UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








FORM
10-Q







x
                    QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934For the quarterly period ended:DECEMBER 31,
      2008orr
                    TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934For the transition period from: _____________
      to
_____________





ANPATH
GROUP, INC.


(Exact
name of registrant as specified in its charter)




DELAWARE
                333-123365
                20-1602779(State
      or Other Jurisdiction of
      Incorporation)
                (Commission
      File
      Number)
                (I.R.S.
      Employer Identification
      No.)





116
Morlake Drive, Suite 201 Mooresville, NC 28117


(Address
of Principal Executive Office) (Zip Code)





(704)
658-3350


(Registrant’s
telephone number, including area code)




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of theSecurities
      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 the past 90 days. x Yes  r
      NoIndicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company.Large
      accelerated filer  r
                              
                              
                              Accelerated
      filer                       
      rNon-accelerated
      filer    r
                              
                              
                              Smaller
      reporting company      xIndicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Act). r Yes   
      x NoIndicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.
  Class
                          
                          Outstanding at February 23,
      2009Common
      Stock, $.0001 par value
                          
                          15,338,525






Table of Contents





INDEX




PAGEPART I
                        FINANCIAL
      INFORMATIONItem
      1
                        Financial Statements
                        
                        3Balance Sheet at December 31, 2008 (unaudited) and March 31,
      2008 (audited)
                        
                        3Statements of Operations for the Three Month Periods Ended
      December 31, 2008 and 2007 and for the Nine Months ended December 31, 2008
      and 2007
                        
                        4Statements of Cash flows for the nine Month Periods Ended
      December 31, 2008 and 2007
                        
                        5Condensed Notes to the Financial
    Statements
                        
                        6Item
      2.
                        Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                        
                        18Item
      3.
                        Quantitative and Qualitative Disclosures About Market
      Risk
                        
                        26Item
      4T.
                        Controls and Procedures
                        
                        27PART II.
                        OTHER
      INFORMATIONItem
      1A.
                        Risk Factors
                        
                        27Item
      6.
                        Exhibits
                        
                        27Signatures
                        
                        28







Table of Contents




PART
I. FINANCIAL INFORMATION
 ITEM 1.FINANCIALSTATEMENTS
 ANPATH GROUP, INC
 Consolidated
Balance Sheets
 Nine
      Months Ended
                                Year
      EndedDecember
      31, 2008
                                March
      31, 2008(unaudited)ASSETSCURRENT
      ASSETSCash
                                
                                $
                                3,656
                                
                                
                                $
                                351,627Accounts
      receivable, net
                                
                                
                                21,513
                                
                                
                                
                                16,880Prepaid
      expenses
                                
                                
                                16,295
                                
                                
                                
                                96,061Inventory
                                
                                
                                26,402
                                
                                
                                
                                49,399TOTAL
      CURRENT ASSETS
                                
                                
                                67,866
                                
                                
                                
                                513,967PROPERTY
      AND EQUIPMENTFurniture
      & fixtures
                                
                                
                                205,694
                                
                                
                                
                                205,694Machinery
      & equipment
                                
                                
                                195,137
                                
                                
                                
                                195,137Capitalized
      software
                                
                                
                                3,210
                                
                                
                                
                                3,210Less
      accumulated depreciation
                                
                                
                                (188,953
                                )
                                
                                
                                (138,712
                                )TOTAL
      FIXED ASSETS
                                
                                
                                215,088
                                
                                
                                
                                265,329OTHER
      ASSETSTrade
      secrets
                                
                                
                                1,026,000
                                
                                
                                
                                1,026,000Deposits
                                
                                
                                261,703
                                
                                
                                
                                244,338TOTAL
      OTHER ASSETS
                                
                                
                                1,287,703
                                
                                
                                
                                1,270,338TOTAL
      ASSETS
                                
                                $
                                1,570,657
                                
                                
                                $
                                2,049,634LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                                
                                $
                                378,228
                                
                                
                                $
                                121,727Accrued
      interest payable
                                
                                
                                106,017
                                
                                
                                
                                23,877Wages
      payable
                                
                                
                                122,588
                                
                                
                                
                                -TOTAL
      CURRENT LIABILITIES
                                
                                
                                606,833
                                
                                
                                
                                145,604LONG
      TERM LIABILITIESNotes
      payable, net of discount
                                
                                
                                1,071,202
                                
                                
                                
                                250,000Notes
      payable - related parties, net of discount
                                
                                
                                92,950
                                
                                
                                
                                -TOTAL
      LONG TERM LIABILITIES
                                
                                
                                1,164,152
                                
                                
                                
                                250,000TOTAL
      LIABILITIES
                                
                                
                                1,770,985
                                
                                
                                
                                395,604COMMITMENTS
      AND CONTINGENCIES
                                
                                
                                -
                                
                                
                                
                                -STOCKHOLDERS'
      EQUITYPreferred
      stock, $0.0001 par value; 5,000,000 shares authorized,no
      shares issued and outstanding
                                
                                
                                -
                                
                                
                                
                                -Common
      stock, $0.0001 par value; 100,000,000 shares authorized,15,338,525
      and 14,249,889 shares issued and outstanding
                                
                                
                                1,534
                                
                                
                                
                                1,425Additional
      paid-in capital
                                
                                
                                28,724,772
                                
                                
                                
                                27,226,561Accumulated
      deficit
                                
                                
                                (28,926,634
                                )
                                
                                
                                (25,573,956
                                )TOTAL
      STOCKHOLDERS' EQUITY
                                
                                
                                (200,328
                                )
                                
                                
                                1,654,030TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      EQUITY
                                
                                $
                                1,570,657
                                
                                
                                $
                                2,049,634
  See
accompanying condensed notes to interim consolidated financial
statements.






3
 Table of Contents






ANPATH GROUP, INC


Consolidated
Statements of Operations


(Unaudited)




Three
      Months Ended
                        
                        
                        Nine
      Months EndedDecember
      31,
                        
                        
                        December
      31,2008
                        
                        
                        2007
                        
                        
                        2008
                        
                        
                        2007REVENUES
                        
                        $
                        28,176
                        
                        
                        $
                        48,120
                        
                        
                        $
                        73,680
                        
                        
                        $
                        102,082COST
      OF SALES
                        
                        
                        22,534
                        
                        
                        
                        51,072
                        
                        
                        
                        68,173
                        
                        
                        
                        111,449Gross
      Profit
                        
                        
                        5,642
                        
                        
                        
                        (2,952
                        )
                        
                        
                        5,507
                        
                        
                        
                        (9,367
                        )EXPENSESSales
                        
                        
                        78,889
                        
                        
                        
                        87,311
                        
                        
                        
                        266,425
                        
                        
                        
                        225,770Product
      development
                        
                        
                        91,858
                        
                        
                        
                        89,005
                        
                        
                        
                        301,982
                        
                        
                        
                        358,675Corporate
                        
                        
                        1,370,854
                        
                        
                        
                        1,044,391
                        
                        
                        
                        2,390,495
                        
                        
                        
                        2,040,429Finance
      and administrative
                        
                        
                        82,886
                        
                        
                        
                        98,246
                        
                        
                        
                        317,148
                        
                        
                        
                        345,181Total
      Expenses
                        
                        
                        1,624,487
                        
                        
                        
                        1,318,953
                        
                        
                        
                        3,276,050
                        
                        
                        
                        2,970,055LOSS
      FROM OPERATIONS
                        
                        
                        (1,618,845
                        )
                        
                        
                        (1,321,905
                        )
                        
                        
                        (3,270,543
                        )
                        
                        
                        (2,979,422
                        )OTHER
      INCOME (EXPENSE)Interest
      expense
                        
                        
                        (27,423
                        )
                        
                        
                        -
                        
                        
                        
                        (82,141
                        )
                        
                        
                        -Other
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Interest
      income
                        
                        
                        -
                        
                        
                        
                        1,329
                        
                        
                        
                        6
                        
                        
                        
                        17,731Impairment
      of long lived assets
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (374,000
                        )Total
      Other Income and Expense
                        
                        
                        (27,423
                        )
                        
                        
                        1,329
                        
                        
                        
                        (82,135
                        )
                        
                        
                        (356,269
                        )LOSS
      BEFORE TAXES
                        
                        
                        (1,646,268
                        )
                        
                        
                        (1,320,576
                        )
                        
                        
                        (3,352,678
                        )
                        
                        
                        (3,335,691
                        )INCOME
      TAX EXPENSE
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -NET
      LOSS
                        
                        $
                        (1,646,268
                        )
                        
                        $
                        (1,320,576
                        )
                        
                        $
                        (3,352,678
                        )
                        
                        $
                        (3,335,691
                        )BASIC
      AND DILUTED NET LOSS PER SHARE
                        
                        $
                        (0.11
                        )
                        
                        $
                        (0.09
                        )
                        
                        $
                        (0.23
                        )
                        
                        $
                        (0.22
                        )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,BASIC
      AND DILUTED
                        
                        
                        14,558,905
                        
                        
                        
                        14,210,759
                        
                        
                        
                        14,392,525
                        
                        
                        
                        14,965,525
 
 See
accompanying condensed notes to interim consolidated financial
statements.




4
 Table of Contents




ANPATH GROUP, INC


Consolidated
Statement of Cash Flows


(Unaudited)


Nine
      Months EndedDecember
      31,2008
                                        
                                        
                                        2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                                        
                                        $
                                        (3,352,678
                                        )
                                        
                                        $
                                        (3,336,032
                                        )Depreciation
      and amortization
                                        
                                        
                                        50,241
                                        
                                        
                                        
                                        37,343Stock
      issued for services
                                        
                                        
                                        143,000
                                        
                                        
                                        
                                        650,000Stock
      options granted and warrants issued
                                        
                                        
                                        408,211
                                        
                                        
                                        
                                        136,590Stock
      options re-priced for services
                                        
                                        
                                        623,549
                                        
                                        
                                        
                                        701,192Discount
      on note payable
                                        
                                        
                                        729,452
                                        
                                        
                                        
                                        -Adjustments
      to reconcile net loss to net cash used by operations:Decrease
      (increase) in accounts receivable
                                        
                                        
                                        (4,633
                                        )
                                        
                                        
                                        (21,063
                                        )Decrease
      (increase) in prepaid expenses
                                        
                                        
                                        79,766
                                        
                                        
                                        
                                        10,047Decrease
      (increase) in inventory
                                        
                                        
                                        22,997
                                        
                                        
                                        
                                        46,954Decrease
      in trade secrets
                                        
                                        
                                        -
                                        
                                        
                                        
                                        374,000Decrease
      (increase) in deposits
                                        
                                        
                                        (17,365
                                        )
                                        
                                        
                                        (36,949
                                        )Increase
      (decrease)  in accounts payable & accrued
      expenses
                                        
                                        
                                        461,229
                                        
                                        
                                        
                                        28,244Increase
      (decrease) in product recall reserve
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (26,999
                                        )Net
      cash used by operating activities
                                        
                                        
                                        (856,231
                                        )
                                        
                                        
                                        (1,436,673
                                        )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of equipment
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (21,812
                                        )Net
      cash provided (used) in investing activities
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (21,812
                                        )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from notes payable
                                        
                                        
                                        319,700
                                        
                                        
                                        
                                        -Payment
      of notes payable
                                        
                                        
                                        (135,000
                                        )
                                        
                                        
                                        -Proceeds
      from the sale of common stock and warrants
                                        
                                        
                                        235,000
                                        
                                        
                                        
                                        250,000Proceeds
      from the re-pricing of warrants
                                        
                                        
                                        88,560
                                        
                                        
                                        
                                        -Net
      cash provided by financing activities
                                        
                                        
                                        508,260
                                        
                                        
                                        
                                        250,000NET
      INCREASE (DECREASE) IN CASH
                                        
                                        
                                        (347,971
                                        )
                                        
                                        
                                        (1,208,485
                                        )CASH
      - Beginning of period
                                        
                                        
                                        351,627
                                        
                                        
                                        
                                        1,216,495CASH
      - End of period
                                        
                                        $
                                        3,656
                                        
                                        
                                        $
                                        8,010SUPPLEMENTAL
      CASH FLOW DISCLOSURES:Interest
      expense
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Income
      taxes
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        341
 
 See
accompanying condensed notes to interim consolidated financial
statements.




5
 Table of Contents


ANPATH GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008




Anpath
Group, Inc. (hereinafter the “Company”) was incorporated in the State of
Delaware on August 26, 2004.  The principal business of the Company is
a holding company. The Company’s sole subsidiary is EnviroSystems, Inc.
(hereinafter “ESI”) The Company’s name was changed to Anpath Group, Inc on
January 8, 2007 at a special meeting of the shareholders’ of the Company. The
Company’s former name was Telecomm Sales Network, Inc. The Company’s
headquarters is located in Mooresville, North Carolina. The Company’s year end
is March 31.
 
 ESI
provides infection control products on an international basis through both
direct sales and channels of distribution. While ESI’s current focus is on the
health care market, products are also sold to transportation, military and
industrial/institutional markets. ESI products are manufactured utilizing
chemical-emulsion technology, designed to make the products effective against a
broad spectrum of harmful organisms while safe to people, equipment and
habitat.
 
 NOTE
1 – BASIS OF PRESENTATION
 
 The
foregoing unaudited interim consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
consolidated financial information and with the instructions to Regulation S-K
as promulgated by the Securities and Exchange Commission. Accordingly, these
financial statements do not include all of the disclosures required by generally
accepted accounting principles in the United States of America for complete
financial statements. These interim financial statements should be read in
conjunction with the annual financial statements of the Company included in its
Annual Report on Form 10-K which was filed with the SEC on July 9, 2008. In the
opinion of management, all adjustments and disclosures necessary for a fair
presentation of these interim statements have been included.  All such
adjustments are, in the opinion of management, of a normal recurring
nature.
 
 Operating
results for the nine month period ending December 31, 2008 are not necessarily
indicative of the results that may be expected for the year ending March 31,
2009.
  NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 This
summary of significant accounting policies is presented to assist in
understanding the Company's financial statements. The financial statements and
notes are representations of the Company's management, which is responsible for
their integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America, and have been
consistently applied in the preparation of the financial
statements.
  The
following are summarized accounting policies considered to be significant by the
Company's management:
  Accounting
Method
  The
Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") and have been consistently applied in the
preparation of the consolidated financial statements.
  6
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
  Cash and Cash
Equivalents
  The
Company considers all unrestricted cash, short-term deposits, and other
investments with original maturities of no more than ninety days when acquired
to be cash and cash equivalents for the purposes of the statement of cash
flows
  Accounts
Receivable
  Accounts
receivable are uncollateralized customer obligations due under normal trade
terms requiring payment within thirty days from the invoice date or as specified
by the invoice and are stated at the amount billed to the customer. Customer
account balances with invoices dated over ninety days or ninety days past the
due date are considered delinquent.
 
 The
carrying amount of accounts receivable is reduced by a valuation allowance that
reflects management's best estimate of the amount that will not be collected.
Management reviews all accounts receivable balances that are considered
delinquent and, based on an assessment of current credit worthiness, estimates
the portion, if any, of the balance that will not be collected. In addition,
management periodically evaluates the adequacy of the allowance based on the
Company's past experience. Allowance for doubtful accounts amounted to $1,698
and $889 at December 31, 2008 and March 31, 2008,
respectively.
  Earnings
Per Share
  The
Company has adopted Statement of Financial Accounting Standard No. 128 "Earnings
per Share" ("SFAS 128"), which provides for calculation of "basic" and "diluted"
earnings per share. Basic earnings per share includes no dilution and is
computed by dividing net income available to common shareholders by the weighted
average common shares outstanding for the period. Diluted earnings per share
reflect the potential dilution of securities that could share in the earnings of
an entity similar to fully diluted earnings per share. Although there were
common stock equivalents outstanding at December 31, 2008 and March 31, 2008,
they were not included in the calculation of earnings per share because their
inclusion would have been considered anti-dilutive.
  Provision for
Taxes
  Income
taxes are provided based upon the liability method of accounting pursuant to
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). Under this approach, deferred income taxes are recorded to
reflect the tax consequences in future years of differences between the tax
basis of assets and liabilities and their financial reporting amounts at each
year-end. A valuation allowance is recorded against deferred tax assets if
management does not believe the Company has met the "more likely than not"
standard imposed by SFAS 109 to allow recognition of such an asset.
  At
December 31, 2008, the Company had net deferred tax assets calculated at an
expected rate of 34% of approximately $13,235,000 (March 31, 2008 - $8,695,000)
principally arising from net operating loss carry forwards and stock
compensation. As management of the Company cannot determine that it is more
likely than not that the Company will realize the benefit of the net deferred
tax asset, a valuation allowance equal to the net deferred tax asset was
recorded at December 31, 2008.
  The
significant components of the deferred tax asset at December 31, 2008 and March
31, 2008 were as follows:
  December
      31,
                    
                    
                    March
      31,2008
                    
                    
                    2008Estimated
      net operating loss carry forward
                    
                    $
                    28,927,000
                    
                    
                    $
                    25,574,000Deferred
      tax asset
                    
                    $
                    13,235,000
                    
                    
                    $
                    8,695,000Deferred
      tax asset valuation allowance
                    
                    
                    (13,235,000
                    )
                    
                    
                    (8,695,000
                    )Net
      deferred tax asset
                    
                    $
                    -
                    
                    
                    $
                    -
  7
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
  At
December 31, 2008, the Company has net operating loss carry forwards of
approximately $28,927,000 ($25,574,000 in March 31, 2008), which expire in the
years 2023 through 2027. The change in the allowance account from March 31, 2008
to December 31, 2008 was $4,540,000.
  Although
we believe that our estimates are reasonable, no assurance can be given that the
final tax outcome of these matters will not be different than that which is
reflected in our tax provisions. Ultimately, the actual tax benefits to be
realized will be based upon future taxable earnings levels, which are very
difficult to predict.
 
 Fair Value
Measurements
 
 SFAS No.
157, Fair Value Measurements ("SFAS 157"), defines fair value, establishes a
framework for measuring fair value in accordance with generally accepted
accounting principles, and expands disclosures about fair value
measurements.  On April 1, 2008, the Company adopted the provisions of
SFAS No. 157 related to its financial assets and liabilities measured at fair
value on a recurring basis. SFAS No. 157 establishes a fair value hierarchy that
prioritizes the inputs used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurement) and the lowest priority to
unobservable inputs (Level 3 measurement).
  The three
levels of the fair value hierarchy defined by SFAS No. 157 are as
follows:
  Level 1 –
Quoted prices are available in active markets for identical assets or
liabilities. Active markets are those in which transactions for the asset or
liability occur with sufficient frequency and volume to provide pricing
information on an ongoing basis.
  Level 2 –
Pricing inputs are other than quoted prices in active markets included in Level
1, which are either directly or indirectly observable as of the reporting date.
Level 2 includes those financial instruments that are valued using models or
other valuation methodologies. These models are primarily industry-standard
models that consider various assumptions, including quoted forward prices for
commodities, time value, volatility factors, and current market and contractual
prices for the underlying instruments, as well as other relevant economic
measures. Substantially all of these assumptions are observable in the
marketplace throughout the full term of the instrument, can be derived from
observable data or are supported by observable levels at which transactions are
executed in the marketplace.
  Level 3 –
Pricing inputs include significant inputs that are generally unobservable from
objective sources. These inputs may be used with internally developed
methodologies that result in management's best estimate of fair value. Level 3
instruments include those that may be more structured or otherwise tailored to
the Company's needs.
  On
April 1, 2008, we adopted SFAS 157. We had no assets or liabilities
measured at fair value on a recurring basis. Therefore, the initial adoption of
SFAS 157 had no impact on our Consolidated Financial Statements. On December 14,
2007 the FASB issued a proposed FASB staff position ("FSP") that would amend
SFAS 157 to delay its effective date for all non-financial assets and
non-financial liabilities, except for those that are recognized or disclosed at
fair value in the financial statements on a recurring basis, that is, at least
annually. For items within the scope of the proposed FSP the effective date of
SFAS 157 would be delayed to fiscal years beginning after November 15, 2008
(fiscal 2010 for the Company) and interim periods within those fiscal years.
During February 2008, the FASB confirmed and made effective the FSP. The Company
has chosen not to implement SFAS 157 for non-financial assets and non-financial
liabilities at this time.
  8
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
  Recent Accounting
Pronouncements
  In May
2008, FASB issued FASB Staff Position (“FSP”) APB 14-1, “Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 clarifies
that convertible debt instruments that may be settled in cash upon either
mandatory or optional conversion (including partial cash settlement) are not
addressed by paragraph 12 of APB Opinion No.14, “Accounting for Convertible Debt
and Debt issued with Stock Purchase Warrants.” Additionally, FSP APB 14-1
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB 14-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. The Company will adopt FSP APB 14-1 beginning in the first
quarter of 2009, and this standard must be applied on a retrospective basis. The
Company is evaluating the impact the adoption of FSP APB 14-1 will have on its
consolidated financial position and results of operations.
  During
May 2008, the FASB issued Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted
Accounting Principles No. 162("SFAS 162"). SFAS 162 is intended to
improve financial reporting by identifying a consistent framework, or hierarchy,
for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles for nongovernmental entities. The Company does not expect the
adoption of any standards to have a direct material impact on its financial
position or results of operations.
  In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS
161), Disclosures about Derivative Instruments and Hedging Activities an
amendment of FASB Statement No. 133, which requires enhanced disclosures about
an entity's derivative and hedging activities and improves the transparency of
financial reporting. This Statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008, with
early application encouraged. This Statement encourages, but does not require,
comparative disclosures for earlier periods at initial adoption. Management has
not determined the effect that adopting this statement would have on the
Company’s financial condition or results of operation.
 
 Fixed
Assets
 
 Equipment
is recorded at cost. Depreciation and amortization are provided using the
straight-line method over the useful lives of the respective assets, typically
3-7 years. Major additions and betterments are capitalized. Upon retirement or
disposal, the cost and related accumulated depreciation or amortization is
removed from the accounts and any gain or loss is reflected in
operations.
 
 The
following table summarizes the Company's fixed assets:
 December
      31,
                                
                                
                                March
      31,2008
                                
                                
                                2008Office
      Equipment
                                
                                $
                                51,347
                                
                                
                                $
                                51,347Furniture
      & Fixtures
                                
                                
                                11,825
                                
                                
                                
                                11,825Marketing/Trade
      Show Equipment
                                
                                
                                2,659
                                
                                
                                
                                2,659Manufacturing
      Equipment
                                
                                
                                195,138
                                
                                
                                
                                195,138Laboratory
      Equipment
                                
                                
                                139,862
                                
                                
                                
                                139,138Capitalized
      Software
                                
                                
                                3,210
                                
                                
                                
                                3,210404,041
                                
                                
                                
                                382,230Allowance
      for Depreciation and amortization
                                
                                
                                (188,953
                                )
                                
                                
                                (138,712
                                )Fixed
      Assets, net
                                
                                $
                                215,088
                                
                                
                                $
                                265,329
 
 Depreciation
expense for the Nine Months periods ending December 31, 2008 and 2007 was
$50,241 and $37,343 respectively.
 
 During
the Nine Months ended December 31, 2008, depreciation expense in the amount of
$25,566 was recorded for manufacturing equipment that sat idle and is included
as part of Expenses on the Consolidated Statement of Operations.
  9
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
  Going
Concern
 
 The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.
 
 As shown
in the financial statements, the Company incurred a net loss for the Nine Months
ended December 31, 2008 and 2007, and has an accumulated deficit of $28,926,634
since the inception of the Company. These factors indicate that the Company may
be unable to continue in existence. The financial statements do not include any
adjustments related to the recoverability and classification of recorded assets,
or the amounts and classification of liabilities that might be necessary in the
event the Company cannot continue existence. The Company anticipates its
projected business plan will require a minimum of $2,000,000 to continue
operations for the next twelve months.
 
 Impairment of Long Lived
Assets
 
 The
Company assesses potential impairment of its long lived assets, which include
its property and equipment and its identifiable intangibles such as its trade
secrets under the guidance of Statement of Financial Standards No. 144,
“Accounting for the Impairment or Disposal of Long Lived Assets.” On an annual
basis, or as events and circumstances indicate that an asset may be impaired,
the Company assesses potential impairment of its long lived assets. The Company
determines impairment by measuring the undisclosed future cash flows generated
by the assets, comparing the results to the assets' carrying value and adjusting
the assets to the lower of the carrying value to fair value and charging current
operations for any measured impairment. The Company determined that the Trade
Secrets was impaired by $374,000 in the year ending March 31, 2008 and has taken
a charge for this amount.
 
 Concentration
Risk
 
 Sales to
two customers represented approximately 72.4% of our sales for the Nine Months
ended December 31, 2008 and sales to four customers represented approximately
93.4% of our sales for the Nine Months ended December 31, 2007.
 
 The
Company relied upon a single supplier to provide it with PCMX, which is the
biocide used in our chemical emulsion disinfectant products. Although there are
other suppliers of this material, a change in suppliers would cause a delay in
the production process, which could ultimately affect operating
results.
 
 Principles of
Consolidation
 
 The
consolidated financial statements include the accounts of the Company and its
subsidiary. All significant intercompany transactions and balances have been
eliminated in consolidation. References herein to the Company include the
Company and its subsidiary, unless the context otherwise requires.
 
 Reclassifications
 
 Certain
amounts have been reclassified from the prior financial statements for
comparative purposes.
  10
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
  Revenue
Recognition
 
 Revenue
is generally recognized and earned when all of the following criteria are
satisfied: a) persuasive evidence of sales arrangements exists; b) delivery has
occurred; c) the sales price is fixed or determinable; and d) collectibility is
reasonably assured.
 
 Persuasive
evidence of an arrangement is demonstrated via a purchase order from our
customers. Delivery occurs when title and all risks of ownership are transferred
to the purchaser which generally occurs when the products are shipped to the
customer. No right of return exists on sales of product except for defective or
damaged products. The sales price to the customer is fixed upon acceptance of
purchase order. To assure that collectibility is reasonably assured, credit
evaluations are performed on all customers.
 
 Stock Based
Compensation
 
 The
Company measures compensation cost for its stock based compensation plans under
the provisions of Statement of Financial Accounting Standards No. 123(R),
“Accounting for Stock Based Compensations.” This statement supersedes APB
Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related
implementation guidance. This statement establishes standards for the accounting
for transactions in which an entity exchanges its equity instruments for goods
or services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. This statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123(R), "Accounting for Stock-Based Compensation",
requires companies to include expenses in net income (loss) and earnings (loss)
for each issuance of options and warrants. The Company uses the Black-Scholes
option valuation model to value its issuance of options and
warrants.
 
 Use of
Estimates
 
 The
process of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated
amounts.
  NOTE
3 - INVENTORIES
 
 Inventories
consist of the following:
  December
      31,
                    
                    
                    March
      31,2008
                    
                    
                    2008Raw
      material
                    
                    $
                    26,402
                    
                    
                    $
                    36,540Finished
      goods
                    
                    
                    -
                    
                    
                    
                    12,859Allowance
      for obsolescence
                    
                    
                    -
                    
                    
                    
                    -Inventory,
      net
                    
                    $
                    26,402
                    
                    
                    $
                    43,399
  11
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
  NOTE
4 - NOTES, LOANS AND CONVERTIBLE DEBT
 
 Notes
payable consists of the following:
 
 December
      31,
                      
                      
                      March
      31,2008
                      
                      
                      20087%
      note due May 8, 2009  payable to ANPG Lending,
    Inc
                      
                      $
                      1,500,000
                      
                      
                      $
                      1,500,0006%
      notes due November 26, 2008 payable to Arthur Douglas &
      Associates
                      
                      
                      25,000
                      
                      
                      
                      -6%
      notes due January 30, 2009 payable to Arthur Douglas &
      Associates
                      
                      
                      25,000
                      
                      
                      
                      -6%
      notes due February 14, 2009 payable to Arthur Douglas &
      Associates
                      
                      
                      25,000
                      
                      
                      
                      -6%
      notes due February 24, 2009 payable to Arthur Douglas &
      Associates
                      
                      
                      10,000
                      
                      
                      
                      -Discount
      on notes payable
                      
                      
                      (513,798
                      )
                      
                      
                      (1,250,000
                      )$
                      1,071,202
                      
                      
                      $
                      250,000
 
 Notes
payable-related parties consist of the following:
 
 December
      31,
                      
                      
                      March
      31,2008
                      
                      
                      20086%
      notes due November 25, 2008 payable to our CEO
                      
                      
                      25,000
                      
                      
                      
                      -6%
      notes due December 11, 2008 payable to our CEO
                      
                      
                      25,000
                      
                      
                      
                      -6%
      notes due December 28, 2008 payable to our CEO
                      
                      
                      12,000
                      
                      
                      
                      -6%
      notes due December 29, 2008 payable to our CFO
                      
                      
                      6,000
                      
                      
                      
                      -6%
      notes due January 15, 2009 payable to our CEO
                      
                      
                      9,000
                      
                      
                      
                      -6%
      notes due February 4, 2009 payable to our CEO
                      
                      
                      6,000
                      
                      
                      
                      -6%
      notes due March 15, 2009 payable to our CEO
                      
                      
                      16,700
                      
                      
                      
                      -Discount
      on notes payable
                      
                      
                      (6,750
                      )
                      
                      
                      -$
                      92,950
                      
                      
                      $
                      -
 In the
Nine Months ended December 31, 2008, the Company borrowed from various parties
the aggregate amount of $319,700. These loans are due on demand after 90 days
and bear interest of 6% payable at maturity. Each note is convertible into
common stock of the Company at a conversion rate of $.88 per share. The loans
are initially convertible into 363,294 shares of the Company’s common stock.
Detachable warrants were also issued with each note giving the holder the right
to purchase an aggregate 363,294 shares of the Company’s common stock at an
exercise rice of $.88 per share.
 
 In
accordance with EITF 00-27, the Company recognized the beneficial conversion
feature associated with the notes convertibility into shares and warrants. The
total value of warrants was determined using the Black Scholes Option Price
Calculation. In employing this model, the following assumptions were used: The
actual three month T-Bill rate on the advance dates for the risk-free rate; The
actual share price on advance dates; expected volatility of 67.36%, no dividends
and a five year horizon in all Black Scholes Option Price calculations. The
total value of warrants was $122,375 and the total value of shares was
$122,375.
 
 Following
the guidance provided by EITF 00-27 the Company allocated proceeds first to the
warrants issuable upon conversion of the note. The value of the warrants was
recorded on the balance sheet as debt discounts and increases to shareholder’s
equity. The debt discounts are being amortized over the remaining life of the
convertible note.
  12
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
  NOTE
5 - COMMITMENTS AND CONTINGENCIES
 
 Operating
Leases
  The
Company has formal operating leases for all of its office and laboratory space.
Rent expense relating to operating spaces leased was approximately $64,328 and
$64,286 for the Nine Months ended December 31, 2008 and 2007,
respectively.
 Payments
      Due by PeriodContractual
      Obligations
                                                                      
                                                                      Total
                                                                      
                                                                      
                                                                      Less
      than 1 year
                                                                      
                                                                      
                                                                      1-3
      years
                                                                      
                                                                      
                                                                      4-5
      years
                                                                      
                                                                      
                                                                      After
      5 yearsOffice
      Lease
                                                                      
                                                                      $
                                                                      353,029
                                                                      
                                                                      
                                                                      $
                                                                      71,685
                                                                      
                                                                      
                                                                      $
                                                                      149,882
                                                                      
                                                                      
                                                                      $
                                                                      131,462
                                                                      
                                                                      
                                                                      $
                                                                      -Total
      Contractual Cash Obligations
                                                                      
                                                                      $
                                                                      353,029
                                                                      
                                                                      
                                                                      $
                                                                      71,685
                                                                      
                                                                      
                                                                      $
                                                                      149,882
                                                                      
                                                                      
                                                                      $
                                                                      131,462
                                                                      
                                                                      
                                                                      $
                                                                      -
  NOTE
6 - PREFERRED STOCK AND COMMON STOCK
 
 Preferred
Stock
  As of
December 31, 2008, no preferred stock has been issued by the
Company.
 
 Common
Stock
  On June
26, 2008, the Company entered into a Securities Purchase Agreement with The OGP
Group LLC, a Delaware limited liability company (“OGP”) pursuant to which the
Company sold to OGP 113,636 shares of restricted common stock of the Company at
a price of $0.88 per Share.  In addition, the Company issued to OGP a
five year warrant to purchase up to an aggregate of 113,636 shares of the
Company’s common stock at an exercise price of $0.88 per share. The warrants
were valued using the Black-Scholes option price calculation and the company
recorded $39,995 in expense in the issuance of the warrants. (See Note 9
Related Party Transactions)
 
 On
October 1, 2008, the Company entered into a consulting agreement with Arthur
Douglas and Associates, Inc for investment relations services. The Company
agreed to pay compensation to Arthur Douglas and Associates, Inc of 100,000
shares of restricted common stock per month for a period of 12 months. During
the quarter ended December 31, 2008, the Company issued 300,000 shares of
restricted common stock valued at $143,000 to Arthur Douglas and
Associates.
 
 On
December 17, 2008, MV Nanotech Corporation converted its notes payable in
the amount of $135,000 through the exercise of warrants. The Company issued
675,000 shares of restricted common stock in this transaction. (See Note 9
Related Party Transaction)
  13
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
  NOTE
7 - STOCK PURCHASE WARRANTS
 
 On
November 20, 2008, the Board of Directors approved the re-pricing of outstanding
stock purchase warrants held by MV Nanotech Corporation and Arthur Douglas and
Associates in connection with their assistance in raising capital funds for the
Company.  A total of 2,147,655 stock purchase warrants originally
priced from $2.50 to $1.25 were re-priced to $.20 per stock purchase warrant.
The Company valued the re-priced stock purchase warrants using the Black-Scholes
option price calculation method. The Company recorded a charge of $623,548 for
re-pricing these stock purchase warrants.
 
 On
November 26, 2008, the Board of Directors authorized the re-pricing of all
outstanding stock purchase warrants as a means for raising additional capital.
During December 2008, the Company received proceeds of $88,560 to re-price
442,801 stock purchase warrants to a new price of $.20 per stock purchase
warrant. The original price of these stock purchase warrants ranged from $1.25
to $2.50 per stock purchase warrant.
 
 The
following is a summary of all common stock warrant activity during the period
from March 31, 2007 through December 31, 2008:
 
 Number
      of
                    Shares
      Under Warrants
                  
                  
                  Exercise
      Price
                    Per Share
                  
                  
                  Weighted
                    Average
                    Exercise
      PriceWarrants
      issued and exercisable at:March
      31, 2007
                  
                  
                  4,713,533
                  
                  
                  $
                  2.50-5.00
                  
                  
                  $
                  1.97Warrants
      issued
                  
                  
                  4,250,000
                  
                  
                  
                  -
                  
                  
                  
                  -Warrants
      expired
                  
                  
                  (823,191
                  )
                  
                  
                  5.00
                  
                  
                  
                  5.00Warrants
      exercised
                  
                  
                  (200,000
                  )
                  
                  
                  1.25
                  
                  
                  
                  1.25Warrants
      issued and exercisable at:March
      31, 2008
                  
                  
                  7,940,342
                  
                  
                  $
                  .87-5.00
                  
                  
                  $
                  2.25Warrants
      issued
                  
                  
                  476,930
                  
                  
                  
                  0.20-0.88
                  
                  
                  
                  0.88Warrants
      expired
                  
                  
                  (178,007
                  )
                  
                  
                  5.00
                  
                  
                  
                  5.00Warrants
      exercised
                  
                  
                  (675,000
                  )
                  
                  
                  0.20
                  
                  
                  
                  0.20Warrants
      issued and exercisable at:December
      31, 2008
                  
                  
                  7,564,265
                  
                  
                  $
                  0.20-5.00
                  
                  
                  $
                  2.76
 
 The
following represents additional information related to common stock warrants
outstanding and exercisable at December 31, 2008:
 
 Outstanding
      and ExercisableRange
      of Exercise Price
                    
                    
                    Number
      of
                      Shares
      Under
                      Warrants
                    
                    Weighted
                      Average
                      Remaining
                      Contract
      Life in
                      Years
                    
                    Weighted
                      Average
                      Exercise
      Price$
                    5.00
                    
                    
                    
                    324,835
                    
                    0.81
                    
                    $
                    2.39$
                    0.20
      - 2.50
                    
                    
                    
                    2,762,500
                    
                    1.22
                    
                    
                    1.40$
                    2.70
                    
                    
                    
                    2,500,000
                    
                    3.52
                    
                    
                    2.70$
                    0.20
      - .88
                    
                    
                    
                    1,976,930
                    
                    4.17
                    
                    
                    .87Total
                    
                    
                    
                    7,564,265
                    
                    2.73
                    
                    
                    1.72
 
 The
Company used the Black-Scholes option price calculation to value the warrants
issued during  the nine months ended December 31, 2008 and the year
ending March 31, 2008 using the following assumptions: risk-free rate of
0.25-4.50%; volatility of 63% to 67; zero dividend yield; the actual exercise
term of the warrants issued and the exercise price of warrants
issued.
  14
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
  NOTE
8 - EQUITY COMPENSATION PLAN
 
 The
Company has two stock option plans: (a) the 2006 Stock Incentive Plan which has
been approved by the Board of Directors and is expected to be presented for
shareholder approval at the next shareholders' meeting and (b) the 2004 Equity
Compensation Plan which has been approved by both the Board of Directors and the
shareholders. An aggregate amount of common stock that may be awarded and
purchased under the Plans is 3,700,000 shares of the Company's common
stock.
 
 The
exercise price for incentive stock options granted under the 2006 and 2004 Plans
may not be less than the fair market value of the common stock on the date the
option is granted, except for options granted to 10% stockholders which must
have an exercise price of not less than 110% of the fair market value of the
common stock on the date the option is granted. The exercise price for
non-statutory options is determined by the Compensation Committee of our Board
of Directors. Incentive stock options granted under the plans have a maximum
term of ten years, except for grants to 10% stockholders which are subject to a
maximum term of five years. The term of non-statutory stock options is
determined by the Compensation Committee of our Board of Directors. Options
granted under the plans are not transferable, except by will and the laws of
descent and distribution.
 
 Under the
Plans during the Nine Months ended December 31, 2008 and the year ended March
31, 2008, the Company granted 42,000 and 98,200 stock options to employees and
directors. The options were granted with an exercise prices $0.63-2.85 and will
fully vest from one to four years of service. The options were valued using the
fair value method as prescribed by SFAS No. 123 (R), resulting in a total value
associated with these options for the Nine Months ended December 31, 2008 and
the year ended March 31, 2008 of $15,000 and $86,612. Pursuant to SFAS No.
123(R), this amount will be accrued to compensation expense over the expected
service term as vested. The accrued compensation expense related to these
options for the Nine Months ended December 31, 2008 and 2007 is $148,095 and
$136,590 and has been expensed in the Nine Months ended December 31, 2008 and
2007, respectively pursuant to the application of SFAS No. 123(R), and credited
to additional paid-in capital.
 
 As of
December 31, 2008 there were 2,151,900 remaining options available to be issued
in the 2006 Stock Incentive Plan and the 2004 Equity Compensation
Plan.
 
 The
following is a summary of all common stock option activity during the year ended
March 31, 2008 and the Nine Months ended December 31, 2008:
  Shares
      Under
                    Options
                    Outstanding
                  
                  
                  Weighted
                    Average
                    Exercise
      PriceOptions
      outstanding at March 31, 2007
                  
                  
                  2,578,255
                  
                  
                  $
                  2.73Options
      granted
                  
                  
                  98,200
                  
                  
                  
                  1.75Options
      expired
                  
                  
                  -
                  
                  
                  
                  -Options
      exercised
                  
                  
                  -
                  
                  
                  
                  -Options
      outstanding at March 31, 2008
                  
                  
                  2,676,455
                  
                  
                  
                  2.75Options
      granted
                  
                  
                  42,000
                  
                  
                  
                  0.63Options
      expired
                  
                  
                  (373,265
                  )
                  
                  
                  2.88Options
      exercised
                  
                  
                  -
                  
                  
                  
                  -Options
      outstanding at December 31, 2008
                  
                  
                  2,345,190
                  
                  
                  $
                  2.69
  Options
                    Exercisable
                  
                  
                  Weighted
                    Average
                    Exercise
      Price
                    per
      ShareOptions
      exercisable at March 31, 2008
                  
                  
                  2,298,955
                  
                  
                  $
                  2.75Options
      exercisable at December 31, 2008
                  
                  
                  2,068,965
                  
                  
                  $
                  2.78
  15
 Table of Contents
  ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
 The
following represents additional information related to common stock options
outstanding and exercisable at December 31, 2008:
 
 Range
                    of
                    Exercise
                    Price
                  
                  
                  Number
                    Outstanding
      at
                    March
      31,
                    2008
                  
                  
                  Weighted
                    Average
                    Remaining
                    Contractual
                    Life
                    Years
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                    (Total
                    Shares)
                  
                  
                  Number
                    Exercisable
                    At
                    December
      31,
                    2008
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                    (Exercisable
                    Shares)$
                  3.40
                  
                  
                  
                  702,392
                  
                  
                  
                  5.84
                  
                  
                  $
                  3.40
                  
                  
                  
                  702,392
                  
                  
                  $
                  3.40$
                  5.00
                  
                  
                  
                  72,333
                  
                  
                  
                  2.13
                  
                  
                  $
                  5.00
                  
                  
                  
                  72,333
                  
                  
                  $
                  5.00$
                  1.61
      - 2.95
                  
                  
                  
                  22,365
                  
                  
                  
                  7.71
                  
                  
                  $
                  2.06
                  
                  
                  
                  22,365
                  
                  
                  $
                  2.06$
                  1.00
      - 2.85
                  
                  
                  
                  1,506,100
                  
                  
                  
                  4.83
                  
                  
                  $
                  2.31
                  
                  
                  
                  1,265,475
                  
                  
                  $
                  2.33$
                  0.63
                  
                  
                  
                  42,000
                  
                  
                  
                  9.83
                  
                  
                  $
                  0.63
                  
                  
                  
                  6,400
                  
                  
                  $
                  0.63$
                  0.63
      - 5.00
                  
                  
                  
                  2,345,190
                  
                  
                  
                  5.15
                  
                  
                  $
                  2.69
                  
                  
                  
                  2,068,965
                  
                  
                  $
                  2.78
 
 Total
compensation cost related to non-vested stock options as of December 31, 2008
and March 31, 2008 was $263,362 and $409,158, respectively.
 
 Weighted
average period of non-vested stock options was 7.89 years as of December 31,
2008.
 
 The
Company used the Black-Scholes option price calculation to value the options
granted in the Nine Months ended December 31, 2008 and the year ended March 31,
2008 using the following assumptions: risk-free rate of 1% to 4.5%; volatility
of 63% to 67%; zero dividend yield; half the actual term and exercise price of
options granted.
 
 NOTE
9 – RELATED PARTY TRANSACTIONS
 
 Our CFO,
and a member of our Board of Directors, is a 5% owner and CFO of Mastodon
Ventures, Inc. Mastodon provides office space and incidentals for our CFO at no
cost to the Company. On June 26, 2008 Mastodon advanced the Company $35,000 in a
short-term advance. On June 30, 2008, the Company returned to Mastodon $35,000
in repayment of the June 26, 2008 advance and on that date had no balances
outstanding with Mastodon.
 
 On July
29, and August 12, 2008, MV Nanotech Corporation, a subsidiary of Mastodon made
loans to the Company in the amounts of $75,000 and $60,000,
respectively.  The loans are due on demand after 90 days and bear
interest at 6%. In addition, the Company issued to Mastodon five year warrants
to purchase up to an aggregate of 153,409 shares of the Company’s common stock
at an exercise price of $0.88 per share. MV Nanotech transferred 100,000 of
these warrants to an non-affiliated individual. On November 20, 2008, the Board
of Directors re-priced all outstanding warrants held by MV Nanotech to $.20 per
warrant. On December 17, 2008, MV Nanotech Corporation converted its notes
payable in the amount of $135,000 through the exercise of warrants. The Company
issued 675,000 shares of restricted common stock in this transaction. At
December 31, 2008, the Company does not owe MV Nanotech Corporation any
amounts.
  16
 Table of Contents
 ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2008
 
 During
the nine months ended December 31, 2008, our CEO, made loans to the Company in
the amount of $93,700.  The loans are due on demand after 90 days and
bear interest at 6%. In addition, the Company issued to the CEO five year
warrants to purchase up to an aggregate of 106,477 shares of the Company’s
common stock at an exercise price of $0.88 per share. The warrants were valued
using the Black-Scholes option price calculation and the company recorded
$63,386 in expense in the issuance of the warrants. At December 31, 2008
the balance owed to the CEO on these loans was $93,700 plus accrued interest of
$1,386.
 
 On
September 30, 2008, our CFO, made a loan to the Company in the amounts of
$6,000.  The loan is due on demand after 90 days and bear interest at
6%. In addition, the Company issued to the CFO a five year warrant to purchase
up to an aggregate of 6,818 shares of the Company’s common stock at an exercise
price of $0.88 per share. The warrants were valued using the Black-Scholes
option price calculation and the company recorded $3,958 in expense in the
issuance of the warrants. At December 31, 2008 the balance owed to the CFO
on this loan was $6,000 plus accrued interest of $92.
 
 At
December 31, 2008 the CEO and CFO have deferred their salaries in the amount
$80,165 and $46,672, respectively.
 
 On June
26, 2008, The OGP Group LLC, purchased 113,636 shares of restricted common stock
of the Company at a price of $0.88 per Share.  In addition, the
Company issued to OGP a five year warrant to purchase up to an aggregate of
113,636 shares of the Company’s common stock at an exercise price of $0.88 per
share. The warrants were valued using the Black-Scholes option price calculation
and the company recorded $39,995 in expense in the issuance of the
warrants.  In a separate agreement between OGP and MV Nanotech
Corporation, a subsidiary of Mastodon Ventures, Inc in which our CFO is a 5%
owner and CFO, MV Nanotech has agreed to sell to OGP 50,000 shares of our
Company common stock that MV Nanotech owns for $100. In addition after September
24, 2008, OGP has the right to present to MV Nanotech up to 113,636 shares of
our common stock for purchase at a price of $1.00 per share.
 
 NOTE
10 – SUBSEQUENT EVENT
 
 On
February 9, 2009, our CEO made an additional loan to the Company in the amount
of $8,510.  The loan is due on demand after 90 days and bear interest
at 6%. In addition, the Company issued to the CEO five year warrants to purchase
up to an aggregate of 19,341 shares of the Company’s common stock.
 
 Our CEO,
CFO, Chief Science Officer and Vice President of Sales and Marketing have agreed
to receive common stock for their compensation due for the month of February
2009. The Company will issue 282,565 shares of common stock valued at $.215 per
share.
  17
 Table of Contents
 
 CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
 This
Report contains certain financial information and statements regarding our
operations and financial prospects of a forward-looking nature. Although these
statements accurately reflect management’s current understanding and beliefs, we
caution you that certain important factors may affect our actual results and
could cause such results to differ materially from any forward-looking
statements which may be deemed to be made in this Report. For this purpose, any
statements contained in this Report which are not statements of historical fact
may be deemed to be forward-looking statements. Without limiting the generality
of the foregoing, words such as “may”, “intend”, “expect”, “believe”,
“anticipate”, “could”, “estimate”, “plan”, or “continue” or the negative
variations of these words or comparable terminology are intended to identify
forward-looking statements. There can be no assurance of any kind that such
forward-looking information and statements in any way reflect our actual future
operations and/or financial results, and any of such information and statements
should not be relied upon either in whole or in part in any decision to invest
in the shares. Many of the factors, which could cause actual results to differ
from forward looking statements, are outside our control. These factors include,
but are not limited to, the factors discussed under “Risk Factors” in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2008 and incorporated
herein by reference.
 
 ITEM 2. MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
 Overview
 Through
our wholly-owned subsidiary EnviroSystems, Inc., we produce cleaning and
disinfecting products that we believe will help prevent the spread of infectious
microorganisms while minimizing the harmful effects to people, equipment or the
environment.
 
 Products. Our infection
prevention products will target a United States market for infection prevention
products and services estimated at $11.8 billion in 2009. It is further
estimated that consumables/disposables constitute 91% of this market. The total
global demand is believed to be approximately 3-3.5 times that of the U.S. The
demand for disinfectants in the U.S. is estimated to be $2.2 billion to
$2.5 billion in the same period.
 
 Primary
Technology Platform
  We have
developed and have trade secret rights to what we believe to be a unique and
proprietary Parachlorometaxylenol (more commonly known as PCMX) based chemical
emulsion biocide technology platform.  PCMX has been widely used as an
antimicrobial in surgical hand and skin scrubs.  Based on this
technology, we have developed a portfolio of efficacious
disinfectants/sanitizers/cleaners that achieve bio-decontamination without using
toxic & corrosive chemicals.  Our PCMX chemical emulsion biocides
have the following characteristics:
  ·
              They
      kill a wide range of infectious microorganism, including
    MRSA;
  ·
              They
      minimize harmful effects to people and do not cause skin, eye, pulmonary,
      oral or dermal irritation;
  ·
              They
      are non-corrosive (EnviroTru®/EnviroTru®
      1453 are included in the Boeing Qualified Products List (QPL) and conform
      with AMS-1452A, 1453 & D6-7127 Aircraft Corrosion Specifications);
      and
  In
addition to the foregoing benefits, we also believe that our proprietary PCMX
chemical emulsion biocide technology will act as a barrier to
competition.
  18
 Table of Contents
  Product Categories
  We
believe that the concept of an easy-to-use and effective line of decontaminants
that fits with a favorable environmental profile offers us a unique opportunity
to differentiate our products in multiple infection prevention markets. It is
our intention to use the unique characteristics of our chemical emulsion
technology to build acceptance of our decontaminants as an alternative which is
significantly different from other biocidal products that currently dominate the
marketplace.  We are exploiting our technology platform to establish a
broad product portfolio in the following categories:
  ·
              Surface
      care products - disinfectants, sanitizers and cleaners (including
      wipes);
  ·
              Animal
      care products - skin and hoof care treatment and animal
      shampoo;
  ·
              Personal
      care products – antimicrobial hand soaps, hand sanitizers and facial
      scrubs (including wipes); and
  ·
              Geo-Biocides
      – biocides for use in the oil and gas
industry.
  Surface
Care Products
  We
believe that convenience, safety, the effect on air quality and environmental
responsibility are increasingly playing a greater role in the buying decision
for surface cleaners/disinfectants. We believe that consumers in general have
become more health conscious and at the same time have grown more concerned
about the effect that traditional cleaners/disinfectants have on internal and
external environments.  Often consumers are required to settle for a
trade-off between effectiveness and environmental friendliness.  We
believe that our surface care products will provide consumers with products that
are both efficacious and safe for the environment.
  Our
surface care products include the following.
  ·
              EnviroTru®Disinfectant
      & Cleaner Deodorizer,which is a
      multi-purpose, ready-to-use disinfectant, sanitizer and deodorizing
      cleaner for use on hard surfaces. EnviroTru® is
      effective against numerous organisms without causing any adverse effects
      to surfaces, humans or the environment. EnviroTru® is
      registered by the Environmental Protection Agency (EPA) and meets EPA
      requirements for Toxicity Category IV (minimal effects noted, no
      precautionary or first aid statements required; no harmful dermal, ocular,
      inhalation or ingestion effects). EnviroTru®
      also conforms to AMS 1452A, AMS 1453 and Boeing D6-7127 specifications for
      non-corrosion and materials compatibility. EnviroTru®
      has no special handling requirements, does not require protective
      clothing, gloves or special ventilation and is
    non-flammable.
  EnviroTru® is also
effective for use in animal housing facilities, including veterinary clinics,
farms, equine farms, kennels, livestock houses, swine houses, poultry houses and
laboratories.  When used as directed, EnviroTru® will
clean, deodorize and disinfect veterinary feeding and watering equipment,
utensils, instruments, cages, kennels, stables, catteries, etc.
  19
 Table of Contents
  ·
              EnviroTru®1453Disinfectant
      & Cleaner Deodorizer, whichis a
      multi-purpose, ready-to-use disinfectant, sanitizer and deodorizing
      cleaner for use on aircraft hard surfaces, including exterior and interior
      surfaces such as cabins, toilets, sinks, faucets, counter tops and luggage
      compartments. EnviroTru®1453
      conforms to AMS 1452A, AMS 1453 and Boeing D6-7127 specifications for
      non-corrosion and materials compatibility. EnviroTru®1453
      is registered by the Environmental Protection Agency (EPA) and meets EPA
      requirements for Toxicity Category IV (minimal effects noted, no
      precautionary or first aid statements required; no harmful dermal, ocular,
      inhalation or ingestion effects).  EnviroTru®1453
      has no special handling requirements, does not require protective
      clothing, gloves or special ventilation and is
    non-flammable.
  ·
              SurfaceTruTMDeodorizing
      Cleaner, which is a powerful, multi-purpose cleaner and deodorizer
      that’s safe for use on a variety of surfaces.  SurfaceTruTM is
      effective for removing dirt and grime and is gentle to application
      surfaces, safe for the user and friendly to the environment. It has no
      special handling requirements, does not require protective clothing,
      gloves or special ventilation and is
  non-flammable.
  ·
              SurfaceTruTMCleaning & Deodorizing Wipes, which are powerful cleaning and
      deodorizing wipes that are packaged in their own individual foil wrappers
      for easy portability. Each wipe opens to a large, 9” x 8” durable cloth
      with a smooth finish that can be conveniently used on a variety of
      surfaces. SurfaceTruTM Wipes can be carried with you for use when an
      immediate need for an effective, yet gentle cleaner
  arises.
  ·
              Electrostatic
      Sprayers.   In addition to the foregoing products,
      we also market electrostatic sprayers produced by Electrostatic Spraying
      Systems, Inc. (“ESS”)
      which may be used to apply our liquid surface care products to the target
      surfaces. Electrostatic sprayers provide superior spray coverage by more
      effectively dispensing solutions compared to conventional sprayers; tests
      have demonstrated 4-10 times better coverage. Electrostatic sprayers
      operate by producing highly charged spray droplets using a unique embedded
      induction electrode design. This induction charging results in spray
      droplets that have a force of attraction that is 75 times that of gravity.
      This means droplets will reverse direction and move upwards, against
      gravity, to coat hidden surfaces, and wrap around objects resulting in
      complete, even coverage of the target. When using an electrostatic sprayer
      it is possible to deliver ESI’s liquid disinfectants and cleaners to
      difficult to reach locations that may harbor disease-causing
      microorganisms.
  In
October 2008, we announced that ESI entered into a prime distributor agreement
with ESS.  Using ESS electrostatic sprayers in conjunction with our
EnviroTru®
Disinfectant Cleaner creates an electrostatically charged decontamination system
which provides an efficient system to quickly administer EnviroTru®
Disinfectant Cleaner to large areas, difficult to reach spaces, or to
high-traffic areas that require frequent treatment. This system substantially
improves the bio-availability of EnviroTru®.  The
result is reduced manpower costs and simultaneously improved coverage, reducing
the threat of disease-causing microorganisms.  In summary, the system
offers an extremely efficient, cost-effective way to realize the advantages of
EnviroTru®.
  20
 Table of Contents
  Future
Surface Care Products
  We are
conducting research and development and are planning to reintroduce a hospital
grade disinfectant product to replace one of our earlier products called
EcoTru®.  The reformulated disinfectant is expected to demonstrate
through testing that it will effectively kill numerous bacteria, fungi, and
viruses, including MRSA, Hepatitis B and C, HIV, herpes and influenza. Likewise,
in addition to being highly effective as a disinfectant, our reformulated
hospital grade product is expected to occupy a unique position in the market
place, combining this microbial effectiveness in a disinfectant product which
will also have a favorable profile for health and environmental
effects.
  Animal
Care Products
  We
believe that the microorganism killing properties of our products, combined with
their safety profile, make them ideally suited for use as a topical treatment
for skin ailments caused by microorganisms.  We have worked to develop
products for use on animals and have focused initially on the equine market with
the introduction of EquineTru®Skin and
Hoof Treatment.  EquineTru® Skin & Hoof Treatment is an
antiseptic that may be used to rapidly, safely and effectively treat common skin
and hoof conditions caused by microorganisms without irritating a horse’s skin
or drying out its hoofs.  The active ingredient used in EquineTru®
Skin and Hoof Treatment, PCMX, has been widely used as an antimicrobial in
surgical hand and skin scrubs and it is successfully used as a topical
antiseptic for skin and mucous membranes.  It is also used as a
fungicide in a variety of applications.  EquineTru® Skin and Hoof
Treatment has been reviewed and cleared for market by the Center for Veterinary
Medicine (CVM), a division of the U.S. Food and Drug Administration (FDA). Its
use is permitted for United States Equestrian Federation (USEF) and Fédération
Equestre Internationale (FEI) regulated competitions.
  Future Animal Care Product
Considerations
  We are
working on developing several variations of EquineTru® Skin and
Hoof Treatment for specific application, an animal shampoo and skin treatments
for household pets.
  Personal
Care Products
  Personal
care products such as antimicrobial hand soaps and hand sanitizers, have
traditionally been purchased by hospitals and health
clinics.  However, due to an increased awareness of germs and
transmission of disease, individual consumers as well as institutional buyers
such as health clubs, schools, restaurants and grocery stores are increasingly
purchasing these products.  These consumers, however, appear to have
little understanding of the benefits and/or adverse consequences of the products
they choose.
  In
response to what we believe will be an increasing market for these products, we
are developing our KeraTruTMPersonal
Care line of products which will include hand sanitizers and
antimicrobial soaps.  Our KeraTruTM personal
care line of products are safe and include several alcohol free products and we
believe that they are more than or as effective as the leading
brands.
  Geo
Biocides
  In
response to requests from members of the oil & gas industry for a non-toxic
but effective disinfectant to replace toxic biocides used in hydraulic
fracturing, we developedGeoTruTM
Concentrate designed to be used as a “down-hole” biocide in the oil &
gas industry.  GeoTruTM Concentrate is a surfactant-based anionic
chemistry with extended shelf life that is effective when used under aerobic or
anaerobic conditions.  It is active over a wide pH range and is
non-oxidizing and nonreactive with other down-hole chemistries and designed to
be used particularly in hydraulic fracturing.
  Our
headquarters is located at 116 Morlake Drive, Suite 201, Mooresville, North
Carolina 28117. Our telephone number is (704) 658-3350. Our website address
iswww.envirosi.com.
  21
 Table of Contents
  Results
of Operations
 
 Three
Months Ended December 31, 2008 compared to Three Months Ended December 31,
2007
 
 Revenues.  Our
revenues for the three months ended December 31, 2008 and 2007 were $28,176 and
$48,120, respectively.  This is a decrease of $19,944. This decrease
is directly attributive to larger initial orders from our distributors to stock
our EnviroTru® and
EnviroTru 1453® which
initially became available for sale in late September 2007. Subsequent reorders
from our distributors have been smaller in comparison to the initial orders
placed. Revenues from the sales of the Electro-Static Sprayer for the three
months ended December 31, 2008 and 2007 were $12,000 and $-0-. The
Electro-Static Sprayer was not available in the prior year. Revenues from the
sales of SurfaceTru® Cleaning
& Deodorizing Wipes for the three months ended December 31, 2008 and 2007
were $5,387 and $19,450. Revenues from the sales of EnviroTru® and
EnviroTru 1453®for
the three months ended December 31, 2008 and 2007 were $10,053 and
$28,670.
 
 Revenues
for the three months ended December 31, 2008 and 2007 were composed of the
following:
 Three
      Months Ended December 31,Products
                  
                  2008
                  
                  
                  2007Electro-Static
      Sprayer
                  
                  
                  42.59
                  %
                  
                  
                  -SurfaceTru®
      Cleaning & Deodorizing Wipes
                  
                  
                  19.12
                  %
                  
                  
                  40.42
                  %EnviroTru®
      and EnviroTru 1453®
                  
                  
                  35.68
                  %
                  
                  
                  59.58
                  %EquineTru®
                  
                  
                  2.61
                  %
                  
                  
                  -
 
 Cost of Sales. Cost of sales
for the three months ended December 31, 2008 and 2007 were $22,534 and $51,072,
respectively, a decrease of $28,538.  As a percentage of revenues, for
the three months ended December 31, 2008 and 2007, cost of sales represented 80%
and 106% of revenues, respectively.  During the three months ended
December 31, 2008, depreciation expense in the amount of $8,522 was recorded for
manufacturing equipment that sat idle and is included as part of Operating
Expenses on the Consolidated Statement of Operations.
 
 Operating Expenses. Total
operating expenses for the three months ended December 31, 2008 and 2007 were
$1,624,487 and $1,318,953, respectively, an increase of $305,534 or
23%.  Individual components of operating expenses are:
 
 Sales
expense for the three months ended December 31, 2008 and 2007 were $78,889 and
$87,311, respectively, a decrease of $8,422 or 10%.  The decrease in
cost includes amounts in the previous period for consultants hired that were not
employed in the current period. Additional costs in the current period were for
a sales associate to help in the promotion of our products that we did not
employ in the prior period.
  22
 Table of Contents
  Product
development expenses for the three months ended December 31, 2008 and 2007 were
$91,858 and $89,005, respectively, an increase of $2,853 or 3%.
 
 Corporate
expense for the three months ended December 31, 2008 and 2007 were $1,370,854
and $1,044,391, respectively, an increase of $326,463 or 31%.  The
increase in expenses from the prior year includes an increase in interest
expense and financing cost of $332,021.
 
 Finance
and administrative expenses for the three months ended December 31, 2008 and
2007 were $82,886 and $98,246, respectively a decrease of $15,360 or
16%.  Expenses that decreased from the prior period included fees for
professional services of $13,263.
 
 Nine
Months Ended December 31, 2008 compared to Nine Months Ended December 31,
2007
 
 Revenues.  Our
revenues for the Nine Months ended December 31, 2008 and 2007 were $73,680 and
$102,082, respectively.  This is a decrease of $28,402. This decrease
is directly attributive to larger initial orders from our distributors to stock
our  EnviroTru® and
EnviroTru 1453® which
initially became available for sale in September  2007. Subsequent
reorders from our distributors have been smaller in comparison to the initial
orders placed. Revenues from the sales of SurfaceTru® Cleaning
& Deodorizing Wipes for the nine months ended December 31, 2008 and 2007
were $24,896 and $42,568. Revenues from the sales of EnviroTru® and
EnviroTru 1453®for
the nine months ended December 31, 2008 and 2007 were $28,964 and $59,514.
Revenues from the sales of the Electro-Static Sprayer for the nine months ended
December 31, 2008 and 2007 were $16,800 and $-0-. The Electro-Static Sprayer was
not available in the prior year.
 
 Revenues
for the Nine Months ended December 31, 2008 and 2007 were composed of the
following:
  Nine
      Months Ended December 31,Products
                  
                  2008
                  
                  
                  2007SurfaceTru®
                  
                  
                  0.92
                  %
                  
                  
                  -SurfaceTru®
      Cleaning & Deodorizing Wipes
                  
                  
                  33.79
                  %
                  
                  
                  41.70
                  %EnviroTru®
      and EnviroTru 1453®
                  
                  
                  39.31
                  %
                  
                  
                  58.30
                  %EquineTru®
                  
                  
                  3.18
                  %
                  
                  
                  -Electro-Satic
      Sprayer
                  
                  
                  22.80
                  %
                  
                  
                  -
  Cost of Sales. Cost of sales
for the Nine Months ended December 31, 2008 and 2007 were $68,173 and $111,449,
respectively, a decrease of $43,276.  As a percentage of revenues, for
the Nine Months ended December 31, 2008 and 2007, cost of sales represented 93%
and 109% of revenues, respectively.  Cost of sales for the Nine Months
ended December 31, 2008 and 2007 includes $5,019 and $15,840 for disposal cost
of material that scrapped. During the nine months ended December 31, 2008,
depreciation expense in the amount of $25,566 was recorded for manufacturing
equipment that sat idle and is included as part of Operating Expenses on the
Consolidated Statement of Operations.
  23
 Table of Contents
  Operating Expenses. Total
operating expenses for the nine months ended December 31, 2008 and 2007 were
$3,276,050 and $2,970,055, respectively, an increase of $305,995.
 
 Sales
expense for the Nine Months ended December 31, 2008 and 2007 were $266,425 and
$225,770, respectively, an increase of $40,655 or 18%.  The increase
in cost includes amounts for an additional sales associate in our sales
department to help in the promotion of our products. Other increases include
amounts spent on advertising and marketing efforts. Decreases included amounts
incurred for consultants in the prior period that were not employed in the
current period.
 
 Product
development expenses for the Nine Months ended December 31, 2008 and 2007 were
$301,982 and $358,675, respectively, a decrease of $56,693 or 16%. Decrease in
expenses for the Nine Months ended December 31, 2008 compared to 2007 includes a
decrease of $63,271 for product development testing.
 
 Corporate
expense for the Nine Months ended December 31, 2008 and 2007 were $2,390,495 and
$2,040,429, respectively, an increase of $350,066 or 17%.  The
increase in expenses from the prior year includes an increase in interest
expense and financing cost of $982,334 and a decrease in consulting expense of
$550,125. Other decreases include a decrease in legal professional fees of
approximately $99,647.
 
 Finance
and administrative expenses for the Nine Months ended December 31, 2008 and 2007
were $317,148 and $345,181, respectively a decrease of $28,033 or
8%.  Expenses that decreased from the prior period included fees for
professional services of $38,251 and an increase in compensation expenses of
$10,873 for options issued to employees.
 
 Liquidity
and Capital Resources
 
 For the
Nine Months ended December 31, 2008, we used net cash of $856,231 in operating
activities, compared with $1,436,673 of net cash used in operating activities
for the Nine Months ended December 31, 2007, in comparison to the same period in
the prior year, this is a decrease in net cash used in operating activities of
$580,442 from the prior.
 
 Cash used
in investing activities included $-0- and $21,812 for the Nine Months ended
December 31, 2008 and 2007, respectively. In the Nine Months ended December 31,
2007 we used $21,811 in the purchase of additional testing equipment for our
product research and development activities.
 
 We had
net cash provided by financing activities of $508,260 for the Nine Months ended
December 31, 2008 compared with $250,000 provided by financing activities for
the Nine Months ended December 31, 2007. Cash provided by financing activities
for the Nine Months ended December 31, 2008, includes $100,000 from the sale of
113,636 shares of common stock with 113,636 detachable warrants and $135,000
from the exercise of 675,000 warrants and $319,700 from the issuance of short
term notes payable. Increases include $88,560 cash proceeds from the re-pricing
of warrants. Decreases include the payment of $135,000 in short-term notes
payable.
 
 At
December 31, 2008 and March 31, 2008, we had cash and cash equivalents available
in the amounts of $3,656 and $351,627, a decrease of $347,971.
 
 Subsequent
to December 31, 2008 we are actively seeking to raise between $500,000 to
$5,000,000 in a private placement of our common stock. We have received
subscriptions for $350,000 in this private placement offering.
 
 24
 Table of Contents
  Contractual
Obligations
 
 We have
entered into a lease agreement for office lease. The office lease requires us to
pay $353,029 over a five year period beginning in August 2008. We have an
option to extend this lease for an additional five year period. The office is
located in Mooresville, NC.
 
 Effective
August 1, 2006, EnviroSystems, Inc., our wholly owned subsidiary, which we
refer to as ESI, entered into a manufacturing agreement with Minntech
Corporation, a Minnesota corporation pursuant to which Minntech has agreed to be
the exclusive U.S. manufacturer of EnviroSystems' liquid products.
 
 The
Manufacturing Agreement provides the terms and conditions pursuant to which
Minntech will manufacture and supply to ESI all of ESI's requirements for its
products.  Manufacturing of products commenced in September 2007.
The Manufacturing Agreement has a term of three years commencing after the first
shipment of commercial quantities of the Product by Minntech to ESI, provides
for automatic one year renewals if not terminated by one of the parties. The
Manufacturing Agreement may be terminated by either party upon 90 days prior
written notice.
 
 Payments
      Due by PeriodContractual
      Obligations
                                        
                                        Total
                                        
                                        
                                        Less
      than 1 year
                                        
                                        
                                        1-3
      years
                                        
                                        
                                        4-5
      years
                                        
                                        
                                        After
      5 yearsOffice
      Lease
                                        
                                        $
                                        353,029
                                        
                                        
                                        $
                                        71,685
                                        
                                        
                                        $
                                        149,882
                                        
                                        
                                        $
                                        131,462
                                        
                                        
                                        $
                                        -Total
      Contractual Cash Obligations
                                        
                                        $
                                        353,029
                                        
                                        
                                        $
                                        71,685
                                        
                                        
                                        $
                                        149,882
                                        
                                        
                                        $
                                        131,462
                                        
                                        
                                        $
                                        -
 
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 Management's
discussion and analysis of financial condition and results of operations are
based upon our consolidated financial statements. These statements have been
prepared in accordance with generally accepted accounting principles in the
United States of America. All inter-company balances and transactions have been
eliminated in consolidation.
 
 Use
of estimates in preparation of financial statements
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates, judgments
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, based on
historical experience, and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The following critical
accounting policies rely upon assumptions, judgments and estimates and were used
in the preparation of our consolidated financial statements:
 
 Trade
Secret
 
 The trade
secret of the formula/formulation of EnviroSystems' product, at the time
acquired by us was based upon the valuation of an independent
appraiser.
 
 25
 Table of Contents
  Impairment
of Long Lived Assets
 
 We assess
potential impairment of our long lived assets, which include our property and
equipment and our identifiable intangibles such as our trade secrets under the
guidance of Statement of Financial Standards No. 144Accounting for the Impairment or
Disposal of Long Lived Assets.  Once annually, or as events and
circumstances indicate that an asset may be impaired, we assess potential
impairment of our long lived assets. We determine impairment by measuring the
undisclosed future cash flows generated by the assets, comparing the results to
the assets' carrying value and adjusting the assets to the lower of the carrying
value to fair value and charging currant operations for any measured
impairment.
 
 Revenue
Recognition
 
 Revenue
is generally recognized and earned when all of the following criteria are
satisfied: a) persuasive evidence of sales arrangements exists; b) delivery has
occurred; c) the sales price is fixed or determinable, and d) collectibility is
reasonably assured.
 
 Persuasive
evidence of an arrangement is demonstrated via a purchase order from our
customers. Delivery occurs when title and all risks of ownership are transferred
to the purchaser which generally occurs when the products are shipped to the
customer. No right of return exists on sales of product except for defective or
damaged products. The sales price to the customer is fixed upon acceptance of
purchase order. To assure that collectibility is reasonably assured we perform
ongoing credit evaluations of all of our customers.
  Contingent
Liability
 
 In
accordance with Statement of Financial Accounting Standards Interpretation
No. 14, we may have certain contingent liabilities with respect to material
existing or potential claims, lawsuits and other proceedings. We accrue
liabilities when it is probable that future cost will be incurred and such cost
can be measured.
 
 ITEM 3. QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
 
 As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide information required by this Item.
  26
 Table of Contents
  ITEM 4T. CONTROLSAND PROCEDURES
 
 (a)
Disclosure Controls and Procedures.
 
 In
connection with the preparation of this Form 10-Q, an evaluation was carried out
by the Company’s management, with the participation of the Company’s Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)). 
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified
in SEC rules and forms and that such information is accumulated and communicated
to management, including the Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required disclosures.  Based
on such evaluation, and in light of the previously identified material weakness
in internal control over financial reporting, as of March 31, 2008, relating to
the lack of appropriate accounting policies and related procedures described in
the Company’s annual report on Form 10-K for the fiscal year ended March 31,
2008, the Company’s Chief Executive Officer and Chief Financial Officer
concluded that, as of December 31, 2008, the Company’s disclosure controls and
procedures were ineffective.
 
 (b)
Changes to Internal Control Over Financial Reporting.
 
 There
have been no changes in the Company’s internal control over financial reporting
(as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during the quarter ended December 31, 2008, that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
 
 PART
II. OTHER INFORMATION
 
 Item 1A. RiskFactors
 
 There
have been no material changes to the Risk Factors described in Part I, Item
1A-Risk Factors in our annual report on Form 10-K for the fiscal year ended
March 31, 2008.
 
 Item 6. Exhibits
    Exhibit
    31.1
              
              Certification of the CEO Pursuant to Rule 15d-14(a)
      under the Securities Exchange Act of 1934, as amended, as Adopted Pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit
    31.2
              
              Certificate of the CFO Pursuant to Rule 15d-14(a) under
      the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit
    32.1
              
              Certification of the CEO and CFO Pursuant to 18 U.S.C.
      Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.
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    SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
  Anpath
      Group, Inc.February
      23, 2009
                By: /s/ J. Lloyd
  BreedloveJ.
      Lloyd Breedlove
                  President,
      Chief Executive Officer (Principal Executive
  Officer)
   
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 EXHIBIT
INDEX
 
 Exhibit
    31.1
                
                Certification of the CEO Pursuant to Rule 15d-14(a)
      under the Securities Exchange Act of 1934, as amended, as Adopted Pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit
    31.2
                
                Certificate of the CFO Pursuant to Rule 15d-14(a) under
      the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit
    32.1
                
                Certification of the CEO and CFO Pursuant to 18 U.S.C.
      Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.








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