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 1934





For
      the
      quarterly period ended: March 31, 2006




**OR**





[ 
       ]  TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





For
      the
      transition period from ______ to ______.





Commission
      File Number: 0-17458








**AHPC
                Holdings, Inc.**(Exact
                name of registrant as specified in its charter)**Maryland**
            
            **73-1326131**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**80
                Internationale Boulevard, Unit A**
              **Glendale
                Heights, IL 60139**(Address
                of principal executive office)**(630)
                407-0242**(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.


Yes
      [X]
      No [    ]





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of "accelerated
      filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
      one):




Large
                  Accelerated Filer [     ]
              Accelerated
                  Filer [     ]
              Non-accelerated
                  Filer [X]


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


Yes
      [    ] No [X]








APPLICABLE
      ONLY TO CORPORATE ISSUERS





The
      number of shares of the issuer’s Common Stock, par value $.03 per share,
      outstanding as of May 15, 2006 was 1,251,246.









2





**AHPC
      Holdings, Inc**


**FORM
      10-Q**


**March
      31, 2006**





**INDEX**





PART
      I
      - FINANCIAL INFORMATION





Item
      1.
      Financial Statements





Condensed
                Consolidated Balance Sheets (unaudited)
              March
                31, 2006 and June 30, 2005
            pgs.
                4-5Condensed
                Consolidated Statements of Operations (unaudited) for the
              Three
                Months Ended March 31, 2006 and 2005
            pg.
                6Condensed
                Consolidated Statements of Operations (unaudited) for the
              Nine
                Months Ended March 31, 2006 and 2005
            pg.
                7Condensed
                Consolidated Statements of Cash Flows (unaudited) for the
              Nine
                Months Ended March 31, 2006 and 2005
            pg.
                8Notes
                to Condensed Consolidated Financial Statements (unaudited)
            pg.
                9





Item
                2.    Management’s Discussion and Analysis of Financial
                Condition andResults
                of Operations
            pg.
                18Item
                3.    Quantitative and Qualitative Disclosures About Market
                Risk
            pg.
                23Item
                4.    Controls and Procedures
            pg.
                23





PART
      II - OTHER INFORMATION





Item
                1.    Legal Proceedings
            pg.
                25Item
                2.    Unregistered Sales of Equity Securities and Use of
                Proceeds
            pg.
                25Item
                3.    Defaults Upon Senior Securities
            pg.
                25Item
                4.    Submission of Matters to a Vote of Security
                Holders
            pg.
                25Item
                5.    Other Information
            pg.
                25Item
                6.    Exhibits
            pg.
                25





3


**ITEM** **1.    Financial Statements**





**AHPC
      Holdings, Inc. and Subsidiary**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**March
      31, 2006 and June 30, 2005**


**ASSETS**
            
            
            March
                31, 2006
            
            
            
            June
                30, 2005
              (as
                restated)(unaudited)
            
            
            
            (unaudited)**CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            69,246
            
            
            $
            16,434Accounts
                receivable - trade, net of allowance for
              doubtful
                accounts of $61,988 at March 31, 2006
              and
                $336,351 at June 30, 2005
            
            
            1,735,543
            
            
            
            1,844,349Inventories,
                net
            
            
            5,688,984
            
            
            
            4,992,385Prepaid
                expenses
            
            
            606,021
            
            
            
            488,733Other
                receivables
            
            
            3,694
            
            
            
            4,694Total
                current assets
            
            
            8,103,488
            
            
            
            7,346,595**PROPERTY,
                PLANT AND EQUIPMENT**Equipment,
                furniture and fixtures
            
            
            2,618,324
            
            
            
            2,617,934Building
                improvements
            
            
            35,036
            
            
            
            25,866Total
                property, plant and equipment
            
            
            2,653,360
            
            
            
            2,643,800Less
                accumulated depreciation and amortization
            
            
            2,506,898
            
            
            
            2,307,985Property,
                plant and equipment, net
            
            
            146,462
            
            
            
            335,815**OTHER
                ASSETS**
            
            
            1,108
            
            
            
            1,108Total
                assets
            
            $
            8,251,058
            
            
            $
            7,683,518





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





4


**AHPC
      Holdings, Inc. and Subsidiary**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS - CONTINUED**


**March
      31, 2006 and June 30, 2005**


**LIABILITIES
                AND SHAREHOLDERS' EQUITY**
            
            
            March
                31, 2006
            
            
            
            June
                30, 2005
              (as
                restated)(unaudited)
            
            
            
            (unaudited)**CURRENT
                LIABILITIES**Accounts
                payable - trade
            
            $
            2,261,253
            
            
            $
            2,364,366Trade
                notes payable to bank
            
            
            2,458,134
            
            
            
            783,806Other
                notes payable
            
            
            95,070
            
            
            
            8,803Accrued
                rebates
            
            
            180,324
            
            
            
            231,755Accrued
                warrant liability
            
            
            419,406
            
            
            
            -Accrued
                expenses
            
            
            614,785
            
            
            
            644,888Total
                current liabilities
            
            
            6,028,972
            
            
            
            4,033,618**DEFERRED
                RENT**
            
            
            103,453
            
            
            
            45,950**LONG-TERM
                DEBT**
            
            
            756,297
            
            
            
            -**DEFERRED
                TAX LIABILITIES**
            
            
            308,291
            
            
            
            308,291Total
                liabilities
            
            
            7,197,013
            
            
            
            4,387,859**COMMITMENTS
                AND CONTINGENCIES**
            
            
            -
            
            
            
            -**SHAREHOLDERS'
                EQUITY**Series
                A convertible preferred stock, $0.01 par value;
              220,000 shares
                authorized, none issued and outstanding at
              March
                31, 2006 and 59,350 shares issued and outstanding at June 30,
                2005
            
            
            -
            
            
            
            594Common
                stock, $.03 par value; 16,666,667 shares authorized;
              1,375,511
                shares issued and 1,251,246 shares outstanding at
              March 31,
                2006 and 1,285,052 shares issued and
              1,160,787
                shares outstanding at June 30, 2005
            
            
            41,711
            
            
            
            38,551Additional
                paid-in capital
            
            
            18,747,966
            
            
            
            18,699,817Accumulated
                deficit
            
            
            (11,729,456
            )
            
            
            (9,437,127
            )7,060,221
            
            
            
            9,301,835Less
                common stock in treasury, at cost, 124,265 shares
              on
                March 31, 2006 and on June 30, 2005
            
            
            6,006,176
            
            
            
            6,006,176Total
                shareholders' equity
            
            
            1,054,045
            
            
            
            3,295,659Total
                liabilities and shareholders' equity
            
            $
            8,251,058
            
            
            $
            7,683,518





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





5


**AHPC
      Holdings, Inc. and Subsidiary**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**For
      the Three Months Ended March 31, 2006 and 2005**


Three
                Months Ended
              March
                31,2006
            
            
            
            
            2005(unaudited)
            
            
            
            
            (unaudited)Net
                sales
            
            $
            6,112,764
            
            
            
            $
            6,413,177Cost
                of goods sold
            
            
            5,030,487
            
            
            
            
            4,882,440Gross
                profit
            
            
            1,082,277
            
            
            
            
            1,530,737Operating
                expensesSelling,
                general and administrative
            
            
            1,952,908
            
            
            
            
            1,969,953Loss
                from operations
            
            
            (870,631
            )
            
            
            
            (439,216
            )Other
                Income and (Expense)Interest
                income and (expense)
            
            
            60,881
            
            
            
            
            (41,098
            )Other
                income and (expense)
            
            
            -
            
            
            
            
            19Loss
                from operations before provision
              for
                income taxes
            
            
            (809,750
            )
            
            
            
            (480,295
            )Provision
                for income taxes
            
            
            -
            
            
            
            
            -**NET
                LOSS**
            
            $
            (809,750
            )
            
            
            $
            (480,295
            )Net
                loss per common share:
              Basic
            
            $
            (0.66
            )
            
            
            $
            (0.64
            )Diluted
            
            $
            (0.66
            )
            
            
            $
            (0.64
            )(as
                restated
            )Weighted
                average common shares outstanding:
              Basic
                and diluted
            
            
            1,226,113
            
            
            
            
            960,066





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





6


**AHPC
      Holdings, Inc. and Subsidiary**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**For
      the Nine Months Ended March 31, 2006 and 2005**


Nine
                Months Ended
              March
                31,2006
            
            
            
            2005(unaudited)
            
            
            
            (unaudited)Net
                sales
            
            $
            18,896,065
            
            
            $
            19,471,243Cost
                of goods sold
            
            
            15,250,713
            
            
            
            14,872,064Gross
                profit
            
            
            3,645,352
            
            
            
            4,599,179Operating
                expensesSelling,
                general and administrative
            
            
            5,796,661
            
            
            
            5,758,904Loss
                from operations
            
            
            (2,151,309
            )
            
            
            (1,159,725
            )Other
                ExpenseInterest
                expense
            
            
            (137,785
            )
            
            
            (111,777
            )Other
                income and (expense)
            
            
            -
            
            
            
            (1,102
            )Loss
                from operations before provision
              for
                income taxes
            
            
            (2,289,094
            )
            
            
            (1,272,604
            )Provision
                for income taxes
            
            
            3,235
            
            
            
            -**NET
                LOSS**
            
            $
            (2,292,329
            )
            
            $
            (1,272,604
            )Net
                loss per common share:
              Basic
            
            $
            (1.88
            )
            
            $
            (1.33
            )Diluted
            
            $
            (1.88
            )
            
            $
            (1.33
            )(as
                restated
            )Weighted
                average common shares outstanding:
              Basic
                and diluted
            
            
            1,221,484
            
            
            
            960,066





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











7


**AHPC
      Holdings, Inc. and Subsidiary**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**For
      the Nine Months Ended March 31, 2006 and 2005**


Nine
                Months Ended
              March
                31,2006
            
            
            
            2005(unaudited)
            
            
            
            (unaudited)Cash
                flows from operating activitiesNet
                loss
            
            $
            (2,292,329
            )
            
            $
            (1,272,604
            )Adjustments
                to reconcile net loss to net cash used in
              operating
                activitiesDepreciation
                and amortization
            
            
            198,913
            
            
            
            226,523Amortization
                of discount on subordinated notes
            
            
            159,064
            
            
            
            -Loss
                on disposal of property, plant and equipment
            
            
            -
            
            
            
            1,121Stock-Based
                compensation
            
            
            45,065
            
            
            
            -Deferred
                rent expense
            
            
            57,503
            
            
            
            -Changes
                in operating assets and liabilitiesAccounts
                receivable - trade
            
            
            108,806
            
            
            
            (155,264
            )Inventories,
                net
            
            
            (696,599
            )
            
            
            1,462,041Prepaid
                expenses
            
            
            (90,500
            )
            
            
            (120,509
            )Other
                assets
            
            
            1,000
            
            
            
            1,225Accounts
                payable - trade
            
            
            (103,113
            )
            
            
            144,719Accrued
                rebates
            
            
            (51,431
            )
            
            
            (101,949
            )Accrued
                expenses
            
            
            (240,252
            )
            
            
            (280,760
            )Net
                cash used in operating activities
            
            
            (2,903,873
            )
            
            
            (95,457
            )Cash
                flows from investing activitiesCapital
                expenditures
            
            
            (9,560
            )
            
            
            (16,410
            )Proceeds
                on sales of property, plant and equipment
            
            
            -
            
            
            
            300Net
                cash used in investing activities
            
            
            (9,560
            )
            
            
            (16,110
            )Cash
                flows from financing activitiesGross
                payments on trade notes payable to bank
            
            
            (17,435,509
            )
            
            
            (20,977,401
            )Gross
                borrowings on trade notes payable to bank
            
            
            19,109,837
            
            
            
            20,548,100Gross
                payments on other notes payable
            
            
            (141,641
            )
            
            
            (646,969
            )Gross
                borrowings on other notes payable
            
            
            227,908
            
            
            
            233,785Subordinated
                notes borrowings
            
            
            1,200,000
            
            
            
            -Proceeds
                from issuance of series A convertible preferred stock
            
            
            -
            
            
            
            572,000Proceeds
                from issuance of common stock and exercise of options
            
            
            5,650
            
            
            
            38,464Net
                cash provided by (used in) financing activities
            
            
            2,966,245
            
            
            
            (232,021
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            52,812
            
            
            
            (343,588
            )Cash
                and cash equivalents, beginning of period
            
            
            16,434
            
            
            
            359,012Cash
                and cash equivalents, end of period
            
            $
            69,246
            
            
            $
            15,424Supplemental
                disclosure of cash flow information:Interest
                Paid
            
            $
            141,335
            
            
            $
            111,777Income
                Taxes Paid
            
            $
            32,672
            
            
            $
            1,384





Noncash
      financing activities:


Estimated
      fair value of the accrued warrant liability as of March 31, 2006 in connection
      with the subordinated notes is $419,406.





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








8







**AHPC
      Holdings, Inc and Subsidiary**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**


**March
      31, 2006**




1.    
Description
      of
      Business:




****AHPC
      Holdings, Inc. (the “Company”) is a marketer of foodservice and medical
      examination gloves and other disposable items used primarily in the foodservice
      and medical industries in the United States and Canada through its wholly owned
      subsidiary, American Health Products Corporation (“AHPC”).





**2.    
      Basis of Presentation:**




****The
      accompanying unaudited condensed, consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America, for interim financial information and with the
      instructions to Form 10-Q. Accordingly, they do not include all of the
      information and footnotes required by accounting principles generally accepted
      in the United States of America for a complete presentation of our financial
      statements. In the opinion of management, all adjustments necessary for a fair
      presentation, consisting only of normal recurring adjustments, have been
      included. The audited June 30, 2005 financial statements have been prepared
      under the assumption that we are a going concern. Our independent registered
      public accounting firm has included a “going concern” emphasis paragraph in
      their audit report accompanying the June 30, 2005 financial statements. For
      further information these financial statements and notes are to be read in
      conjunction with the consolidated financial statements contained in the Annual
      Report on Form 10-K for the year ended June 30, 2005, filed October 14, 2005.
      The results of operations for the three and nine-month periods ended March
      31,
      2006, may not be indicative of the results that may be expected for the fiscal
      year ending June 30, 2006.




We
      have
      made certain reclassifications to the prior year balances to show comparatives.





**3.    
      Working Capital:**




****We
      continue to incur operating losses and have working capital shortages. Despite
      this, we have been able to secure both short-term and long-term financing to
      support future operations (refer to Note 15). We believe that this short-term
      and long-term financing will be sufficient to support our liquidity through
      June
      30, 2006, depending on operating results and the continued trade support. We
      expect to continue to consume cash through the end of fiscal year June 30,
      2006.
      The rate at which cash will be consumed is primarily dependent on the revenues
      we realize, cost reductions, rising raw material costs and our ability to pass
      along some of these costs to our customers. There can be no assurances that
      the
      current financing will be sufficient and that favorable operating results will
      be achieved, or that additional financing will be available to us, or that
      the
      terms of any additional financing will be favorable for us.







9




**4.    
      Principles of Consolidation:**




****The
      accompanying condensed consolidated financial statements include our accounts
      and those of AHPC. All significant intercompany transactions have been
      eliminated in consolidation.





**5.    
      Common Stock:**




****During
      the nine months ended, March 31, 2006, we issued 5,000 shares of our Common
      Stock pursuant to the exercise of employee stock options, we issued warrants
      to
      purchase shares of our Common Stock (refer to Note 7) and we issued 26,109
      shares of our Common Stock in connection with a cashless exercise of 57,692
      shares of our Common Stock which were exercisable pursuant to employee stock
      options.





**6.    
      Series A Convertible Preferred Stock:**




On February 2, 2005, we completed a private placement of 220,000 shares of
      Series A Convertible Preferred Stock (the “Preferred Shares”). The Preferred
      Shares were issued at a discount price of $2.60 per share. The Preferred Shares
      were convertible on a one-for-one basis into shares of our Common Stock by
      the
      holders at anytime or by us at anytime provided that the closing price of our
      Common Stock equaled or exceeded 150% of the closing price of our Common Stock
      (i.e. $4.88 per share) for a period equal to 21 consecutive trading days. We
      filed a registration statement with the Securities and Exchange Commission
      (the
“SEC”) on March 25, 2005 registering the shares of Common Stock issuable upon
      conversion of the Preferred Shares. As of September 30, 2005, all 220,000
      Preferred Shares have been converted into shares of our Common Stock. In
      connection with this private placement, we issued the placement company warrants
      to purchase 11,000 shares of our Common Stock (refer to Note 7).




Upon issuance, we recorded the Preferred Shares as a beneficial conversion
      feature to additional paid-in-capital and retained earnings. The Preferred
      Shares were issued at a discount in the aggregate amount of
      $143,000.




Since the Preferred Shares were sold at a discount to the closing price of
      the
      Common Stock and in order to comply with the Nasdaq Stock Market, Inc., Rule
      4351 (which limits the voting rights allocable to preferred stock), the
      Preferred Shares possess, in the aggregate, that number of votes which could
      be
      cast on shares of our Common Stock had the purchase price for the Preferred
      Shares been used instead to purchase shares of our Common Stock at the same
      closing price of our Common Stock on the business day immediately preceding
      the
      closing date of the purchase of the Preferred Shares.





**7.    
      Warrants:**




On February 3, 2005, we issued to LaSalle St. Securities, LLC, the placement
      agent for the private placement of the Preferred Shares, warrants to purchase
      11,000 shares of our Common Stock with an exercise price equal to $3.25 per
      share. These warrants may be converted by the holder on a one-for-one basis
      into
      shares of our Common Stock. The warrants are exercisable during the period
      beginning August 5, 2005 and ending February 2, 2008.




10





On September 29, 2005, we issued warrants to purchase up to 325,714 shares
        of
        our Common Stock in connection with the private placement of $1.2 million
        in
        subordinated promissory notes (refer to Note 15). Each Subordinated Note
        has
        attached a Class A Warrant and a Class B Warrant granting the holder of the
        Subordinated Note the right to purchase an aggregate of 192,000 and 120,000
        shares, respectively, of our Common Stock at an exercise price of $3.50 per
        share and $4.50 per share, respectively. In addition, in connection with
        this
        transaction, we issued the placement company a warrant to purchase 13,714
        shares
        of our Common Stock at an exercise price of $3.50 per share. This warrant
        has
        similar rights and terms to the Class A Warrants and will also be referred
        to as
        a “Class A Warrant.” Each of the Class A Warrants and the Class B Warrants has
        an exercise term of five years. The Class A Warrants and Class B Warrants
        shall
        be automatically exercised in full in a cashless exchange if the closing
        price
        of our Common Stock as listed on the NASDAQ Stock Market exceeds $8.75 and
        $11.25, respectively, for fifteen (15) consecutive trading days. As of March
        31,
        2006, the Class A Warrants and Class B Warrants were assigned a fair value
        of
        $419,406, which is estimated using the Black-Scholes valuation model. The
        following assumptions were used to determine the fair value of these warrants
        using the Black-Scholes valuation model: a term of 4.5 years, a risk-free
        rate
        of 4.8, volatility of 100%, and an expected dividend yield of zero.




The holders of the Subordinated Notes, referenced in the preceding paragraph,
      and Class A Warrants and Class B Warrants have registration rights that require
      us to file a registration statement with the Securities and Exchange Commission
      within one year from the date of issuance of the warrants to register the resale
      of the Common Stock issuable upon exercise of the warrants if we file a
      registration statement or if we receive a collective demand for registration
      from the holders of the Class A Warrants and Class B Warrants holding in the
      aggregate at least 51% of the total shares of Common Stock issuable upon
      exercise of all the warrants. Under EITF No. 00-19, *Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company’s Own Stock,* the ability to register the shares of Common Stock
      issuable upon exercise of the warrants is deemed to be outside of our control.
      Accordingly, we have on recorded the fair value of the Class A Warrants and
      Class B Warrants was $419,406 as an accrued warrant liability on our
      consolidated balance sheet, and this liability will continue to be marked to
      fair value at the end of each subsequent reporting period.




**8.    
      Stock Incentive Plans:**




In December 2004, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”)  No.123,
“Share-Based Payment” (Revised 2004) (“SFAS 123R”). We adopted the provisions of
      SFAS No 123R as of July 1, 2005 using the modified prospective method. SFAS
      No.
      123R is a revision of SFAS No. 123, “Accounting for Stock Based Compensation”
and supersedes Accounting Principles Board (“APB”) Opinion No. 25,
“Accounting for Stock Issued to Employees”. SFAS 123R establishes standards for
      the accounting for transactions in which an entity exchanges its equity
      instruments 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. We have granted stock options to our employees in connection
      with the provision of services. Prior to July 1, 2005, SFAS 123 required us
      to
      disclose the pro forma effect of compensation expense for these stock options.
      Under SFAS 123R, we are required to record applicable compensation expense
      in
      our results of operations. During the three and nine month period ending March
      31, 2006, we recognized a compensation expense of $45,065 related to the stock
      options issued.




Prior
      to
      the adoption of SFAS 123R, we accounted for stock-based compensation in
      accordance with Accounting Principles Board (“APB”) Opinion No. 25,
“*Accounting
      for Stock Issued to Employees*,”
and
      had previously adopted the disclosure-only provisions of SFAS No. 123,
      “*Accounting
      for Stock-Based Compensation*,”
      related to options and warrants issued to employees and directors. Option
      exercise prices for options granted under this plan were not less that the
      fair
      market value of our Common Stock on the date of
      grant.





11




We adopted SFAS 123R using the modified prospective method and accordingly,
      results for prior periods were not restated. The following table illustrates
      the
      effect on net earnings and earnings per share if we had applied the fair value
      recognition provisions of SFAS 123 to stock options for periods prior to the
      adoption of SFAS 123R.




Three
                  Months Ended March
                  31, 2005
              
              
              
              Nine
                  Months Ended
                March
                  31, 2005Net
                  loss, as reported
              
              $
              (480,295
              )
              
              $
              (1,272,604
              )Deduct:
                  discount on Preferred Stock/
                Beneficial
                  Conversion
              
              
              (143,000
              )
              
              
              (143,000
              )Deduct:
                  total stock-based employee compensation expense
                determined
                  under fair value based method for awards granted,
                modified,
                  or settled, net of related tax effects
              
              
              4,999
              
              
              
              14,997Pro
                  forma net loss
              
              $
              (618,296
              )
              
              $
              (1,400,607
              )Earnings
                  per shareBasic
                  - as reported
              
              $
              (0.64
              )
              
              $
              (1.47
              )(as
                restated
              )
              
              
              (as
                  restated
              )Basic
                  - pro forma
              
              $
              (0.64
              )
              
              $
              (1.47
              )(as
                restated
              )
              
              
              (as
                restated
              )Dilutive
                  - as reported
              
              $
              (0.64
              )
              
              $
              (1.47
              )(as
                restated
              )
              
              
              (as
                  restated
              )Dilutive
                  - pro forma
              
              $
              (0.64
              )
              
              
              (1.47
              )(as
                restated
              )
              
              
              (as
                  restated
              )





**9.** **Net
      Loss Per Share:**




****We
      follow
      the Statement of Financial Accounting Standards No. 128, “Earnings Per Share
      (EPS)” (“SFAS 128”), which requires dual presentation of basic and diluted
      earnings per share for all periods presented. Basic EPS amounts are based on
      the
      weighted-average number of shares of Common Stock outstanding during each period
      while diluted EPS amounts are based on the weighted-average number of shares
      of
      Common Stock outstanding during the period after the effect of dilutive stock
      options and warrants. Dilution is not applicable during the loss periods
      presented. The weighted-average number of common shares and common share
      equivalents outstanding for the three and nine months ended March 31, 2006
      and
      2005, respectively, are as follows:





12







Three
                Months Ended
              March
                31,
            
            Nine
                Months Ended
              March
                31,2006
            
            
            2005
            
            
            
            2006
            
            
            2005Net
              Loss as reported
            
            $
            (809,750
            )
            $
            (480,295
            )
            
            $
            (2,292,329
            )
            $
            (1,272,604
            )Deduct: 
              discount on Preferred Stock/Beneficial Conversion
            
            
            
            
            
            (143,000
            )
            
            
            
            
            
            (143,000
            )Net
                Loss available to common shareholders
            
            $
            (809,750
            )
            $
            (623,295
            )
            
            $
            (2,292,329
            )
            $
            (1,415,604
            )Basic
                weighted-average number of common shares
              outstanding
            
            
            1,233,346
            
            
            960,066
            
            
            
            1,233,346
            
            
            960,066Dilutive
                effect of common share equivalents
            
            
            -
            
            
            -
            
            
            
            -
            
            
            -Diluted
                weighted-average number of common shares
              outstanding
            
            
            1,233,346
            
            
            960,066
            
            
            
            1,233,346
            
            
            960,066


**10.** **Accounting
      for Income Taxes:**




****We
      record
      income taxes in accordance with Statement of Financial Accounting Standards
      No.
      109 (“SFAS 109”). SFAS 109 utilizes the liability method and deferred taxes are
      determined based on the estimated future tax effects of differences between
      the
      financial statement and tax basis of fixed assets and other temporary
      differences given the provisions of enacted tax laws. Deferred income tax
      provisions and benefits are based on the changes in the deferred tax asset
      or
      tax liability from period to period.




Our
      U.S.
      operations had generated net operating loss carry-forwards (“NOL’s”) in prior
      years, of which approximately $4.998 million is remaining at March 31, 2006.
      These NOL’s are fully reserved with a valuation allowance and are included as a
      component of deferred tax assets. In accordance with federal tax regulations,
      usage of the net operating loss carryforwards is subject to limitations in
      future years as a direct result of our Redemption Transaction which is described
      in our prior filings with the Securities and Exchange Commission, including
      in
      Note 17 to our Notes to Condensed Consolidated Financial Statements filed
      as part of our Form 10-Q Report for the quarter ended December 31, 2005. We
      have available to utilize only $2.8 million of these NOL’s over the next 20
      years, at which time all of the NOL’s listed above will have expired.




For
      the
      nine months ended March 31, 2006 and 2005, we have recorded a provision of
      $3,235 and $0, respectively, for income taxes. The current period provision
      was
      for state income taxes.




**11.** **Contingencies:**




****Over
      the
      last several years, numerous product liability lawsuits have been filed against
      suppliers and manufacturers of latex gloves alleging, among other things,
      adverse allergic reactions. We are one of numerous defendants that have been
      named in such lawsuits. During the nine months ended March 31, 2006, there
      were
      no additional product liability lawsuits filed against the Company. At March
      31,
      2006, we were involved in a total of 9 lawsuits, either as a named defendant,
      third party or an indemnifier. We have agreed to defend and indemnify certain
      of
      our vendors solely in connection with the sale and distribution of our products.
      None of these lawsuits name us as the sole defendant. We are an active defendant
      in two of the claims. The indemnities have not pursued action against us in
      the
      remaining seven claims.





13






We possess product liability insurance coverage which covers the defense costs
      and certain damage awards associated with the product liability claims against
      the Company and AHPC. Additionally, AHPC’s customers typically procure product
      liability insurance that limits our exposure to those claims for which we have
      agreed to indemnify such customers, subject to deductions for such claims that
      remain our responsibility. We believe that all legal claims are adequately
      provided for or involve such amounts that would not materially or adversely
      affect our financial condition. However, there is no assurance that AHPC’s or
      its customers’ insurance will be sufficient to meet all damages for which we may
      be held liable. In addition, there can be no assurances that product liability
      insurance for these claims will continue to be available to us or, if available,
      that it will be available in sufficient amounts and at affordable
      terms.




We
      have
      arelatively small number of national accounts that comprise a substantial portion
      of our revenues. As of March 31, 2006, receivables from our key national
      accounts amounted to 77.4% of our outstanding accounts receivable.





**12.   
      Critical Accounting Policies:**




****While
      all
      of our accounting policies are important in assuring that we adhere to current
      accounting standards, certain policies are particularly important due to their
      impact on our financial statements. These are described in detail
      below.




Reserves for Accounts Receivable and Inventory. We
      review on an ongoing basis the realizability of our trade receivables and the
      need for establishing reserves. As of March 31, 2006 and June 30, 2005, we
      have
      established reserves of $61,988 and $336,351, respectively, in relation to
      our
      trade receivables. The decrease in this reserve was from a direct write-off
      of a
      fully reserved account receivable which had no impact on the financial results
      for the quarter ending March 31, 2006.




We
      review on an ongoing basis the realizability of our inventory value and the
      need
      for establishing reserves. Accordingly, we have established inventory reserves
      for valuation, shrinkage, excess and obsolete inventory. As of March 31, 2006,
      these reserves were $203,642 and as of June 30, 2005 these reserves were
      $225,941.




Revenue Recognition. Sales
      for all products shipped from our Glendale Heights, Illinois warehouse are
      recognized at the time the product is shipped to our customers or picked up.
      Sales shipped or picked up from our designated two public warehouse facilities
      are recognized the day following the date of shipment. An accrual is recorded
      to
      recognize these sales in accordance with our accounting policies.




Inventories. Inventories are accounted for on a first-in, first-out basis and are valued
      at
      the lower of actual cost or market. Inventories are stored at our Glendale
      Heights, Illinois warehouse and two independent public warehouses located in:
      Oakland, California; and Fond du Lac, Wisconsin.




Property, Plant and Equipment. We
      record property, plant and equipment at cost. Depreciation is provided by both
      straight-line and accelerated methods over lives ranging from 2 to 7 years.
      Building improvements are amortized on a straight-line basis over their
      estimated useful lives or lease terms, whichever is shorter.





14





Sales Incentives. Certain
      customers are granted discounts, rebates or other allowances which are intended
      to assist in the promotion of our products. We record these discounts and
      rebates as our customers earn them or when they are paid, depending on the
      nature of the item. All discounts, rebates and allowances are shown as a
      deduction from gross sales to arrive at net sales in our consolidated statements
      of income.




Deferred Tax Asset. Deferred
      taxes result from the effect of transactions that are recognized in different
      periods for financial and tax reporting purposes. A valuation allowance is
      established when it is more likely than not that any portion of the deferred
      tax
      assets will not be realized. The valuation allowance is adjusted if the
      realization of deferred tax assets becomes more likely than not. Should our
      income projections result in the conclusion that realization of deferred tax
      assets is more likely than not, further adjustments to the valuation are made.




Accrued
      Warrant Liability.In
      connection with the issuance of the Subordinated Notes, referred to in Note
      15,
      we recorded the fair market value of the associated warrants (refer to Note
      7)
      as an accrued warrant liability in accordance with SFAS 133 Accounting for
      Derivative Instruments and Hedging Activities and EITF 00-19 Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company's Own Stock. Accordingly, changes in the fair market value of the
      warrants will be reported in earnings as they occur. The associated discount
      on
      the Subordinated Notes is being amortized to interest expense, using the
      effective interest rate method, over the term of the Subordinated
      Notes.





**13.   
      Key Customers:**




****Our
      customers include leading foodservice distributors and healthcare product
      suppliers. During the nine months ended March 31, 2006, AHPC’s national customer
      group accounted for 86.5% of net sales. This customer group is comprised of
      60
      independent customers, of which 38 we currently generate sales to. The loss
      of
      the national customers comprising this customer group would have a materially
      adverse effect on us. Our customers tend to limit the number of qualified
      vendors they purchase from to gain efficiencies across their product line.
      We,
      therefore, expend substantial efforts to maintain and grow our relationships
      with our existing major customers. However, our products are ultimately
      distributed by three diversified distribution companies, through their combined
      networks of over 100 operating companies, to thousands of foodservice
      organizations and medical facilities throughout the United States. The ultimate
      end-users of our products are foodservice organizations and medical facilities,
      healthcare professionals and individuals who use our gloves and other associated
      disposable products.





**14.   
      Trade Notes Payable to Bank:**




****On September 9, 2004, we signed a commitment for a one-year credit
      facility with Greenfield Commercial Credit, LLC, a privately held commercial
      financing company. This credit facility consisted of an asset-based loan and
      security agreement that provided us with a $3 million revolving line of credit.
      Pursuant to the line of credit, we could borrow up to the lesser of (i) $3
      million or (ii) the sum of 75% of eligible receivables and 35% of eligible
      inventory, with a limit of $1,000,000 on the amount of borrowing availability
      on
      the eligible inventory. The line of credit borrowings under this facility
      carried an interest rate of prime plus 8.0%. At anytime prior to the maturity
      date, the lender had the unrestricted right to demand payment of all outstanding
      indebtedness. These bank obligations were secured by a security interest in
      substantially all of AHPC tangible and intangible assets. The credit facility
      contained certain penalties for early termination. This credit facility was
      renewed on September 9, 2005 with certain amendments described
      below.







15




The renewal of our loan and security agreement with Greenfield Commercial
      Credit, LLC, on September 9, 2005, included an amendment increasing our
      borrowing availability from $3 million to a potential maximum borrowing amount
      of $5 million. Under the amended facility we may borrow up to the lesser of
      (i)
      $5 million or (ii) the sum of 80% of eligible receivables and 50% of eligible
      inventory on hand and 35% of eligible inventory in-transit, with a sub limit
      on
      the inventory in-transit of $500,000, and an overall inventory cap of
      $2,500,000. The line of credit borrowings under the amended facility carry
      an
      interest rate of prime plus 4.5%. The prime rate is the rate published in the
      Wall Street Journal in its “Money Rates” column as the “Prime Rate.” As of March
      31, 2006, the prime rate was 7.75%. At any time prior to the maturity date,
      the
      lender has the unrestricted right to demand payment of all outstanding
      indebtedness. These bank obligations remain secured by a security interest
      in
      substantially all of AHPC tangible and intangible assets and continue to contain
      certain penalties for early termination. As of March 31, 2006 and June 30,
      2005,
      we had an outstanding credit line balance of $2,458,134 and $783,806,
      respectively, under this credit facility and were contingently liable for
      outstanding letters of credit liabilities totaling $609,763 and $927,337,
      respectively. Also, included in the contingent outstanding letters of credit
      for
      both March 31, 2006 and June 30, 2005 is one stand by letter of credit for
      $125,000 which represents our warehouse and office space security
      deposit.




In addition to our grant of a security interest in substantially all of AHPC’s
      assets, Alan Zeffer, our Chief Executive Officer, has guaranteed the repayment
      of the revolving loan in full if the loan is not repaid as a result of
      malfeasance by Mr. Zeffer in the performance of his duties.




**15.** **Long
      Term Debt:**




On September 29, 2005, we completed a private placement of $1.2 million in
      subordinated promissory notes (the “Subordinated Notes”). Our obligations under
      the Subordinated Notes are secured by a Security Agreement that generally grants
      the holder of the Subordinated Note a secondary interest, behind Greenfield
      Commercial Credit, LLC, in substantially all of our assets. The Subordinated
      Notes bear interest at a rate of 7% per annum with a maturity date of two years
      after the date of issuance of the Subordinated Notes. Each Subordinated Note
      has
      attached a Class A Warrant and a Class B Warrant granting the holder of the
      Subordinated Note the right to purchase shares of our Common Stock at an
      exercise price of $3.50 per share and $4.50 per share, respectively (refer
      to
      Note 7). We recorded each warrant at its fair value at the date of issuance.
      The
      $26,786 fair value of the warrants allocable to the placement agent has been
      recorded as debt issue costs and is being amortized to expense over the term
      of
      the Subordinated Notes. The discount on the Subordinated Notes for the warrants
      is being amortized to interest expense, using the effective interest rate
      method, over the term of the Subordinated Notes. At March 31, 2006, the
      unamortized discount on the warrants was $443,704. For the nine months ended
      March 31, 2006, total interest expense recognized relating to the discount
      was
      $159,064.








16





**16.    
        NASDAQ Listing:**
  On February
        16,
        2006, Nasdaq notified us that we did not comply with or satisfy Nasdaq
        Marketplace Rule 4310(c)(2)(B) for continued listing on the Nasdaq Stock
        Market.  On April 25, 2006, we received a determination letter from the
        Listing Qualifications Staff of The Nasdaq Stock Market, Inc. indicating
        that
        the Nasdaq Staff had determined to delist our securities from The Nasdaq
        Capital
        Market based upon our failure to satisfy the $2.5 million stockholders’ equity
        requirement, as noted above.  We plan to request a hearing before the
        NASDAQ Listing Qualifications Panel to review the Staff Determination and
        to
        seek continued listing on The Nasdaq Capital Market.
  On
        May 2,
        2006, we submitted a request for a hearing to outline our plan to achieve
        and
        sustain compliance with all Nasdaq listing requirements that is acceptable
        to
        Nasdaq. The request for a hearing with the Nasdaq Panel will stay the Staff
        Determination at least until the hearing is held, likely within 30-45 days
        of
        the submission date, and the Panel subsequently issues a formal decision
        in this
        matter. Our securities will continue to trade on The Nasdaq Capital Market
        pending the issuance of a decision by the Nasdaq Panel.




On
      May 5, 2006, we received a stay on the delisting action pending a final written
      decision by the Nasdaq Listing Qualifications Panel. The Panel will consider
      our
      appeal at the set hearing date of June 15, 2006.





**17.** **Restatement:**




This Form 10-Q reflects a correction of certain accounting information and
      disclosures related to the calculation of our reported basic and diluted net
      loss per share. For the quarter ended March 31, 2005 we improperly included
      potential common shares in the denominator of our diluted net loss per share
      computation, which caused an incorrect anti-dilutive diluted net loss per share
      amount. We have restated our financial statements to reflect the correction
      of
      this error.




Three
                  Months Ended
                March
                  31,2005
                (as
                  restated)
              
              
              Nine
                  Months Ended
                March
                  31, 2005
                (as
                  restated)
              
              
              Three
                  Months Ended
                March
                  31,2005
                (as
                  previously reported)
              
              
              Nine
                  Months Ended
                March
                  31, 2005
                (as
                  previously reported)Net
                  Loss
              
              $
              (480,295
              )
              $
              (1,272,604
              )
              $
              (480,295
              )
              $
              (1,272,604
              )Basic
                  net loss per common share
              
              $
              (0.64
              )
              $
              (1.47
              )
              $
              (0.50
              )
              $
              (1.33
              )Diluted
                  net loss per common share
              
              $
              (0.64
              )
              $
              (1.47
              )
              $
              (0.44
              )
              $
              (1.20
              )


**18.** **Prior
      Period Restatement:**




This Form 10-Q reflects a prior period restatement related to the recognition
      of
      the loss from the Stock Redemption Transaction, which is described in our prior
      filings with the Securities and Exchange Commission, including in Note B to
      our Notes to Consolidated Financial Statements filed as part of our Form 10-K
      Report for the Fiscal Year Ended June 30, 2005, as a loss in operations and
      not
      as a capital transaction. We have restated our financial statements to reflect
      the correction of this error. Further, we are in the process of restating our
      Consolidated Financial Statements filed in our Form 10-K Report for the Fiscal
      Year Ended June 30, 2005 to reflect the corrections noted below.


Common
                Stock
            Series
                A Preferred Stock
            
            Additionalpaid-in
            
            Retained
                Earnings(accumulated
            
            
            Treasury
                Stock
            
            
            Shareholders'Shares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            capital
            
            
            deficit)
            
            
            Amount
            
            
            EquityBalance,
                June 30, 2005
            
            
            1,285,052
            
            $
            38,551
            
            
            59,350
            
            $
            594
            
            $
            18,525,456
            
            $
            (9,262,766)
            
            $
            (6,006,176)
            
            $
            3,295,659Prior
                period restatement
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            174,361
            
            
            (174,361)Balance,
                June 30, 2005, as
              restated
            
            
            1,285,052
            
            $
            38,551
            
            
            59,350
            
            $
            594
            
            $
            18,699,817
            
            $
            (9,437,127)
            
            $
            (6,006,176)
            
            $
            3,295,659


17





**ITEM
      2.    
Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**





The
      purpose of management’s discussion and analysis of financial condition and
      results of operations is to provide shareholders with an understanding of our
      financial condition, changes in financial condition and results of operations.





***Business
      Overview***





Our
      wholly owned subsidiary, American Health Products Corporation (“AHPC”), is
      engaged in the marketing and distribution of high quality medical grade
      examination and foodservice gloves and other complimentary products within
      the
      United States and Canada. We have been in the glove business since our
      incorporation in January 1989. For the nine months ended March 31, 2006, we
      recorded net sales of approximately $18.9 million.




**Three
      Months Ended March 31, 2006 Compared to the Three Months Ended March 31,
      2005:**





Consolidated
      net sales for the three months ended March 31, 2006 were $6,112,764 which
      represents a decrease in net sales of $300,413 or 4.7% compared to the three
      months ended March 31, 2005. This decrease in net sales is due to continued
      competitive pricing pressure within some of our national account customers
      for
      our lower margin products. Our net sales are derived from the sales of finished
      product net of allowable rebates, discounts and returns.





Consolidated
      gross profit decreased $448,460 or 29.3% for the three months ended March 31,
      2006 compared to the three months ended March 31, 2005. Cost of goods sold,
      a
      component in calculating our gross profit, includes all costs to purchase our
      finished products plus the related costs associated with ocean freight, customs
      duty and warehousing. The increase in cost of goods sold during the current
      year
      period was due to continued increases in raw material costs. We expect to
      improve our margins on our product sales in subsequent quarters due to certain
      price increases that have been approved to enable us to pass on to our customers
      certain of the increased raw material costs we have recently incurred. We
      continue to expect our gross margins to be affected by the cost of latex,
      changes in product mix, competition, manufacturing capacity levels and other
      factors.





Our
      operating loss has increased $431,415 or 98.2% for the three months ended March
      31, 2006 from the same time period in the prior year. Selling expenses, a
      component of calculating our operating loss, include all salaries and payroll
      related costs for sales and marketing staff together with other sales related
      expenses such as sales commissions, travel costs, trade shows, advertising,
      promotions and delivery costs. During the three months ended March 31, 2006,
      our
      selling, general, administrative and other expenses (“SG&A expenses”)
      decreased by $17,045 or 0.9%. As a percentage of net sales, SG&A expenses
      increased from 30.7% for the three months ended March 31, 2005, to 31.9% for
      the
      three months ended March 31, 2006. This percentage increase was primarily due
      to
      the decrease in net sales for the three month period ended March 31,
      2006.





18





Loss
      from operations before taxes increased by $329,455 or 68.6% for the three months
      ended March 31, 2006 compared to the same period in the prior year. This
      increase in our loss from operations was primarily due to the decrease in sales
      and an increase in raw material costs. Also included in the computation of
      our
      loss from operations is other income (or expense) which consists of interest
      expense and income and miscellaneous expense and income. Other expense increased
      by $101,979 for the three months ended March 31, 2006 from the reported amount
      in the same period in the prior year. This increase was due to amortization
      of
      the recorded warrant discount of $63,423 (refer to Note 15), a decrease in
      interest expense due to a decrease in the fair value of the warrants of
      $222,070, and an increase in borrowings on our current credit facility during
      the current year period.





The
      expense for income taxes for the three month-periods ended March 31, 2006
      and March 31, 2005 was $0.





As
      a
      result of the factors discussed above, we reported a net loss of $(809,750)
      for
      the three months ended March 31, 2006, which compares to a net loss of
      $(480,295) during the same period in the prior year. Basic and dilutive net
      loss
      per share for the three months ended March 31, 2006 and March 31, 2005, were
      $(0.66) and $(0.64), respectively. Outstanding options and warrants are excluded
      from the calculation of diluted net loss per share since the inclusion of such
      options and warrants is anti-dilutive.




**Nine
      Months Ended March 31, 2006 Compared to the Nine Months Ended March 31,
      2005:**





Consolidated
      net sales for the nine months ended March 31, 2006 were $18,896,065 which
      represents a decrease in net sales of $575,178 or 3.0% compared to the nine
      months ended March 31, 2005. This decrease in net sales is due to competitive
      pricing pressure within some of our national account customers for our lower
      margin products. Our net sales are derived from the sales of finished product
      net of allowable rebates, discounts and returns.





Consolidated
      gross profit decreased $953,827 or 20.7% for the nine months ended March 31,
      2006 compared to the nine months ended March 31, 2005. Cost of goods sold,
      a
      component in calculating our gross profit, includes all costs to purchase our
      finished products plus the related costs associated with ocean freight, customs
      duty and warehousing. The increase in cost of goods sold during the current
      year
      period was due to increases in raw material costs. As stated above, we expect
      to
      improve our margins on our product sales in subsequent quarters due to certain
      price increases that have been approved to enable us to pass on to our customers
      certain of the increased raw material costs we have recently incurred. We
      continue to expect our gross margins to be affected by the cost of latex,
      changes in product mix, competition, manufacturing capacity levels and other
      factors.





Our
      operating loss has increased $991,584 or 85.5% for the nine months ended March
      31, 2006 from the same time period in the prior year. Selling expenses, a
      component of calculating our operating loss, include all salaries and payroll
      related costs for sales and marketing staff together with other sales related
      expenses such as sales commissions, travel costs, trade shows, advertising,
      promotions and delivery costs. During the nine months ended March 31, 2006,
      our
      SG&A expenses increased by $37,757 or 0.7%. As a percentage of net sales,
      SG&A expenses increased from 29.6% for the nine months ended March 31, 2005,
      to 30.7% for the nine months ended March 31, 2006. This percentage increase
      was
      primarily due to a decrease in net sales for the nine month period ended March
      31, 2006.





19





Loss
      from operations before taxes increased by $1,016,490 or 79.9% for the nine
      months ended March 31, 2006 compared to the same period in the prior year.
      This
      increase in our loss from operations was primarily due to the decrease in net
      sales described above combined with an increase in our raw material costs.
      Also
      included in the computation of our loss from operations is other income (or
      expense) which consists of interest expense and income and miscellaneous expense
      and income. Other expense increased by $26,008 for the nine months ended March
      31, 2006 from the reported amount in the same period in the prior year. This
      increase was due to amortization of the warrant discount of $159,064 (refer
      to
      Note 15), a decrease in interest expense due to a decrease in the fair value
      of
      the warrants of $210,147 and an increase in borrowings on our current credit
      facility during the current year period.





The
      expense for income taxes for the nine months ended March 31, 2006 was $3,235
      compared to $0 in the prior year period. The increase in the current year period
      was due to income taxes paid to various states.





As
      a
      result of the factors discussed above, we reported a net loss of $(2,292,329)
      for the nine months ended March 31, 2006, which compares to a net loss of
      $(1,272,604) during the same period in the prior year. Basic and dilutive net
      loss per share for the nine months ended March 31, 2006 and March 31, 2005,
      were
      $(1.88) and $(1.33), respectively. Outstanding options and warrants are excluded
      from the calculation of diluted net loss per share since the inclusion of such
      options and warrants is anti-dilutive.





**Liquidity
      and Capital Resources:**





**Nine
      Months Ended March 31, 2006:**





Cash
      and
      cash equivalents at March 31, 2006 were $69,246, an increase of $52,812 from
      $16,434 at June 30, 2005. We experienced an increase in cash flows during the
      nine months ended March 31, 2006, primarily as a result of cash provided by
      financing activities which largely related to proceeds received from the
      issuance of our secured subordinated promissory notes (refer to Note 15 of
      our
      Condensed Consolidated Financial Statements included elsewhere in this report)
      and increased borrowings on our trade notes payable to the bank.





Our
      operations used cash of $2,903,873 during the nine months ended March 31, 2006,
      primarily as a result of increases in inventory levels and product line
      extensions. Inventory levels for our core line of business is maintained at
      levels between six-eight weeks on hand whereas inventory levels on all
      other lines of business vary. Net trade accounts receivable at March 31, 2006
      was $1,735,543 which decreased from $1,844,349 at June 30, 2005 due to the
      decline in our net sales and due to the timing of our cash receipts. Net
      inventories at March 31, 2006 were $5,688,984, an increase from the level at
      June 30, 2005, of $4,992,385, due to management’s efforts to maintain inventory
      levels and bring on new product line extensions.





During
      the nine months ended March 31, 2006, we used cash in investing activities
      of
      $9,560 in connection with capital improvement expenditures primarily relating
      to
      computer software and hardware purchases.





During
      the nine months ended March 31, 2006, cash provided by financing activities
      equaled $2,966,245. The cash provided by financing activities primarily came
      from the issuance of $1.2 million in secured subordinated promissory notes
      (refer to Note 15 of our Condensed Consolidated Financial Statements included
      elsewhere in this report) and increased borrowings on our trade notes payable
      to
      the bank due to the increased need to finance the inventory at March 31,
      2006.





20





We
      renewed our credit facility with Greenfield Commercial Credit, LLC on September
      9, 2005 with certain amendments described below. In connection with the renewal,
      we incurred a renewal fee of $100,000. Moreover, the fee to again renew the
      security agreement after the one-year term expires in September 2006 will be
      $50,000.





The
      renewal of our loan and security agreement with Greenfield Commercial Credit,
      LLC, on September 9, 2005, included an amendment increasing our borrowing
      availability from $3 million to a potential maximum borrowing amount of $5
      million. Under the amended facility, we may borrow up to the lesser of (i)
      $5
      million or (ii) the sum of 80% of eligible receivables and 50% of eligible
      inventory on hand and 35% of eligible inventory in-transit, with a sub limit
      of
      $500,000, and an overall inventory cap of $2,500,000. The line of credit
      borrowings carry an interest rate of prime plus 4.5%. At any time prior to
      the
      maturity date, the lender has the unrestricted right to demand payment of all
      outstanding indebtedness. These bank obligations are secured by a security
      interest in substantially all of AHPC's tangible and intangible assets and
      contain certain penalties for early termination. As of March 31, 2006, we had
      an
      outstanding balance under this credit facility of $2,458,134 and were
      contingently liable for outstanding letters of credit liabilities totaling
      $609,763.




Our
      audited June 30, 2005 financial statements have been prepared under the
      assumption that we are a going concern. Our independent registered public
      accounting firm has included a “going concern” emphasis paragraph in their audit
      report accompanying the June 30, 2005 financial statements. We continue to
      experience reoccurring net losses. Although, we have benefited from several
      cost
      reduction programs, the volatility of raw material costs and rising oil prices
      together have limited the benefits of these programs in our results of
      operations.




Despite the negative cash flow, we have been able to secure both short-term
      and
      long-term financing to support future operations (refer to Note 15 of our
      Condensed Consolidated Financial Statements included elsewhere in this report).
      We believe that this short-term and long-term financing will be sufficient
      to
      support our liquidity for the foreseeable future, depending on operating results
      and the continued trade support. We expect to continue to consume cash through
      the end of fiscal year June 30, 2006. We are evaluating certain strategic
      alternatives that we believe will improve our long-term cash flow and
      profitability. These alternatives include evaluating product line and customer
      profitability, evaluating the markets within which we participate, further
      diversification of the product line to include additional non-glove products,
      and expanding into markets where we currently do not participate
      in.  No assurances can be given that these will occur. The rate at
      which cash will be consumed is primarily dependent on the revenues realized,
      cost reductions, rising raw material costs and our ability to pass along some
      of
      these costs to our customers. There can be no assurances that the current
      financing will be sufficient and that favorable operating results will be
      achieved, or that additional financing will be available to us, or that the
      terms of any additional financing will be favorable for us.




The
      following table summarizes our significant contractual commitments as of March
      31, 2006:




**Payments
                  Due by Period****Contractual****Obligation**
              
              
              **Total**
              
              
              **Less
                  Than 1 Year**
              
              
              **1
                  - 3 Years**
              
              
              **4
                  - 5 Years**
              
              
              **After
                  5 Years**Operating
                  Leases (1)
              
              $
              1,789,413
              
              $
              105,599
              
              $
              1,306,836
              
              $
              376,978
              
              $
              -Purchase
                  Commitments (2)
              
              $
              16,192,121
              
              $
              1,310,042
              
              $
              14,882,079
              
              $
              -
              
              $
              -


21




(1)
      On
      March 31, 2005, we entered into a Lease Agreement with ProLogis to lease
      warehouse and office space in the building known as 80 Internationale Boulevard,
      Unit A in Glendale Heights, Illinois. The term of the Lease Agreement commenced
      on May 1, 2005 and will end on June 30, 2010, subject to our option to extend
      the lease term for an additional term of 5 years.





(2)
      On
      April 30, 2004, we entered into a five year supply agreement with WRP Asia.
      This
      agreement calls for us to purchase no less than a minimum of seven forty-foot
      containers of product per month and no less than 125 forty-foot containers
      of
      product per each 12 month period commencing on April 30, 2004. Our estimated
      12
      month liability, for 125 forty-foot containers, would be $5,240,168. However,
      in
      the event that our customers comprising our major customer group cease
      purchasing latex gloves from us, we shall only be obligated to purchase from
      WRP
      Asia as many forty-foot containers of product per month as needed to meet 100%
      of our products needs, or the minimum annual amount, whichever is
      less.





**Forward
      Looking Statements**





Certain
      matters discussed in this Form 10-Q are “forward-looking statements,” and the
      Company intends these forward-looking statements to be covered by the safe
      harbor provisions for forward-looking statements contained in the Private
      Securities Litigation Reform Act of 1995 and is including this statement for
      purposes of those safe harbor provisions. These forward-looking statements
      can
      generally be identified as such because the context of the statement includes
      phrases such as the Company “expects,” “believes,” “anticipates” or other words
      of similar meaning. Similarly, statements that describe the Company’s future
      plans, objectives or goals are also forward-looking statements. Such
      forward-looking statements are subject to certain risks and uncertainties which
      could cause actual results or outcomes to differ materially from those currently
      anticipated. Factors that could affect actual results or outcomes include those
      contained in our reports that we file with the Securities and Exchange
      Commission, including in our Annual Report on Form 10-K for the year ended
      June
      30, 2005, filed October 14, 2005, and the following: changes in consumer
      spending patterns; unanticipated issues related to the Company’s business; the
      Company’s success in implementing its strategic plan; actions of companies that
      compete with the Company; the Company’s success in managing inventory; the
      success of suppliers and customers; the ability of the Company to deploy its
      capital successfully; unanticipated outcomes related to outsourcing certain
      manufacturing processes; and unanticipated outcomes related to outstanding
      litigation matters. Shareholders, potential investors and other readers are
      urged to consider these factors in evaluating the forward-looking statements
      and
      are cautioned not to place undue reliance on such forward-looking statements.
      The forward-looking statements included herein are only made as of the date
      of
      this Form 10-Q. The Company assumes no obligation, and disclaims any obligation,
      to update such forward-looking statements to reflect subsequent events or
      circumstances.











22




**ITEM
      3.     Quantitative and Qualitative Disclosures About Market
      Risk**





We
      are
      exposed to the impact of interest rate changes, foreign currency fluctuations
      and changes in the market value of investments. We have not entered into
      interest rate caps or collars or other hedging instruments.





Exposure
      to changes in interest rates is limited to borrowings under our revolving credit
      and debt agreements, which have variable interest rates that are tied to the
      prime rate of interest. We estimate that the fair value of each debt instrument
      approximated its market value at March 31, 2006.





**ITEM
      4.     Controls and Procedures**





As
      of the
      end of the period covered by this report, the Company carried out an evaluation,
      under the supervision and with the participation of the Company's management,
      including the Company's Chief Executive Officer and Chief Financial Officer,
      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, as amended). Based
      upon
      this evaluation and because of the material weakness described below, the
      Company's Chief Executive Officer and Chief Financial Officer concluded that,
      as
      of the end of such period, the Company's disclosure controls and procedures
      were
      not effective in recording, processing, summarizing and reporting on a timely
      basis, information required to be disclosed by the Company in reports that
      the
      Company files with or submits to the Securities and Exchange Commission. It
      should be noted that in designing and evaluating the disclosure controls and
      procedures, management recognized that any controls and procedures, no matter
      how well designed and operated, can provide only reasonable assurance of
      achieving the desired control objectives, and management necessarily was
      required to apply its judgment in evaluating the cost-benefit relationship
      of
      possible controls and procedures. The Company has designed its disclosure
      controls and procedures to reach a level of reasonable assurance of achieving
      the desired control objectives and, based on the evaluation described above,
      the
      Company's Chief Executive Officer and Chief Financial Officer concluded that
      the
      Company's disclosure controls and procedures were not effective at reaching
      that
      level of reasonable assurance.





During
      the process of responding to a recent Securities and Exchange Commission comment
      letter, the Company’s management identified an error which led to the
      identification of a material weakness within the Company’s financial reporting
      and disclosure controls.





The
      error
      relates to the Company's accounting and disclosure of the reverse three for
      one
      stock split effective January 20, 2004 and the calculation of the reported
      basic
      and diluted net loss per share. The Company incorrectly included potential
      common shares in the denominator of a diluted per-share computation that
      resulted in the disclosure of an anti-dilutive per share amount, which is not
      the equivalent of diluted earnings per share disclosure. Additionally, in
      connection with the reverse three for one stock split, the Company failed to
      retroactively adjust its loss per share amounts to reflect the stock split.
      It
      should be noted, however, that the Company's failure to accurately report its
      basic and diluted net loss per share did not have any affect on the Company's
      cash balance or net loss for the applicable periods.





23





In
      addition, during the quarter ended September 30, 2005 and March 31, 2006, a
      significant adjustment relating to the accounting treatment for the warrants
      (refer to Note 7 of our Condensed Consolidated Financial Statements included
      elsewhere in this report) was proposed by our independent auditors and recorded
      by management and reflected in the financial statements included within this
      Form 10-Q.





The
      material weakness relates to the lack of formal policies and procedures related
      to our financial statement reporting and regulatory filing process. Management
      is addressing this material weakness by enacting the following
      steps:





-
            Developing
                a formal policy/procedures manual for the financial statement reporting
                and regulatory filing process;


-
            Developing
                monthly, quarterly and annual closing procedures checklists and “close”
                binders. These binders should include a draft of the financials statements
                and 10-K/Q with references to supporting schedules or other documentation
                (i.e., agreements);


-
            Utilizing
                Generally Accepted Accounting Principle (GAAP) checklist to help
                ensure
                all relevant disclosures are included;


-
            Preparing
                white papers to address the accounting for any new accounting
                pronouncements and any existing and/or new complex or unusual accounting
                transactions;


-
            Employing
                documented detail reviews by management and others of regulatory
                filings
                and financial statements;


-
            Implementing
                training programs for technical accounting areas and SEC reporting
                requirements; and


-
            Continuing
                to consider with outside legal counsel the filing of an 8-K upon
                signature
                of any agreements made on behalf of the
                Company.





There
      was
      no change in the Company’s internal control over financial reporting (as defined
      in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934,
      as
      amended) during the Company’s most recently completed fiscal quarter that has
      materially affected, or is reasonably likely to materially affect, the Company’s
      internal control over financial reporting.





24







**PART
      II**


**Other
      Information**





**ITEM
      1.     Legal Proceedings.**




In
      the
      normal course of business, the Company may be involved in various legal
      proceedings from time to time. The Company does not believe it is currently
      involved in any claim or action the ultimate disposition of which would have
      a
      material adverse effect on the Company’s financial statements.





**ITEM
      2.     Unregistered Sales of Equity Securities and Use of
      Proceeds.**





None





**ITEM
      3.     Defaults Upon Senior
      Securities.**





None





**ITEM
      4.     Submission of Matters to a Vote of Security
      Holders.**





None





**ITEM
      5.     Other Information.**





None





**ITEM
        6. Exhibits.**
  Exhibit
                  Number
              
              Description
                  of Document3.1
              
              Certificate
                  of Incorporation of the Company, incorporated herein by reference
                  to
                  Exhibit No. 3.1 to the Company’s Form S-1 Registration Statement
                  (Registration No. 33-36206).3.2
              
              Certificate
                  of Amendment to Certificate of Incorporation of the Company, incorporated
                  herein by reference to Exhibit No. 3.2 to the Company’s Form S-1
                  Registration Statement (Registration No. 33-36206).3.3
              
              Certificate
                  of Amendment to Certificate of Incorporation of the Company, incorporated
                  herein by reference to Exhibit 3.3 to the Company’s Form 10-K Annual
                  Report for the fiscal year ended December 31, 1991 (File No.
                  0-17458).3.4
              
              Articles
                  of Amendment to Certificate of Incorporation, incorporated herein
                  by
                  reference to Exhibit 10.42 included in the Company’s Form 10-K Annual
                  Report for the fiscal year ended December 31, 1997 (File No.
                  0-17458).3.5
              
              Bylaws
                  of the Company, incorporated herein by reference to Exhibit No.
                  3.4 to the
                  Company’s Form S-18 Registration Statement (Registration No.
                  33-23164-FW).3.6
              
              Amendment
                  to Bylaws of the Company, incorporated herein by reference to Exhibit
                  3.5
                  to the Company’s Form 10-K Annual Report for the fiscal year ended
                  December 31, 1991 (File No. 0-17458).31.1
              
              Certification
                  of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.31.2
              
              Certification
                  of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32.1(1)
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
 
 __________________________
 (1)This
        certification is not "filed" for purposes of Section 18 of the Securities
        Exchange Act of 1934, as amended, or incorporated by reference into any filing
        under the Securities Act of 1933, as amended, or the Securities Exchange
        Act of
        1934, as amended.







26







**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, thereunto
      duly authorized.




AHPC
      Holdings, Inc.


(Registrant)






BY:  /s/
      Alan E.
      Zeffer


Alan
      E.
      Zeffer, Chief Executive Officer






BY:  /s/
      Deborah J.
      Bills


Deborah J. Bills, Chief Financial Officer




Dated:
      May 15, 2006







27