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, 2009orr
            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.)





224
Rolling Hill Road Suite 2A 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 the  Securities Exchange Act of
      1934 during the preceding 12 months (or for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      such filing requirements for 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 15, 2010Common
      Stock, $.0001 par value
            
            16,803,654








Table
of Contents








TABLEOF CONTENTS





PAGEPART I
            FINANCIAL
      INFORMATIONItem
      1
            Financial
      Statements
            
            3Balance Sheet at December 31, 2009
      (unaudited) and March 31, 2009 (audited)
            
            3Statements of Operations for the
      three month periods ended December 31, 2009 and 2008 and for the
      nine month periods ended December 31, 2009 and 2008
            
            4Statements of Cash flows for
      the nine Month Periods Ended December 31, 2009 and
      2008
            
            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


ITEM1. 
 FINANCIAL STATEMENTS


ANPATHGROUP, INC


Consolidated
Balance Sheets


Nine
      Months Ended
            
            Year
      EndedDecember
      31, 2009
            
            March
      31, 2009(unaudited)
            
            
            (audited)ASSETSCURRENT
      ASSETSCash
            
            $
            134,713
            
            
            $
            11,231Accounts
      receivable, net
            
            
            4,228
            
            
            
            10,241Prepaid
      expenses
            
            
            50,507
            
            
            
            4,817Inventory
            
            
            -
            
            
            
            22,354TOTAL
      CURRENT ASSETS
            
            
            189,448
            
            
            
            48,643PROPERTY
      AND EQUIPMENTFurniture
      & fixtures
            
            
            205,694
            
            
            
            205,694Machinery
      & equipment
            
            
            195,137
            
            
            
            195,137Capitalized
      software
            
            
            3,210
            
            
            
            3,210Less
      accumulated depreciation
            
            
            (254,332
            )
            
            
            (205,676
            )TOTAL
      FIXED ASSETS
            
            
            149,709
            
            
            
            198,365OTHER
      ASSETSTrade
      secrets
            
            
            1,026,000
            
            
            
            1,026,000Deposits
            
            
            183,488
            
            
            
            198,082TOTAL
      OTHER ASSETS
            
            
            1,209,489
            
            
            
            1,224,082TOTAL
      ASSETS
            
            $
            1,548,646
            
            
            $
            1,471,090LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
            
            $
            283,890
            
            
            $
            395,525Accrued
      interest payable
            
            
            277,439
            
            
            
            135,570Wages
      payable
            
            
            153,340
            
            
            
            188,840Current
      maturities of long-term debt, net of discount
            
            
            2,822,156
            
            
            
            1,484,357TOTAL
      CURRENT LIABILITIES
            
            
            3,536,825
            
            
            
            2,204,292LONG
      TERM LIABILITIESNotes
      payable, net of discount
            
            
            -
            
            
            
            -TOTAL
      LONG TERM LIABILITIES
            
            
            -
            
            
            
            -TOTAL
      LIABILITIES
            
            
            3,536,825
            
            
            
            2,204,292COMMITMENTS
      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,16,803,654
      and 16,203,654 shares issued and outstanding
            
            
            1,680
            
            
            
            1,620Additional
      paid-in capital
            
            
            29,957,783
            
            
            
            28,863,063Accumulated
      deficit
            
            
            (31,947,642
            )
            
            
            (29,597,885
            )TOTAL
      STOCKHOLDERS' EQUITY
            
            
            (1,988,179
            )
            
            
            (733,2020
            )TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      EQUITY
            
            $
            1,548,646
            
            
            $
            1,471,090





See
accompanying condensed notes to interim consolidated financial
statements.





3
 Table
of Contents





ANPATHGROUP, INC


Consolidated
Statements of Operations


(Unaudited)





Three
      Months Ended
            
            Nine
      Months EndedDecember
      31,
            
            December
      31,2009
            
            2008
            
            2009
            
            
            2008REVENUES
            $
            66,988
            
            $
            28,176
            
            $
            321,558
            
            
            $
            73,680COST
      OF SALES
            
            45,195
            
            
            22,534
            
            
            220,766
            
            
            
            68,173Gross
      Profit
            
            21,793
            
            
            5,642
            
            
            100,792
            
            
            
            5,507EXPENSESSales
            
            60,725
            
            
            78,889
            
            
            187,213
            
            
            
            266,425Product
      development
            
            66,825
            
            
            91,858
            
            
            205,690
            
            
            
            301,982Corporate
            
            124,566
            
            
            225,690
            
            
            425,099
            
            
            
            592,870Finance
      and administrative
            
            85,427
            
            
            82,886
            
            
            319,862
            
            
            
            317,148Consultants
            
            25,000
            
            
            143,000
            
            
            294,000
            
            
            
            199,875Compensation
      cost for re-pricing warrants
            
            -
            
            
            623,548
            
            
            265,383
            
            
            
            623,548Financing
      expense
            
            149,779
            
            
            378,606
            
            
            610,350
            
            
            
            974,202Total
      Expenses
            
            512,322
            
            
            1,624,487
            
            
            2,307,597
            
            
            
            3,276,050LOSS
      FROM OPERATIONS
            
            (490,529
            )
            
            (1,618,845
            )
            
            (2,206,805
            )
            
            
            (3,270,543
            )OTHER
      INCOME (EXPENSE)Interest
      expense
            
            (54,265
            )
            
            (27,423
            )
            
            (142,952
            )
            
            
            (82,141
            )Other
      income
            
            -
            
            
            -
            
            
            -
            
            
            
            -Interest
      income
            
            -
            
            
            -
            
            
            -
            
            
            
            6Impairment
      of long lived assets
            
            -
            
            
            -
            
            
            -
            
            
            
            -Total
      Other Income and Expense
            
            (54,265
            )
            
            (27,423
            )
            
            (142,952
            )
            
            
            (82,141
            )LOSS
      BEFORE TAXES
            
            (544,794
            )
            
            (1,646,268
            )
            
            (2,349,757
            )
            
            
            (3,352,678
            )INCOME
      TAX EXPENSE
            
            -
            
            
            -
            
            
            -
            
            
            
            -NET
      LOSS
            $
            (544,794
            )
            $
            (1,646,268
            )
            $
            (2,349,757
            )
            
            $
            (3,352,678
            )BASIC
      AND DILUTED NET LOSS PER SHARE
            $
            (0.03
            )
            $
            (0.11
            )
            $
            (0.14
            )
            
            $
            (0.23
            )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,BASIC
      AND DILUTED
            
            16,803,654
            
            
            14,558,905
            
            
            16,570,927
            
            
            
            14,392,525





See
accompanying condensed notes to interim consolidated financial
statements.





4
 Table
of Contents





ANPATHGROUP, INC


Consolidated
Statement of Cash Flows


(Unaudited)





Nine
      Months EndedDecember
      31,2009
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
            
            $
            (2,349,757
            )
            
            $
            (3,352,678
            )Depreciation
      and amortization
            
            
            48,656
            
            
            
            50,241Stock
      issued for services
            
            
            221,000
            
            
            
            143,000Stock
      options granted and warrants issued
            
            
            118,301
            
            
            
            408,211Stock
      options re-priced for services
            
            
            265,384
            
            
            
            408,211Discount
      on note payable
            
            
            469,348
            
            
            
            623,549Adjustments
      to reconcile net loss to net cash used by operations:Decrease
      (increase) in accounts receivable
            
            
            6,013
            
            
            
            (4,633
            )Decrease
      (increase) in prepaid expenses
            
            
            (45,690
            )
            
            
            79,766Decrease
      (increase) in inventory
            
            
            22,354
            
            
            
            22,997Decrease
      in trade secrets
            
            
            -
            
            
            
            -Decrease
      (increase) in deposits
            
            
            14,594
            
            
            
            (17,365
            )Increase
      (decrease)  in accounts payable & accrued
      expenses
            
            
            (111,635
            )
            
            
            461,229Increase
      (decrease) in accrued interest payable
            
            
            141,869Increase
      (decrease) in wages payable
            
            
            (35,501
            )
            
            
            -Increase
      (decrease) in discount on notes payable
            
            
            -
            
            
            
            -Net
      cash used by operating activities
            
            
            (1,235,064
            )
            
            
            (856,231
            )CASH
      FLOWS FROM INVESTING ACTIVITIESNet
      cash provided (used) in investing activities
            
            
            -
            
            
            
            -CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from notes payable
            
            
            1,464,334
            
            
            
            319,700Payment
      of notes payable
            
            
            (105,788
            )
            
            
            (135,000
            )Proceeds
      from the sale of common stock and warrants
            
            
            -
            
            
            
            235,000Proceeds
      from the re-pricing of warrants
            
            
            -
            
            
            
            88,560Net
      cash provided by financing activities
            
            
            1,358,546
            
            
            
            508,260NET
      INCREASE (DECREASE) IN CASH
            
            
            123,482
            
            
            
            (347,971
            )CASH
      - Beginning of period
            
            
            11,231
            
            
            
            351,627CASH
      - End of period
            
            $
            134,713
            
            
            $
            3,656SUPPLEMENTAL
      CASH FLOW DISCLOSURES:Interest
      expense
            
            $
            1,083
            
            
            $
            -Income
      taxes
            
            $
            -
            
            
            $
            -





See
accompanying condensed notes to interim consolidated financial
statements.





5
 Table
of Contents





ANPATHGROUP, INC


CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009





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, 2008 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.  ESI products are currently
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 10, 2009. 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, 2009 are not necessarily
indicative of the results that may be expected for the year ending March 31,
2010.





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, 2009





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 $-0- and
$1,036 at December 31, 2009 and March 31, 2009, 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, 2009 and March 31, 2009,
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, 2009, the Company had net deferred tax assets calculated at an
expected rate of 34% of approximately $10,862,000 (March 31, 2009 - $10,063,000)
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, 2009.





The
significant components of the deferred tax asset at December 31, 2009 and March
31, 2009 were as follows:





December
      31,
            
            
            March
      31,2009
            
            
            2008Estimated
      net operating loss carry forward
            
            $
            31,947,000
            
            
            $
            29,598,000Deferred
      tax asset
            
            $
            10,862,000
            
            
            $
            10,063,000Deferred
      tax asset valuation allowance
            
            
            (10,862,000
            )
            
            
            (10,063,000
            )Net
      deferred tax asset
            
            $
            -
            
            
            $
            -





7
 Table
of Contents






ANPATH
GROUP, INC


CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009





At
December 31, 2009, the Company has net operating loss carry forwards of
approximately $31,947,000 ($29,598,000 in March 31, 2009), which expire in the
years 2023 through 2027. The change in the allowance account from March 31, 2009
to December 31, 2009 was $799,000.





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,
2008 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, 2009





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
      31,2009
            
            
            2009Office
      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
            
            
            (254,332
            )
            
            
            (205,676
            )Fixed
      Assets, net
            
            $
            149,709
            
            
            $
            198,365





Depreciation
expense for the nine month periods ending December 31, 2009 and 2008 was $48,656
and $50,241 respectively.





During
the nine months ended December 31, 2009 and 2008, depreciation expense in the
amount of $-0- and $17,044 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, 2009





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, 2009 and 2008, and has an accumulated deficit of $31,947,642
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 $1,000,000 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.





Concentration
Risk





Sales to
a metropolitan mass transit authority, international distributors and an airline
distributor represented approximately 91.9% of our sales for the nine months
ended December 31, 2009 and sales to a metropolitan mass transit authority and a
distributor represented approximately 72.4% of our sales for the nine months
ended December 31, 2008.





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
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of Contents





ANPATH
GROUP, INC


CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009





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) collectability 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 collectability 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 raw materials that the Company had manufactured prior to outsourcing
manufacturing to our current contract manufacturer. In the nine months ended
December 31, 2009, the prior raw materials were converted to finished goods in
the manufacturing process and sold. At December 31, 2009 we had no inventories
on hand. Inventories consist of the following:





December
      31,
            
            
            March
      31,2009
            
            
            2009Raw
      material
            
            $
            -
            
            
            $
            22,354Finished
      goods
            
            
            -
            
            
            
            -Allowance
      for obsolescence
            
            
            -
            
            
            
            -Inventory,
      net
            
            $
            -
            
            
            $
            22,354





11
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of Contents





ANPATH
GROUP, INC


CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009





NOTE
4 - NOTES, LOANS AND CONVERTIBLE DEBT





Notes
payable consists of the following:





December
      31, 2009
            
            
            March
      31, 20097%
      note due July 8, 2010 payable to ANPG Lending, LLC
            
            $
            1,500,000
            
            
            $
            1,500,0008%
      notes due from April 7, 2010 through December 24, 2010 payable to
      unrelated individuals
            
            
            1,410,000
            
            
            
            -6%
      notes due on or before May 10, 2009 payable to our CEO
            
            
            93,700
            
            
            
            102,2106%
      notes due on or before February 24, 2009 payable to Arthur Douglas &
      Associates
            
            
            85,000
            
            
            
            85,0005.95%
      note due in 10 installments of $5,583 payable to FlatIron
      Capital
            
            
            22,056
            
            
            
            -6%
      notes due December 29, 2008 payable to our CFO
            
            
            6,000
            
            
            
            6,00010%
      note due April 8, 2009 payable to an unrelated individual
            
            
            -
            
            
            
            25,00010%
      note due September 10, 2009 payable to an unrelated
    individual
            
            
            -
            
            
            
            20,00010%
      note due September 24, 2009 payable to an unrelated
    individual
            
            
            -
            
            
            
            20,000Discount
      on notes payable
            
            
            (294,600
            )
            
            
            (273,853
            )$
            2,822,156
            
            
            $
            1,484,357





Current Year
Financing


During
the nine months ended December 31, 2009 the Company borrowed from various
parties the aggregate amount of $1,410,000. These loans mature from April 7,
2010 through December 24, 2010 and have a mandatory conversion into common stock
of the Company from April 7, 2010 through December 24, 2010. These loans bear
interest of 8% payable at maturity. Each note is convertible into common stock
of the Company at an initial conversion rate $.50 per share. The actual
conversion rate will be based on the previous 20 trading day average price of
our common stock. The conversion rate cannot be more than $0.50 or less than
$0.20. The loans are initially convertible into 2,820,000 shares of the
Company’s common stock. Detachable warrants were also issued with each note
giving the holder the right to purchase an aggregate 2,820,000 shares of the
Company’s common stock at an exercise rice of $.75 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 $490,097 and the total value of shares was
$-0-.





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.




March 31, 2009
Financing


During
the year ended March 31, 2009 the Company borrowed from various parties the
aggregate amount of $393,210. These loans are due on demand after 90 days and
bear interest of 6% to 10% payable at maturity. Each note is convertible into
common stock of the Company at a conversion rate of $.20 to $.88 per share. The
loans are initially convertible into 697,966 shares of the Company’s common
stock. Detachable warrants were also issued with each note giving the holder the
right to purchase an aggregate 512,966 shares of the Company’s common stock at
an exercise rice of $.20 to $.88 per share. During the year ended March 31,
2009, $135,000 of these loans were converted into 675,000 shares of common
stock. During the nine months ended December 31, 2009, $73,510 of these loans
were retired.




12
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of Contents




ANPATH
GROUP, INC
 CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009


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 $122,173 and the total value of shares was
$73,142.





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.





ANPG Lending,
LLC


On
January 8, 2008, the Company completed a financing transaction with ANPG
Lending, LLC, (the “LLC”) pursuant to the terms of a Loan and Security Agreement
by and between the Company and the LLC.  Pursuant to the Loan Agreement,
the Company issued to the LLC convertible promissory notes for an aggregate
principal amount of $1,500,000. The Loan Agreement also provides that the LLC
may make up to an additional $500,000 in advances to the Company in the
discretion of the LLC.  In addition to the Notes, the Company issued to the
LLC warrants to purchase up to an aggregate of 750,000 shares of the Company’s
common stock.  The Warrants have terms of 5 years and are exercisable at an
initial exercise price $0.87 per share, subject to certain anti-dilution
adjustments.





Pursuant
to the Loan Agreement, the Company granted to the LLC a security interest in the
Company’s assets and properties to secure the Company’s obligations under the
Notes to the LLC.





As a
condition to obtaining the Financing, the Company entered into a Securities
Repurchase Agreement by and between the Company, the LLC and the Singer
Children’s Management Trust (the “Trust”) pursuant to which the Company
repurchased from the Trust 250,000 shares of the Company’s common stock and
warrants to purchase up to an aggregate of 750,000 shares of the Company’s
common stock at an exercise price of $2.50 per share for an aggregate purchase
price of $625,000.  The Company used $625,000 from the LLC to pay the
purchase price for the Securities and used $30,000 to pay the lenders legal
expenses of the transaction. Pursuant to the Repurchase Agreement, the Company
issued to the LLC three additional Warrants to purchase up to an aggregate of
750,000 shares of our common stock. The Warrants have terms of 5 years and are
exercisable at an initial exercise price $0.87 per share, subject to certain
anti-dilution adjustments.  The warrants can be exercised using a cashless
exercise exchange and will automatically be exercised at the termination of the
term if the price of the Company’s common stock on such date is above $0.87 per
share, subject to certain adjustments.





As a
result of the foregoing transactions, the Company was able to obtain net
proceeds of approximately $845,000 to be used for general working capital
purposes.





The Notes
are due and payable on July 8, 2009.  The Notes bear interest at a rate of
7% per annum and interest accrues and is payable on the maturity date of the
Notes.  The Notes are convertible into shares of common stock of the
Company at an initial conversion price of $0.87.  The conversion price is
subject to certain anti-dilution adjustments.





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 63%, no dividends
and a five year horizon in all Black Scholes Option Price calculations. The
total value of warrants was $778,500 and the total value of shares was
$721,500.





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. The value of warrants in excess of the actual debt advance
amounts were expensed as financing fees.





Forbearance Agreement with
ANPG Lending, LLC


On
September 26, 2009 the Company agreed to reduce the exercise price of the
1,500,000 warrants outstanding to ANPG Lending LLC to $0.20 in exchange for ANPG
Lending LLC agreeing to extend the maturity date of the loans aggregating
$1,500,000 from July 8, 2009 to September 8, 2009. A subsequent forbearance
agreement was signed extending the maturity date of the loans to March 31,
2010.





13
 Table
of Contents







ANPATH
GROUP, INC


CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009





NOTE
5 - COMMITMENTS AND CONTINGENCIES





Operating
Leases





The
Company has formal operating leases for all of its office and laboratory space.
The Company has entered into a new three year office lease agreement to begin
October 1, 2009 for an office/warehouse combination in Mooresville, NC. Lease
payments under the new office lease will be $2,695 per month for the first year
and increases 3% for each subsequent year.





Rent
expense relating to operating spaces leased was approximately $43,433 and
$64,328 for the nine months ended December 31, 2009 and 2008,
respectively.








Payments
      Due by PeriodContractual
      Obligations
            
            Total
            
            
            Less
      than 1 year
            
            
            1-3
      years
            
            
            4-5
      years
            
            After
      5 yearsOffice
      Lease
            
            $
            89,180
            
            
            $
            32,664
            
            
            $
            56,516
            
            
            $
            -
            
            $
            -Total
      Contractual Cash Obligations
            
            $
            89,180
            
            
            $
            32,664
            
            
            $
            56,516
            
            
            $
            -
            
            $
            -





NOTE
6 - PREFERRED STOCK AND COMMON STOCK





Preferred
Stock





As of
December 31, 2009, no preferred stock has been issued by the
Company.





Common
Stock





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 nine months ended December 31, 2009, the Company issued 600,000 shares of
restricted common stock valued at $221,000 to Arthur Douglas and
Associates.





14
 Table
of Contents







ANPATH
GROUP, INC


CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009





NOTE
7 - STOCK PURCHASE WARRANTS





The
following is a summary of all common stock warrant activity during the year
ended March 31, 2009 and the nine months ended December 31, 2009:





Number
      of
              Shares
      Under Warrants
            
            
            Exercise
      Price
              Per
      Share
            
            
            Weighted
              Average
              Exercise
      PriceWarrants
      issued and exercisable at: March 31, 2008
            
            
            7,940,342
            
            
            $
            .87-5.00
            
            
            $
            2.25Warrants
      issued
            
            
            626,600
            
            
            
            0.20-0.88
            
            
            
            1.97Warrants
      expired
            
            
            (248,928
            )
            
            
            5.00
            
            
            
            5.00Warrants
      exercised
            
            
            (675,000
            )
            
            
            0.20
            
            
            
            0.20Warrants
      issued and exercisable at: March 31, 2009
            
            
            7,643,014
            
            
            $
            0.20-5.00
            
            
            $
            2.25Warrants
      issued
            
            
            3,288,500
            
            
            
            0.75
            
            
            
            0.75Warrants
      expired
            
            
            (3,914
            )
            
            
            5.00
            
            
            
            5.00Warrants
      exercised
            
            
            -
            
            
            
            -
            
            
            
            -Warrants
      issued and exercisable at: December 31, 2009
            
            
            10,927,600
            
            
            $
            0.20-5.00
            
            
            $
            1.22





The
following represents additional information related to common stock warrants
outstanding and exercisable at December 31, 2009:





Outstanding
      and ExercisableRange
      of Exercise Price
            
            
            Number
      of
              Shares
      Under
              Warrants
            
            Weighted
              Average
              Remaining
              Contract
      Life in
              Years
            
            Weighted
              Average
              Exercise
      Price$
            0.20
      – 2.50
            
            
            
            2,762,500
            
            0.22
            
            $
            1.24$
            2.70
            
            
            
            2,500,000
            
            2.52
            
            
            2.70$
            0.20
      – 0.88
            
            
            
            2,226,930
            
            3.16
            
            
            0.30$
            0.20
      - 0.88
            
            
            
            3,438,170
            
            4.46
            
            
            .73Total
            
            
            
            10,927,600
            
            2.68
            
            
            1.22





The
Company used the Black-Scholes option price calculation to value the warrants
issued during the nine months ended December 31, 2009 and the year ending
March 31, 2009 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.





15
 Table
of Contents







ANPATH
GROUP, INC


CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009





NOTE
8 - EQUITY COMPENSATION PLAN





The
Company has two stock option plans: (a) the 2006 Stock Incentive Plan and (b)
the 2004 Equity Compensation Plan which both have 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, 2009 and the year ended March
31, 2009, the Company granted 1,390,000 and 42,000 stock options to employees
and directors. The options were granted with an exercise prices $0.63-0.24 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, 2009
and the year ended March 31, 2009 of $187,655 and $15,000. 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, 2009 and 2008 is $118,302 and
$148,095 and has been expensed in the nine months ended December 31, 2009 and
2008, respectively pursuant to the application of SFAS No. 123(R), and credited
to additional paid-in capital.





As of
December 31, 2009 there were 920,000 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, 2009 and the nine months ended December 31, 2009:





Shares
      Under
              Options
              Outstanding
            
            
            Weighted
              Average
              Exercise
      PriceOptions
      outstanding at March 31, 2008
            
            
            2,676,455
            
            
            $
            2.73Options
      granted
            
            
            42,000
            
            
            
            0.63Options
      expired
            
            
            (1,169,903
            )
            
            
            3.01Options
      exercised
            
            
            -
            
            
            
            -Options
      outstanding at March 31, 2009
            
            
            1,548,552
            
            
            
            2.49Options
      granted
            
            
            1,390,000
            
            
            
            0.24Options
      expired
            
            
            -
            
            
            
            -Options
      exercised
            
            
            -
            
            
            
            -Options
      outstanding at December 31, 2009
            
            
            2,938,552
            
            
            $
            1.42





Options
              Exercisable
            
            
            Weighted
              Average
              Exercise
      Price
              per
      ShareOptions
      exercisable at March 31, 2009
            
            
            1,548,552
            
            
            $
            2.49Options
      exercisable at December 31, 2009
            
            
            1,496,052
            
            
            $
            2.50





16
 Table
of Contents






ANPATH
GROUP, INC


CONDENSED
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2009





The
following represents additional information related to common stock options
outstanding and exercisable at December 31, 2009:





Range
              of
              Exercise
              Price
            
            
            Number
              Outstanding
      at
              December
      31,
              2009
            
            
            Weighted
              Average
              Remaining
              Contractual
              Life
              Years
            
            
            Weighted
              Average
              Exercise
              Price
              (Total
              Shares)
            
            
            Number
              Exercisable
              At
              December
      31,
              2009
            
            
            Weighted
              Average
              Exercise
              Price
              (Exercisable
              Shares)$
            3.40
            
            
            
            63,854
            
            
            
            4.84
            
            
            $
            3.40
            
            
            
            63,854
            
            
            $
            3.40$
            5.00
            
            
            
            72,333
            
            
            
            0.88
            
            
            $
            5.00
            
            
            
            72,333
            
            
            $
            5.00$
            1.61
      - 2.95
            
            
            
            22,365
            
            
            
            6.45
            
            
            $
            2.06
            
            
            
            22,365
            
            
            $
            2.06$
            2.00
      - 2.85
            
            
            
            1,390,000
            
            
            
            3.55
            
            
            $
            2.32
            
            
            
            1,337,500
            
            
            $
            2.32$
            0.24
            
            
            
            1,390,000
            
            
            
            9.33
            
            
            $
            0.24
            
            
            
            -
            
            
            $
            -$
            0.63
      - 5.00
            
            
            
            2,938,552
            
            
            
            6.27
            
            
            $
            1.42
            
            
            
            1,496,052
            
            
            $
            2.50





Total
compensation cost related to non-vested stock options as of December 31, 2009
and March 31, 2009 was $247,455 and $263,362, respectively.





Weighted
average period of non-vested stock options was 9.24 years as of December 31,
2009.





The
Company used the Black-Scholes option price calculation to value the options
granted in the nine months ended December 31, 2009 and the year ended March 31,
2009 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 April 20, 2009 the Company paid Mastodon $30,000 for
consulting services in connection with advising the Company in financing
matters.








During
the year ended March 31, 2009, the Company’s CEO, made loans to the Company in
the amount of $102,210.  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 116,146 shares of the Company’s
common stock at an exercise price of $0.88 per share. During the nine months
ended December 31, 2009, the Company paid $8,510 to the CEO in repayment of
these loans and $150 in accrued interest. At December 31, 2009 the balance owed
to the CEO on these loans was $93,700 plus accrued interest of
$7,086.





On
December 31, 2008, the Company’s 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. At December 31, 2009 the balance owed to the
CFO on this loan was $6,000 plus accrued interest of $457.





At
December 31, 2009 the CEO and CFO have deferred their salaries in the amount
$87,083 and $52,506, respectively.








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, 2009 and incorporated
herein by reference.





ITEM2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS





General





Anpath
Group, Inc. (“Anpath”,
the “Company”,
“we”
or “us”)
through our wholly-owned subsidiary EnviroSystems, Inc. (“ESI”),
produces disinfecting, sanitizing and cleaning products designed to help prevent
the spread of infectious microorganisms, while minimizing the harmful effects to
people, application surfaces and the environment.  We believe that the
ability to destroy a wide-range of disease-causing microorganisms combined with
a favorable profile for health and environmental effects makes our products
ideal for use in a wide range of applications/markets that are in need of
disinfection/cleaning products that are safe to use and non-toxic.





We are
directed by our mission to “Provide a healthier today and a safer tomorrow
through knowledgeable people and innovative infection prevention,
decontamination, and health science technologies, products, and
services.”  We intend to utilize our technology and resources to
develop products that reduce biological risks without introducing the attendant
chemical risks that are so prevalent today.





It is
this focus on developing safe infection prevention technologies that we believe
will position us in the forefront of the industry at a time when there is
rapidly growing awareness of the critical need to prevent biological risks —
both natural and man-made.





Our
headquarters is located at 1224 Rolling Hill Road, Suite 2A, Mooresville, North
Carolina 28117. Our telephone number is (704) 658-3350.





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 (EnviroTru®/EnviroTru®
      1453  meet Environmental Protection Agency requirements for
      Toxicity Category IV) 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);





·
            Geo
      Biocides – biocides for use in the oil and gas
  industry.





·
            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








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.





19
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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.





·
            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.





20
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of Contents




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®.





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.





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 Biocidedesigned 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. In February 2010 we
received our first commercial order for our GeoTruTM Concentrate
Biocide.





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.





21
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of Contents




Results
of Operations





Three
Months Ended December 31, 2009 compared to Three Months Ended December 31,
2008





Revenues.  Our
revenues for the three months ended December 31, 2009 and 2008 were $66,988 and
$28,176, respectively.  This is an increase of $38,812. This increase
is directly attributive to repeat orders from our distributors, orders from new
distributors and from increased market demand. Our products initially become
available for sale in September 2008.





Revenues
for the three months ended December 31, 2009 and 2008 were composed of the
following:




Three
      Months Ended December 31,Products
            
            2009
            
            
            2008Electro-Static
      Sprayer
            
            
            11.2
            %
            
            
            42.6
            %SurfaceTru® Cleaning &
      Deodorizing Wipes
            
            
            0.5
            %
            
            
            19.1
            %EnviroTru®and EnviroTru
      1453®
            
            
            97.5
            %
            
            
            35.7
            %EquineTru®
            
            
            0.8
            %
            
            
            2.6
            %





Cost of Sales. Cost of sales
for the three months ended December 31, 2009 and 2008 were $45,195 and $22,534,
respectively.  As a percentage of revenues, for the three months ended
December 31, 2009 and 2008, cost of sales represented 67.47% and 79.98% of
revenues, respectively.  Cost of sales on revenues from sales of the
Electro-Static Sprayers is a higher percentage of revenues than our other
products.





Operating Expenses. Total
operating expenses for the three months ended December 31, 2009 and 2008 were
$512,322 and $2,307,597, respectively, a decrease of $1,795,275 or
78%.  Individual components of the change in operating expenses are as
follows:





·
            Sales
      expense decrease of $18,164 or 23.02% for the three months ended December
      31, 2009 and 2008


·
            Product
      development expense decrease of $25,033 or 27.25% for the three months
      ended December 31, 2009 and 2008


·
            Corporate
      expense decrease of $101,124 or 44.81% for the three months ended December
      31, 2009 and 2008


·
            Finance
      and administrative expense increase of $2,541 or 3.07% for the three
      months ended December 31, 2009 and
2008


·
            Consultant
      expense decrease of $118,000 or 82.52% for the three months ended December
      31, 2009 and 2008


·
            Compensation
      cost for re-pricing warrants decrease of $623,548 or 100% for the three
      months ended December 31, 2009 and
2008


·
            Financing
      expense decrease of $228,827 or 60.44% for the three months ended December
      31, 2009 and 2008





Sales. The decrease
in sales expense for the three months ended December 31, 2009 compared to 2008
is attributed to a decrease of one employee and associated benefits of $9,689
and a reduction of office lease cost of $6,155. Various other cost had a net
decrease of $2,320 for the three months ended December 31, 2009 compared to
2008.





Product Developement.
The decrease in product development expenses for the three months ended December
31, 2009 compared to 2008 is attributed to a decrease of one employee and
associated benefits of $17,762 and a reduction of product testing cost of $3,395
and a decrease in compensation cost of options awards of $5,316. Various other
cost had a net increase of $1,440 for the three months ended December 31, 2009
compared to 2008.





Corporate. The
decrease in corporate expense for the three months ended December 31, 2009
compared to 2008 is attributed to a decrease in legal fees of $97,871, and a
decrease in idle process depreciation of machinery of $8,522. Various other cost
had a net increase of $5,269 for the three months ended December 31, 2009
compared to 2008.




22
 Table
of Contents




Finance and
Administrative. The were no significant increases or decreases in finance
and administrative expenses for the three months ended December 31, 2009
compared to 2008.  Various cost had a net increase of $2,541 for the
three months ended December 31, 2009 compared to 2008.





Consulting.Consultants are usually compensated through the issuance of
restricted stock or the issuance of common stock warrants. Consulting cost
decreased to $25,000 for the three months ended December 31, 2009 as compared to
$143,000 for the three months ended December 31, 2008, a decrease of
$118,000.  Cash was paid for consulting services for the three months
ended December 31, 2009 in the amount of $25,000. Restricted stock was issued in
the three months ended December 31, 2008 in the amounts of
$143,000.





Compensation Cost for
Re-Pricing Warrants. Warrants were re-priced in the three months ended
December 31, 2008 at a cost of $623,548. No warrants were re-priced in the three
months ended December 31, 2009.





Financing Expense.Financing cost decreased to $149,779 from $378,606 for the three months
ended December 31, 2009 and 2008, a decrease of $228,827. The decrease is
attributed to a reduced amount of financing with convertible debt and detachable
warrants.





Nine
Months Ended December 31, 2009 compared to Six Months Ended December 31,
2008





Revenues.  Our
revenues for the nine months ended December 31, 2009 and 2008 were $321,558 and
$73,680, respectively.  This is an increase of $247,878. This increase
is directly attributive to repeat orders from our distributors, orders from new
distributors and increased market demand. Our products initially become
available for sale in September 2008.





Revenues
for the nine months ended December 31, 2009 and 2008 were composed of the
following:




Six
      Months Ended December 31,Products
            
            2009
            
            
            2008Electro-Static
      Sprayer
            
            
            9.6
            %
            
            
            21.8
            %SurfaceTru® Cleaning &
      Deodorizing Wipes
            
            
            0.3
            %
            
            
            32.3
            %EnviroTru®and EnviroTru
      1453®
            
            
            89.6
            %
            
            
            42.9
            %EquineTru®
            
            
            0.5
            %
            
            
            3.00
            %





Cost of Sales. Cost of sales
for the nine months ended December 31, 2009 and 2008 were $220,766 and $68,173,
respectively.  As a percentage of revenues, for the nine months ended
December 31, 2009 and 2008, cost of sales represented 68.66% and 92.53% of
revenues, respectively.  Cost of sales for the nine months ended
December 31, 2009 and 2008 includes an additional $22,354 and $22,997 in raw
materials that the Company provided to our contract manufacture. This additional
cost included in cost of sales material was produced prior to our current
contract manufacturing contract. Under our current contract our manufacturer is
to provide all raw materials cost. Cost of sales adjusted for these additional
amounts for the nine months ended December 31, 2009 and 2008 would be $153,217
and $26,927 and would represent 61.70% and 61.31% of revenues, respectively. At
December 31, 2009 the Company did not have any further raw materials on
hand.





Operating Expenses. Total
operating expenses for the nine months ended December 31, 2009 and 2008 were
$2,307,597 and $3,276,050, respectively, a decrease of $968,453 or
29.6%.  Individual components of the change in operating expenses are
as follows:





·
            Sales
      expense decrease of $79,212 or 29.73% for the nine months ended December
      31, 2009 and 2008


·
            Product
      development expense decrease of $96,292 or 30.96% for the nine months
      ended December 31, 2009 and 2008


·
            Corporate
      expense decrease of $167,771 or 28.30% for the nine months ended December
      31, 2009 and 2008


·
            Finance
      and administrative expense increase of $2,714 or 0.09% for the three
      months ended December 31, 2009 and
2008


·
            Consultant
      expense increase of $94,125 or 47.09% for the nine months ended December
      31, 2009 and 2008


·
            Compensation
      cost for re-pricing warrants decrease of $358,165 or 57.44% for the nine
      months ended December 31, 2009 and
2008


·
            Financing
      expense decrease of $363,852 or 37.35% for the nine months ended December
      31, 2009 and 2008




23
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of Contents





Sales. The decrease
in sales expense for the nine months ended December 31, 2009 compared to 2008 is
attributed to a decrease of one employee and associated benefits of $24,635, a
reduction of office lease cost of $15,220, and an effort to reduce and control
travel, trade show and advertising expenses by the department of $24,201.
Various other cost had a net decrease of $15,156 for the nine months ended
December 31, 2009 compared to 2008.





Product Developement.
The decrease in product development expenses for the nine months ended December
31, 2009 compared to 2008 is attributed to a decrease of one employee and
associated benefits of $63,384 and a reduction of product testing cost of
$14,525 and a decrease in compensation cost of options awards of $15,948.
Various other cost had a net decrease of $2,435 for the nine months ended
December 31, 2009 compared to 2008.





Corporate. The
decrease in corporate expense for the nine months ended December 31, 2009
compared to 2008 is attributed to a decrease in legal fees of $113,112, a
decrease in annual meeting cost of $8,570, a decrease in idle process
depreciation of machinery of $25,566, an increase in travel and entertainment
expenses of $11,992 and a decrease in office lease cost of $14,933. Various
other cost had a net increase of $17,582 for the nine months ended December 31,
2009 compared to 2008.





Consulting.Consultants are usually compensated through the issuance of
restricted stock or the issuance of common stock warrants. Consulting cost
increased to $294,000 for the nine months ended December 31, 2009 as compared to
$199,875 for the nine months ended December 31, 2008, an increase of
$94,125.  Restricted stock was issued in the nine months ended
December 31, 2009 and 2008 in the amounts of $269,000 and $199,875. A portion of
the increase is attributed to the intrinsic cost of issuing Stock warrants which
are calculated using the Black-Scholes Option pricing model. Expenses related to
the Black-Scholes valuation method in the nine months ended December 31, 2009
and 2008 amounted to $269,000 and $199,875, respectively.  In the nine
months ended December 31, 2009 and 2008 we paid cash compensation of $25,000 and
$-0-, respectively.





Compensation Cost for
Re-Pricing Warrants. Compensation Cost for Re-Pricing Warrants decreased
to $265,383 for the nine months ended December 31, 2009 as compared to $623,548
for nine months ended December 31, 2008, a decrease of $358,165.





Financing Expense.Financing cost decreased to $610,350 from $974,202 for the nine months
ended December 31, 2009 and 2008, a decrease of $363,852. The decrease is
attributed to a reduced amount of financing with convertible debt and detachable
warrants.





Liquidity
and Capital Resources





For the
nine months ended December 31, 2009, we used net cash of $1,235,064 in operating
activities, compared with $856,231 of net cash used in operating activities for
the nine months ended December 31, 2008, in comparison to the same period in the
prior year, this is an increase in net cash used in operating activities of
$378,833 from the prior.





We had
net cash provided by financing activities of $1,358,546 for the nine months
ended December 31, 2009 compared with $508,260 provided by financing activities
for the nine months ended December 31, 2008. Cash provided by financing
activities for the nine months ended December 31, 2009, includes $1,464,334 from
the issuance of note payables and the payment of notes payables of $105,788.
Cash provided by financing activities for the nine months ended December 31,
2008 includes $323,560 from the exercise of warrants and issuance of common
stock as well as $319,700 from the issuance of note payables.





At
December 31, 2009 and March 31, 2009, we had cash and cash equivalents available
in the amounts of $134,713 and $11,231, an increase of $11,231.





Subsequent
to December 31, 2009 we are actively seeking to raise up to $4,000,000 in a
private placement of our common stock.




24
 Table
of Contents





Contractual
Obligations





We have
entered into a lease agreement for an office lease beginning October 1, 2009.
The office lease requires us to pay $99,960 over a three year period beginning.
We have an option to extend this lease for an additional year. 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 our products commenced in
September 2008. 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
            
            $
            89,180
            
            
            $
            32,664
            
            
            $
            56,516
            
            
            $
            -
            
            $
            -Total
      Contractual Cash Obligations
            
            $
            89,180
            
            
            $
            32,664
            
            
            $
            56,516
            
            
            $
            -
            
            $
            -








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
recorded value of the Company’s trade secret relating to the formula/formulation
of ESI’s products at the time acquired by the Company was based upon the
valuation of an independent appraiser. In accordance with SFAS No. 142, the
Company has determined that its trade secret has an indefinite life.
Accordingly, it is not subject to amortization, but is subject to the Company’s
annual assessment of prospective impairment. As of December 31, 2009 and March
31, 2009 no impairment of this trade secret was deemed necessary.





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) collectability 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 collectability 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.





ITEM3. QUANTITATIVE AND 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.





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ITEM4T. CONTROLS AND 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, 2009, 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,
2009, the Company’s Chief Executive Officer and Chief Financial Officer
concluded that, as of December 31, 2009, 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, 2009, that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.





PART
II.
 OTHER INFORMATION





Item1A. Risk Factors





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, 2009.





Item6. 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
      16, 2010
            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
            
            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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