Other
                               Management     Domestic    Foreign     Research &
                               Operations   Operations   Operations   Development   Total
                               -----------  -----------  -----------  ------------  ------
<S>                            <C>          <C>          <C>          <C>           <C>
                                                         2008
                               -----------------------------------------------------------
Revenues                       $     4,630  $       372  $         -  $          -  $5,002
Cost of revenues                     3,987          273            -             -   4,260
                               -----------  -----------  -----------  ------------  ------
Segment profits                        643           99            -             -     742

Identifiable assets                  1,769            -            -             -   1,769

Depreciation and Amortization          285          124            -             -     409


                                                         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

</TABLE>




<PAGE>

NOTE 9.     SEGMENT INFORMATION (CONTINUED)

A reconciliation of total segment profits, identifiable assets and depreciation
and amortization to the consolidated financial statements as of and for the
years ended December 31, 2008 and 2007 follows (dollars in thousands):

<TABLE>
<CAPTION>

                                                          2008      2007
                                                        --------  --------
<S>                                                     <C>       <C>
Segment profits:
Segment profits for reportable segments                 $   742   $   705
Corporate selling, general and administrative
expenses and research and development costs              (1,930)   (2,146)
Other income (expense)                                       31       (59)
                                                        --------  --------
Consolidated earnings before taxes                      $(1,157)  $(1,500)
                                                        ========  ========

Identifiable assets:
Identifiable assets for reportable segments             $ 1,769   $ 1,283
Corporate property and equipment                             12        17
Current assets not allocated to segments                    712       824
Intangible and other assets not allocated to segments       190       319
                                                        --------  --------
Consolidated assets                                     $ 2,683   $ 2,443
                                                        ========  ========

Depreciation and amortization:
Depreciation and amortization for reportable segments   $   409   $   301
Corporate depreciation and amortization                      38       373
                                                        --------  --------
Consolidated depreciation and amortization              $   447   $   674
                                                        ========  ========
</TABLE>

<PAGE>

                        N-VIRO INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007


NOTE 10.     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,  2008  and  2007.


<PAGE>

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

     None


ITEM  9A(T).     CONTROLS  AND  PROCEDURES

EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES

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

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,  2008  for  the  reasons  described  below.

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

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

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

     During  the quarter ended December 31, 2008, there were no material changes
in  the Company's internal control over financial reporting that have materially
affected,  or are reasonably likely to materially affect, the Company's internal
control  over  financial  reporting.

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

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


ITEM  9B.     OTHER  INFORMATION

     None

                                    PART III

ITEM  10.     DIRECTORS,  EXECUTIVE  OFFICERS  AND  CORPORATE  GOVERNANCE

     The  information  required by this Item is incorporated by reference to the
information  under  the  heading  "Election  of  Directors"  and  "Management  -
Directors  and  Executive  Officers"  in  the  definitive proxy statement of the
Company  for  the  2009  Annual  Meeting  of  Stockholders.


ITEM  11.     EXECUTIVE  COMPENSATION

     The  information  required by this Item is incorporated by reference to the
information  under  the heading "Executive Compensation" in the definitive proxy
statement  of  the  Company  for  the  2009  Annual  Meeting  of  Stockholders.


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

     The  information  required by this Item is incorporated by reference to the
information  under  the heading "Security Ownership of Certain Beneficial Owners
and  Management"  in  the definitive proxy statement of the Company for the 2009
Annual  Meeting  of  Stockholders.


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

     The  information  required by this Item is incorporated by reference to the
information  under  the heading "Certain Relationships and Related Transactions"
in  the definitive proxy statement of the Company for the 2009 Annual Meeting of
Stockholders.


ITEM  14.     PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

     The  information  required by this Item is incorporated by reference to the
information  under  the  heading  "Independent Auditors" in the definitive proxy
statement  of  the  Company  for  the  2009  Annual  Meeting  of  Stockholders.


                                    PART IV


ITEM  15.     EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES

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

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

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

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

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

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

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

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

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

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

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

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

14.1     Code  of  Ethics.

21.1     List  of  subsidiaries  of  the  Company.#

23.1     Consent  of  UHY  LLP.

24.1     Power(s)  of  Attorney.#

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

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

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

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


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

               *     Indicates  a  management  contract  or compensatory plan or
arrangement.


<PAGE>

                                   SIGNATURES


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

     N-VIRO  INTERNATIONAL  CORPORATION
Dated:  March  31,  2009

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


                               POWER OF ATTORNEY

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

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

Dated:  March  31,  2009

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


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


/s/  JosephH.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