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, 2007
  **OR**
 
 [ 
         ] TRANSITION
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
  For the transition period from ______ to ______.
  Commission File Number: 0-17458
 
 **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 $.01 per share,
      outstanding as of May 15, 2007, was 1,251,246.







2




**AHPC
      Holdings, Inc**


**FORM
      10-Q**


**March
      31, 2007**





**INDEX**





PART
      I
      - FINANCIAL INFORMATION








Item
                1.
            Financial
                StatementsCondensed
                Consolidated Balance Sheets
              March
                31, 2007 (unaudited) and June 30,
                2006
            pgs.
                4-5Condensed
                Consolidated Statements of
                Operations (unaudited) for the
              Three
                Months Ended March 31, 2007 and
                2006
            pg.
                6Condensed
                Consolidated Statements of
                Operations (unaudited) for the
              Nine
                Months Ended March 31, 2007 and
                2006
            pg.
                7Condensed
                Consolidated Statements of Cash
                Flows (unaudited) for the
              Nine
                Months Ended March 31, 2007 and
                2006
            pg.
                8Notes
                to Condensed Consolidated Financial Statements
                (unaudited)
            pg.
                9Item
                2.
            Management's
                Discussion and Analysis of
                Financial Condition and
              Results
                of Operations
            pg.
                15Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            pg.
                21Item
                4.
            Controls
                and Procedures
            pg.
                21





PART
      II - OTHER INFORMATION





Item
                1.
            Legal
                Proceedings
            pg.
                24Items
                1A.
            Risk
                Factors
            pg.
                24Item
                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, 2007 and June 30, 2006**





**ASSETS**
            
            
            March
                31, 2007
            
            
            June
                30, 2006(unaudited)**CURRENT
                ASSETS**Cash
            
            $
            9,439
            
            $
            83,162Accounts
                receivable - trade, net of allowance fordoubtful
                accounts of $61,988 at March 31, 2007and
                at June 30, 2006
            
            
            1,680,742
            
            
            1,867,977Inventories,
                net
            
            
            4,756,049
            
            
            6,470,411Prepaid
                expenses
            
            
            317,789
            
            
            440,428Other
                receivables
            
            
            3,694
            
            
            3,694Total
                current assets
            
            
            6,767,713
            
            
            8,865,672**PROPERTY,
                PLANT AND EQUIPMENT**Equipment,
                furniture and fixtures
            
            
            2,608,817
            
            
            2,618,324Building
                improvements
            
            
            35,036
            
            
            35,036Total
                property, plant and equipment
            
            
            2,643,853
            
            
            2,653,360Less
                accumulated depreciation and amortization
            
            
            2,555,717
            
            
            2,527,940Property,
                plant and equipment, net
            
            
            88,136
            
            
            125,420**OTHER
                ASSETS**Other
                assets
            
            
            1,108
            
            
            1,108Total
                other assets
            
            
            1,108
            
            
            1,108Total
                Assets
            
            $
            6,856,957
            
            $
            8,992,200





The
      accompanying notes are an integral part of these condensed consolidated balance
      sheets.







4





**AHPC
      Holdings, Inc. and Subsidiary**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**March
      31, 2007 and June 30, 2006**


**LIABILITIES
                AND SHAREHOLDERS' EQUITY**
            
            
            March
                31, 2007
            
            
            June
                30, 2006(unaudited)**CURRENT
                LIABILITIES**Accounts
                payable - trade
            
            $
            2,283,865
            
            $
            2,498,467Trade
                notes payable to bank
            
            
            2,933,639
            
            
            2,094,711Other
                notes payable
            
            
            69,310
            
            
            19,101Accrued
                rebates
            
            
            190,592
            
            
            241,024Accrued
                warrant liability
            
            
            22,588
            
            
            272,178Accrued
                expenses
            
            
            1,005,438
            
            
            987,295Total
                current liabilities
            
            
            6,505,432
            
            
            6,112,776**DEFERRED
                RENT**
            
            
            77,634
            
            
            87,031Total
                liabilities
            
            
            6,583,066
            
            
            6,199,807**COMMITMENTS
                AND CONTINGENCIES****SHAREHOLDERS'
                EQUITY**Series
                B convertible preferred stock, $0.01 par value;30,000
                shares authorized, 30,000 issued and outstanding atMarch
                31, 2007 and June 30, 2006
            
            
            300
            
            
            300Common
                stock, $.01 par value; 50,000,000 sharesauthorized;
                1,375,511 shares issued; 1,251,246 shares outstandingat
                March 31, 2007 and at June 30, 2006
            
            
            41,711
            
            
            41,711Additional
                paid-in capital
            
            
            21,578,417
            
            
            21,507,944Accumulated
                deficit
            
            
            (15,340,361
            )
            
            (12,751,386
            )6,280,067
            
            
            8,798,569Less
                common stock in treasury, at cost, 124,265 shareson
                March 31, 2007 and June 30, 2006
            
            
            6,006,176
            
            
            6,006,176Total
                shareholders' equity
            
            
            273,891
            
            
            2,792,393$
            6,856,957
            
            $
            8,992,200





The
      accompanying notes are an integral part of these condensed consolidated balance
      sheets .




5


**AHPC
      Holdings, Inc. and Subsidiary**


**CONDENSED
      CONSOLIDATED STATEMENTS OF
      OPERATIONS**


**For
      the Three Months Ended March 31, 2007 and 2006**


For
                the Three Months Ended
              March
                31,2007
            
            
            2006(unaudited)
            
            
            (unaudited)Net
                sales
            
            $
            5,477,123
            
            $
            6,112,764Cost
                of goods sold
            
            
            4,609,211
            
            
            5,030,487Gross
                profit
            
            
            867,912
            
            
            1,082,277Operating
                expensesSelling,
                general and administrative
            
            
            1,697,117
            
            
            1,952,908Loss
                from operations
            
            
            (829,205
            )
            
            (870,631
            )Other
                Income and (Expense)Interest
                income (expense), net
            
            
            (63,676
            )
            
            60,881Other
                income
            
            
            (876
            )
            
            -NET
                LOSS
            
            $
            (893,757
            )
            $
            (809,750
            )Preferred
                Stock Dividend
            
            
            (69,375
            )
            
            -**NET
                LOSS Available to Common Shareholders**
            
            $
            (963,132
            )
            $
            (809,750
            )Basic
                and diluted net loss per common share
            
            $
            (0.77
            )
            $
            (0.66
            )Weighted
                average number of common shares outstanding:Basic
                and diluted
            
            
            1,251,246
            
            
            1,226,113





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





6





**AHPC
      Holdings, Inc. and Subsidiary**


**CONDENSED
      CONSOLIDATED STATEMENTS OF
      OPERATIONS**


**For
      the Nine Months Ended March 31, 2007 and 2006**





For
                the Nine Months Ended
              March
                31,2007
            
            
            2006(unaudited)
            
            
            (unaudited)Net
                sales
            
            $
            17,040,390
            
            $
            18,896,065Cost
                of goods sold
            
            
            14,194,496
            
            
            15,250,713Gross
                profit
            
            
            2,845,894
            
            
            3,645,352Operating
                expensesSelling,
                general and administrative
            
            
            5,277,659
            
            
            5,796,661Loss
                from operations
            
            
            (2,431,765
            )
            
            (2,151,309
            )Other
                Income and (Expense)Interest
                income (expense), net
            
            
            44,791
            
            
            (137,785
            )Other
                income
            
            
            6,124
            
            
            -Loss
                from operations before provisionfor
                (benefit from) income taxes
            
            
            (2,380,850
            )
            
            (2,289,094
            )Provision
                for (benefit from) income taxes
            
            
            -
            
            
            3,235NET
                LOSS
            
            $
            (2,380,850
            )
            $
            (2,292,329
            )Preferred
                Stock Dividend
            
            
            (208,125
            )
            
            -**NET
                LOSS Available to Common Shareholders**
            
            $
            (2,588,975
            )
            $
            (2,292,329
            )Basic
                and diluted net loss per common share
            
            $
            (2.07
            )
            $
            (1.88
            )Weighted
                average number of common shares outstanding:Basic
                and diluted
            
            
            1,251,246
            
            
            1,221,484





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





7





**AHPC
      Holdings, Inc. and Subsidiary**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH
      FLOWS**


**For
      the Nine Months Ended March 31, 2007 and 2006**





For
                the Nine Months Ended
              March
                31,2007
            
            
            2006(unaudited)
            
            
            (unaudited)Cash
                flows from operating activitiesNet
                loss
            
            $
            (2,380,850
            )
            $
            (2,292,329
            )Adjustments
                to reconcile net loss to net cash used inoperating
                activitiesDepreciation
                and amortization
            
            
            44,617
            
            
            198,913Amortization
                of discount on subordinated notes
            
            
            -
            
            
            159,064Stock-Based
                compensation
            
            
            70,473
            
            
            45,065Deferred
                rent expense
            
            
            (9,397
            )
            
            57,503Changes
                in operating assets and liabilitiesAccounts
                receivable - trade
            
            
            187,235
            
            
            108,806Inventories,
                net
            
            
            1,714,362
            
            
            (696,599
            )Prepaid
                expenses
            
            
            122,639
            
            
            (90,500
            )Other
                assets
            
            
            -
            
            
            1,000Accounts
                payable - trade
            
            
            (214,602
            )
            
            (103,113
            )Accrued
                rebates
            
            
            (50,432
            )
            
            (51,431
            )Accrued
                expenses
            
            
            (231,447
            )
            
            (240,252
            )Amounts
                due to and from affiliates
            
            
            -
            
            
            -Net
                cash used in operating activities
            
            
            (747,402
            )
            
            (2,903,873
            )Cash
                flows from investing activitiesCapital
                expenditures
            
            
            (7,333
            )
            
            (9,560
            )Net
                cash used in investing activities
            
            
            (7,333
            )
            
            (9,560
            )Cash
                flows from financing activitiesGross
                payments on trade notes payable to bank
            
            
            (9,321,072
            )
            
            (17,435,509
            )Gross
                borrowings on trade notes payable to bank
            
            
            10,160,000
            
            
            19,109,837Gross
                payments on notes payable
            
            
            (120,088
            )
            
            (141,641
            )Gross
                borrowings on notes payable
            
            
            170,297
            
            
            227,908Subordinated
                note borrowings
            
            
            -
            
            
            1,200,000Preferred
                Stock Dividend
            
            
            (208,125
            )
            
            -Proceeds
                from issuance of common stock/exercise of options
            
            
            -
            
            
            5,650Net
                cash provided by financing activities
            
            
            681,012
            
            
            2,966,245Net
                increase (decrease) in cash
            
            
            (73,723
            )
            
            52,812Cash,
                beginning of period
            
            
            83,162
            
            
            16,434Cash,
                end of period
            
            $
            9,439
            
            $
            69,246Supplemental
                disclosure of cash flow informationInterest
                Paid
            
            $
            200,664
            
            $
            141,335Income
                Taxes Paid
            
            $
            -
            
            $
            32,672





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





8


**AHPC
      Holdings, Inc and Subsidiary**


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


**March
      31, 2007**





**1.**
            **Description
                of Business:**





AHPC
      Holdings, Inc. (the "Company") is a marketer and distributor of foodservice
      and
      medical examination gloves and other related 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, 2006 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, 2006 financial statements. For
      further information these financial statements and notes are to be read in
      conjunction with the consolidated financial statements contained in our Annual
      Report on Form 10-K for the year ended June 30, 2006, filed September 13, 2006
      with the Securities and Exchange Commission. The results of operations for
      the
      nine-month period ended March 31, 2007, may not be indicative of the results
      that may be expected for the fiscal year ending June 30, 2007.





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 11). We believe that this
      short-term and long-term financing will be sufficient to support our liquidity
      through September 8, 2007, depending on operating results and our continued
      trade support. We expect to continue to consume cash through the end of fiscal
      year June 30, 2007. 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.Accrued
      Warrant Liability:





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. The subordinated promissory notes had attached
      Class A Warrants and Class B Warrants granting the holders of the subordinated
      promissory notes 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 (or other automated
      quotation system) exceeds $8.75 and $11.25, respectively, for fifteen (15)
      consecutive trading days. As of March 31, 2007, the Class A Warrants and Class
      B
      Warrants were assigned a fair value of $22,588, which was 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 3.48 years, a risk-free rate of 4.472, volatility of 85.649%, and an expected
      dividend yield of zero.





The
      holders of the 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 filed a registration statement or if we received 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 recorded
      the fair value of the Class A Warrants and Class B Warrants of $22,588 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.





**6.** **Stock
      Incentive Plans:**





On
      June
      12, 1998, the Board of Directors approved an amendment and restatement of the
      Company's Omnibus Equity Compensation Plan (the "Plan"), which authorized and
      adjusted the number of shares issuable under the Plan from 133,333 to 466,667
      (reflective of the Company's 3 for 1 reverse stock split effective on January
      20, 2004). Under the Plan, common stock options are issued at the discretion
      of
      our compensation committee and generally are priced at or above fair market
      value on the date of grant, have a vesting period of 3 years and a total term
      of
      10 years.





10





Effective
      June 13, 2005, the Board of Directors approved the immediate vesting of all
      outstanding and unvested stock options held by members of our management, all
      of
      which were issued on February 20, 2004, as recognition for the Company's
      performance. As a result 44,000 stock options were immediately vested. Of the
      355,061 stock options outstanding at March 31, 2007, 241,727 stock options
      were
      fully vested and exercisable. We have reserved an adequate number of shares
      of
      our common stock for issuance upon conversion of these stock
      options.





A
      summary
      of stock options outstanding under the Plan for the nine month period ending
      March 31, 2007 shown below is as follows:


Number
                of Outstanding Options
            
            
            Weighted-
              Average
              Exercise
                Price
            
            
            Weighted-
              Average
              Remaining
                Contractual Life
            
            
            Aggregate
              Intrinsic
                ValueOutstanding,
                June 30, 2006
            
            
            397,965
            
            $
            1.97Grants
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Rescissions
            
            
            (37,988
            )
            
            2.00Expirations
            
            
            (4,916
            )
            
            6.21Outstanding,
                March 31, 2007
            
            
            355,061
            
            $
            1.91
            
            
            7.94
            
            $
            -




During
      the three and nine months ended March 31, 2007, we did not issue any stock
      options.




Options
      outstanding and exercisable at March 31, 2007, were as follows:


Range
                of exercise pricesNumber
            
            Weighted-
            Number
            Weighted-Outstanding
                  at
            Remaining
            average
            exercisable
                at
            averageMarch
                      31, 2007
            life
            exercise
                        price
            March
                        31, 2007
            exercise
                        price$6.21
            
            6,997
            
            0.5-4
                years
            
            $6.21
            
            6,997
            
            $6.212.65
            
            14,692
            
            9
                years
            
            2.65
            
            14,692
            
            2.652.31
            
            20,001
            
            5
                years
            
            2.31
            
            20,001
            
            2.312.25
            
            36,704
            
            5
                years
            
            2.25
            
            36,704
            
            2.252.05
            
            170,000
            
            9.5
                years
            
            2.05
            
            56,666
            
            2.051.13
            
            100,000
            
            7
                years
            
            1.13
            
            100,000
            
            1.130.72
            
            6,667
            
            6
                years
            
            0.72
            
            6,667
            
            0.72$.72-$6.21
            
            355,061
            
            0.5-10
                years
            
            $1.91
            
            241,727
            
            $1.84





11


A
      summary
      of the status of our unvested stock options as of March 31, 2007 and changes
      during the nine months ended March 31, 2007 is as follows:


Nonvested
                Options
            
            
            
            Weighted-average
              grant-date
                fair valueOutstanding
                optionsBalance,
                June 30, 2006
            
            170,000
            
            $1.65Grants
            
            -
            
            -Vested
            
            56,666
            
            $1.65Expirations
            
            -
            
            -Balance,
                March 31, 2007
            
            113,334
            
            $1.65





During
      the nine months ended March 31, 2007 and 2006, we recognized compensation
      expense of $70,473 related to the stock options issued. We have not recognized
      any deferred income tax benefit related to stock-based compensation due to
      our
      deferred tax asset being fully reserved as of March 31, 2007. As of March 31,
      2007, there was $180,102 of total unrecognized compensation cost related to
      unvested stock options granted under the Plan. This cost is expected to be
      recognized over a weighted average period of 3 years.





**7.** **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, under this method,
      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 $6.537 million is remaining at March 31, 2007.
      The
      tax benefits of 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 NOL's 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
      10-Q Report for the quarter ended December 31, 2005. We have the
      availability 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, 2007 and 2006, we have recorded a provision of
      $0
      and $3,235, respectively, for income taxes. The 2006 period provision was for
      state income taxes.





12


**8.** **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 currently not named in any such lawsuits.
      During the nine months ended March 31, 2007, there were no product liability
      lawsuits filed against the Company. Moreover, as of March 31, 2007, we were
      not
      involved in any lawsuit, either as a named defendant, third party or an
      indemnifier. However, we have agreed to defend and indemnify certain of our
      vendors solely in connection with the sale and distribution of our products.
      As
      a result, we may become involved in lawsuits in future periods due to these
      contractual indemnification obligations.





We
      have
      obtained 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 we have provided adequate coverage
      and protection for potential claims or lawsuits and that such claims or
      lawsuits, if brought against the Company, 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.





**9.** **Recently
      Issued Accounting Pronouncements:**





In
      June
      2006, the FASB issued FASB Interpretation No. 48 (FIN 48), *Accounting
      for Uncertainty in Income Taxes* (FIN
      48). FIN 48 defines the threshold for recognizing the benefits of tax return
      positions in the financial statements as “more-likely-than-not” to be sustained
      by the taxing authority. This Interpretation defines the minimum recognition
      threshold a tax position is required to meet before being recognized in the
      financial statements. FIN 48 is effective for fiscal years beginning after
      December 15, 2006. The differences between the amounts recognized in the
      statements of financial position prior to the adoption of FIN 48 and the amounts
      reported after adoption will be accounted for as a cumulative-effect adjustment
      recorded to the beginning balance of retained earnings. We do not expect the
      adoption of this standard to result in a significant change in our financial
      position or results of operations.





**10.** **Exit
      of Private Label Business:**





On
      March
      16, 2007, we announced that we would exit the private label food service market
      business by July 1, 2007. Our decision to exist this business followed our
      determination that the private label business did not provide AHPC enough margin
      to support the working capital investment required to maintain and grow the
      private label business, as compared to our branded products business. As a
      result, we intend to focus our resources on marketing our core brands, SafePrep,
      Glovetex, DermaSafe and BarrierSelect, to the foodservice and healthcare
      markets.






13





In
      accordance with SFAS No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets,* and EITF
      03-13, *Applying
      the Conditions in Paragraph 42 of SFAS No. 144 in Determining Whether to Report
      Discontinued Operations,* the
      results of operations of long-lived assets which qualify as a component of
      an
      entity that either have been disposed of or are classified as held for sale
      are
      required to be reported in discontinued operations only if (i) the operations
      and cash flows of the component have been, or will be, eliminated from our
      operations as a result of the disposal transaction and (ii) we will not have
      any
      significant continuing involvement in the operations of the component after
      the
      disposal transaction. We have evaluated our exit from the private label food
      service business under SFAS No. 144 and we have determined that (1) we
      will have a continuation of cash flows as a result of our continuing activities
      within the food service market and (2) there will be significant continuing
      cash inflows and outflows from the results of the ongoing business. Based on
      this determination, we have concluded that our exit from the private label
      food
      service business should not be reported under discontinued operations but should
      be reported in our consolidated operations as continuing operations.





**11.** **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.





On
      September 9, 2005, we extended our loan and security agreement with Greenfield
      Commercial Credit, LLC for an additional one-year term through September 9,
      2006, with an additional automatic one year renewal term. This renewal included
      an amendment to the loan and security agreement increasing our revolving line
      of
      credit borrowing limit 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. As of January 12, 2007, we were notified by Greenfield Commercial
      Credit that our borrowing under the facility on eligible receivables will be
      reduced by 1% a week to an estimated floor of 70% due to certain dilution rates.
      As of March 31, 2007, our borrowing rate on eligible receivables was at a rate
      of 70%. Our obligations under this credit facility are secured by a security
      interest in substantially all of AHPC tangible and intangible assets. 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, 2007, the prime
      rate was 8.25%. At any time prior to the maturity date, Greenfield Commercial
      Credit has the unrestricted right to demand payment of all outstanding
      indebtedness under this facility. This credit facility contains certain
      penalties for early termination.





On
      September 9, 2006, we extended the amended loan and security agreement with
      Greenfield Commercial Credit, LLC through September 9, 2007. Our obligations
      under this facility remain secured by a security interest in substantially
      all
      of AHPC tangible and intangible assets.






14





As
      of
      March 31, 2007 and June 30, 2006, we had an outstanding credit line balance
      of
      $2,933,639 and $2,094,711, respectively, under this credit facility and were
      contingently liable for outstanding letters of credit liabilities totaling
      $305,597 and $555,051, respectively. Also, included in the contingent
      outstanding letters of credit for both March 31, 2007 and June 30, 2006 is
      one
      stand-by letter of credit for $125,000 which represents our warehouse and office
      space security deposit. As of March 31, 2007 and June 30, 2006 our credit line
      had an availability of $106,031 and $1,006,925, respectively.





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.





**12.** **Related
      Party Transactions:**





We
      engaged SMS, a company 100% owned by Robert J. Simmons, Jr., the son of our
      director, Robert J. Simmons, to provide sales and marketing services to AHPC
      to
      further enhance our efforts in negotiating and executing sales agreements for
      our products in the health care industry. This agreement will expire August
      1,
      2007.




The
      following table summarizes our related party transactions for the three months
      and nine months ended March 31, 2007 and 2006, respectively **:**





Three
                Months Ended
            Nine
                Months EndedMarch
                31,
            March
                31,2007
            2006
            2007
            2006SMS
            $
                50,340
            $
                45,887
            $
                145,140
            $
                136,787





**13.** **NASDAQ
      Delisting:**





On
      March
      20, 2007, we received
      a determination from the Listing Qualifications Panel of The Nasdaq Stock Market
      indicating that the panel had determined to delist the Company from The Nasdaq
      Stock Market as a result of the Company's failure to comply
      with or satisfy Nasdaq Marketplace Rule 4310(c)(2)(B) for continued listing,
      which required that the Company maintain minimum shareholders' equity of $2.5
      million. Trading in the Company's shares of common stock was suspended effective
      with the opening of business on Thursday, March 22, 2007 .





Effective
      March 22, 2007, our
      securities were eligible
      for quotation in the Pink Sheets, an electronic quotation service for securities
      traded over-the-counter.




**14.** **Subsequent
        Event:**
  On
        May
        14, 2007, the Company received a demand payment letter, dated May 8, 2007,
        from its major vendor WRP Asia Pacific Sdn. Bhd. (WRPAP) demanding immediate
        payment of $1.4 million in accounts payable and $300,000 in interest. Of
        the
        total amount, $1.4 million is included in accounts payable at March 31,
        2007. Management does not believe the Company is obligated to pay the
        interest amount. WRPAP has threatened legal action in the event that the
        Company
        fails to make payment. This matter has not yet been resolved but an unfavorable
        outcome would add to the Company's working capital shortages and could impact
        the Company's ability to continue as a going concern.
  15




**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 primarily 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, 2007, we
      recorded net sales of approximately $17.0 million.





**Analysis
      of Results of Operations**




*Three
      Months Ended March 31, 2007 Compared to the Three Months Ended March 31,
      2006:*





Our
      consolidated net sales for the three months ended March 31, 2007 were $5,477,123
      which represents a decrease in net sales of $635,641 or 10.4% compared to the
      three months ended March 31, 2006. This decrease in net sales is primarily
      due
      to the loss of some customers from continued competitive pricing pressure within
      our national account customer group. We expect our sales will continue to
      decrease as a result of exiting the private label food service business (refer
      to Note 10). The private label food service business net sales for the three
      months ended March 31, 2007 and March 31, 2006 were $4,157,314 and $5,277,426,
      respectively. Our net sales are derived from the sales of finished product
      net
      of allowable rebates, discounts and returns.





Our
      consolidated gross profit decreased $214,365 or 19.8% for the three months
      ended
      March 31, 2007 compared to the three months ended March 31, 2006. The decrease
      in the gross profit was mainly due to increased inventory reserves of $125,000
      related to the exit of the private label food service market. 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 decrease in cost of goods sold during
      the current year period as a percentage of sales was due to lower sales, reduced
      transportation and related warehousing costs. During the current quarter, our
      raw material cost continued to increase slightly which also contributed to
      our
      lower gross margins in the current quarter. We continue to review our gross
      margins and the affects of increases in the cost of latex, changes in product
      mix, competition, manufacturing capacity levels and other factors.





16


Our
      operating loss decreased $41,426 or 4.8% for the three months ended March 31,
      2007 from the same time period in the prior year. The decrease in our operating
      loss was mainly related to a decrease in certain of our selling expenses related
      to our reduction in sales, which was offset in part by a reduction in our gross
      profit margin described above. 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, 2007, our selling, general,
      administrative and other expenses ("SG&A expenses") decreased by $255,791 or
      13.1%. As a percentage of net sales, SG&A expenses decreased from 31.9% for
      the three months ended March 31, 2006, to 31.0% for the three months ended
      March
      31, 2007. This percentage decrease was primarily due to the decrease in our
      selling expenses related to the decrease in our sales for the three month
      period, a reduction in personnel, travel and tradeshow expenses related to
      our
      exit from the food service private label business (refer to Note 10) and an
      insurance premium rate decrease.





Loss
      from
      operations before taxes increased by $84,007 or 10.4% for the three months
      ended
      March 31, 2007 compared to the same period in the prior year. This increase
      in
      our loss from operations before taxes was primarily due to increased interest
      expense incurred in the current year period. Our interest expense changed from
      $60,881 in interest income during the three months ended March 31, 2006 to
      an
      interest expense of $63,676 for the three months ended March 31, 2007. This
      change was due to a decrease in the fair value of the warrant liability of
      $222,070 during the quarter ended March 31, 2006 compared to a decrease of
      $25,348 during the quarter ended March 31, 2007 and a reduction in interest
      expense related to fully paid subordinated notes of $96,970 offset by an
      increase in our trade notes payable interest expense of $24,478.





The preferred stock dividend of $69,375 for the three months ended March 31,
      2007 related to a cash dividend paid to our series B preferred
      shareholders.





As
      a
      result of the factors discussed above, we reported a net loss available to
      common shareholders of $(963,132) for the three months ended March 31, 2007,
      which compares to a net loss available to common shareholders of $(809,750)
      during the same period in the prior year. Basic and dilutive net loss per share
      for the three months ended March 31, 2007 and March 31, 2006, were $(0.77)
      and
      $(0.66), 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, 2007 Compared to the Nine Months Ended March 31,
      2006:*





Our
      consolidated net sales for the nine months ended March 31, 2007 were $17,040,390
      which represents a decrease in net sales of $1,855,675 or 9.8% compared to
      the
      nine months ended March 31, 2006. This decrease in net sales was primarily
      due
      to the loss of some customers from continued competitive pricing pressure within
      our national account customer group. We expect that our sales will continue
      to
      decrease as a result of our exit from the private label food service business
      (refer to Note 10). The private label food service business net sales for the
      nine months ended March 31, 2007 and March 31, 2006 were $13,650,949 and
      $16,235,351, respectively. Our net sales are derived from the sales of finished
      product net of allowable rebates, discounts and returns.





17


Our
      consolidated gross profit decreased $799,458 or 21.9% for the nine months ended
      March 31, 2007 compared to the nine months ended March 31, 2006. 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 decrease in cost of goods sold during
      the current year period as a percentage of sales was due to lower sales, reduced
      transportation and related warehousing costs, and additional inventory reserves
      of $125,000 related to our exit from the private label food service market.
      During the nine months ended March 31, 2007, our raw material costs have
      continued to increase which has also contributed to our lower gross profit
      in
      the current year period. We continue to review our gross margins and the affects
      of increases in the cost of latex, changes in product mix, competition,
      manufacturing capacity levels and other factors.





Our
      operating loss has increased $280,456 or 13.0% for the nine months ended March
      31, 2007 from the same time period in the prior year. The increase in our
      operating loss was primarily due to the decrease in our sales and the increases
      in raw material pricing offset by certain reductions in selling, general,
      administrative and other expenses. 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, 2007, our selling, general,
      administrative and other expenses ("SG&A expenses") decreased by $519,002 or
      9.0%. This decrease was due to a reduction in insurance premiums, depreciation
      expense, and salary expenses. As a percentage of net sales, SG&A expenses
      increased from 30.7% for the nine months ended March 31, 2006, to 31.0% for
      the
      nine months ended March 31, 2007.





Loss
      from
      operations before taxes increased by $91,756 or 4.0% for the nine months ended
      March 31, 2007 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 primarily of
      interest expense. Other expense changed from an expense of $137,785 to income
      of
      $50,915 for the nine months ended March 31, 2007 as compared to the reported
      amount in the same period in the prior year. This decrease in expense was due
      to
      a decrease in interest expense as a result of a decrease in the fair value
      of
      our warrant liability of $249,590.





The
      benefit for income taxes for the nine month-periods ended March 31, 2007 and
      March 31, 2006 was $0 and $3,235, respectively.





The
      preferred stock dividend of $208,125 for the nine months ended March 31, 2007
      related to a cash dividend paid to our series B preferred shareholders.





As
      a
      result of the factors discussed above, we reported a net loss available to
      common shareholders of $(2,588,975) for the nine months ended March 31, 2007,
      which compares to a net loss available to common shareholders of $(2,292,329)
      during the same period in the prior year. Basic and dilutive net loss per share
      for the nine months ended March 31, 2007 and March 31, 2006, were $(2.07) and
      $(1.88), 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.





18





**Liquidity
      and Capital Resources:**





*Nine
      Months Ended March 31, 2007:*





Cash
      and
      cash equivalents at March 31, 2007 were $9,439, a decrease of $73,723 from
      $83,162 at June 30, 2006. We experienced a decrease in cash flows during the
      nine months ended March 31, 2007, due to continuing operating losses mitigated
      by increased borrowings.





Our
      operations used cash of $747,402 during the nine months ended March 31, 2007,
      primarily due to the current loss mitigated by an increase in trade accounts
      payable. Net trade accounts receivable decreased by $187,235
      from $1,867,977 at June 30, 2006 to $1,680,742 at March 31, 2007 due to the
      loss of some customers from continued competitive pricing pressures. Net
      inventories decreased by $1,714,362 from $6,470,411 at June 30, 2006 to
      $4,756,049 at March 31, 2007 due to the reduction of inventory levels related
      to
      our exit from the private label food service business (refer to Note 10). We
      expect these inventory levels to continue to decrease through the end of June
      30, 2007.





During
      the nine months ended March 31, 2007, we used cash in investing activities
      of
      $7,333 in connection with capital improvement expenditures primarily relating
      to
      computer software and hardware purchases.





During
      the nine months ended March 31, 2007, cash provided by financing activities
      equaled $681,012 compared to $2,966,245 during the nine months ended March
      31,
      2006. The cash provided by financing activities primarily came from increased
      borrowings on our trade notes payable to the bank due to the increased need
      to
      finance the operations of our business.





We
      renewed our credit facility with Greenfield Commercial Credit, LLC which was
      scheduled to expire on September 9, 2006 for another one-year period. In
      connection with the renewal, we incurred a renewal fee of $50,000.





The
      loan
      and security agreement with Greenfield Commercial Credit, LLC, extended on
      September 9, 2006, 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. As of January 12, 2007, we were notified
      by Greenfield Commercial Credit that our borrowing on eligible receivables
      under
      this credit facility was to be reduced by 1% a week to an estimated floor of
      70%, due to certain dilution rates. As of March 31, 2007, our borrowing rate
      on
      eligible receivables was at a rate of 70%. The line of credit borrowings carry
      an interest rate equal to the prime rate 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, 2007, we had
      an
      outstanding balance under this credit facility of $2,933,639 and were
      contingently liable for outstanding letters of credit liabilities totaling
      $305,597.






19




Our
      audited June 30, 2006 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, 2006 financial statements. We continue to
      experience recurring net losses and decreases in our net sales. Although, we
      have benefited from several cost reduction programs, decreased sales and 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 11 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, 2007. We intend to pursue a strategy whereby
      we
      will introduce additional consumable products to the healthcare market with
      the
      goal of achieving higher revenue growth. We have announced the decision to
      exit
      the private label food service business due to margins not being sufficient
      to
      support the working capital investment required to maintain and grow the private
      label business. In addition, we continue to review alternatives including
      evaluating product line and customer profitability, evaluating the markets
      within which we participate, evaluating diversification opportunities for our
      product line to include additional non-glove products, and expanding into
      markets where we currently do not participate in. We are also evaluating several
      strategies for reducing costs and expenses that we expect will enable us to
      improve our liquidity and reduce our financing requirements. If and when
      effectively implemented, we anticipate these plans will reduce our cash
      consumption in periods after June 30, 2007. 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 to us.




The
      following table summarizes our significant contractual commitments as of March
      31, 2007:




**Payments
                Due by Period****Contractual
                Obligation**
            
            
            **Total**
            
            
            **Less
                Than 1 Year**
            
            
            **1
                - 3 Years**
            
            
            **4
                - 5 Years**
            
            
            **After
                5 Years**Operating
                Leases (1)
            
            $
            1,450,390
            
            $
            460,458
            
            $
            989,932
            
            $
            -
            
            $
            -Purchase
                Commitments (2)
            
            $
            4,200,030
            
            $
            1,866,680
            
            $
            2,333,350
            
            $
            -
            
            $
            -





(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
      Pacific Sdn Bhd. 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.  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.  As a result of the exit from the private label
      foodservice market (refer to Note 10), our estimated 12-month liability would
      decrease from 125 forty-foot containers to 40 forty-foot containers, with a
      current estimated annual liability to be $1,866,680.





20


**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," "intends,"
      "could," "may," "planned," "potential," "should" 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 Part I, Item 1A, "Risk Factors" of our Annual Report
      on
      Form 10-K for the year ended June 30, 2006, filed September 13, 2006, 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 the Company's 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.





**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, 2007. Based on the Company's interest
      rate exposure on variable rate borrowings at March 31, 2007, a one percentage
      point increase in average interest rates on the Company's borrowings would
      increase future interest expense by approximately $2,000 per month and a five
      percentage point increase would increase future interest expense by
      approximately $10,000 per month. The Company determined these amounts based
      on
      approximately $2,400,000 of variable rate borrowings outstanding at March 31,
      2007, multiplied by 1.0% and 5.0%, respectively, and divided by twelve. The
      Company is currently not using any interest rate collars, hedges or other
      derivative financial instruments to manage or reduce interest rate risk. As
      a
      result, any increase in interest rates on the Company's variable rate borrowings
      would increase interest expense and reduce net income.




21





**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). The
      Securities and Exchange Commission defines the term “disclosure controls and
      procedures” to mean a company’s controls and other procedures that are designed
      to ensure that information required to be disclosed in the reports that it
      files
      or submits under the Securities Exchange Act of 1934, as amended, is recorded,
      processed, summarized, and reported within the time periods specified on the
      Commission’s rules and forms and that such information is accumulated and
      communicated to management, including the Chairman and Chief Executive Officer
      and Chief Financial Officer, as appropriate to allow timely decisions regarding
      required disclosure. 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 and
      that
      the Company's disclosure controls and procedures were not effective in
      accumulating and communicating to management such information. 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 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.
      The
      Company also restated its 2005 Form 10-K to correct the recognition of the
      loss
      incurred in a fiscal 2004 stock redemption.





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 5 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.





22


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
                a 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.





Additionally,
      the Company has retained an outside firm to assist it in its accounting
      matters.





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.


23


**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
      1A. Risk Factors.**





**The
      trading price of shares of our common stock fluctuates and investors in our
      common stock may experience substantial losses.**





The trading price of our common stock has been volatile and may continue to
      be
      volatile in the future. The trading price of our common stock could decline
      or
      fluctuate in response to a variety of factors, including:





·
            the
                timing of our announcements or those of our competitors concerning
                significant product developments, acquisitions or financial
                performance;·
            fluctuation
                in our quarterly operating results;·
            changes
                in raw material costs;·
            substantial
                sales of our common stock;·
            general
                stock market conditions; or·
            other
                economic or external factors.




You may be unable to sell your stock at or above your purchase
      price.




**Our
      shares of common stock are** **thinly traded and our stock price may be more
      volatile.**





Because our common stock is thinly traded, its market price may fluctuate
      significantly more than the stock market in general or the stock prices of
      similar companies, which are exchanged, listed or quoted on a stock exchange.
      Moreover, our common stock was recently delisted from the Nasdaq Stock Market
      and, accordingly, our common stock will be less liquid than the stock of
      companies with broader public ownership or who are listed on more publicly
      known
      exchanges. As a result, the trading prices for our shares of common stock may
      be
      more volatile. Among other things, trading of a relatively small volume of
      our
      common stock may have a greater impact on the trading price for our stock than
      would be the case if our public float were larger.




**We
        have received a letter from counsel to one of our suppliers demanding payment
        of
        outstanding amounts we allegedly owe such supplier.**
  On May 14, 2007, the Company received a demand payment letter, dated May
        8,2007,
        from its major vendor WRP Asia Pacific Sdn. Bhd. (WRPAP) demanding immediate
        payment of $1.4 million in accounts payable and $300,000 in interest. Of
        the
        total amount, $1.4 million is included on our balance sheet in accounts
        payable at March 31, 2007. We are attempting to resolve this dispute
        to the mutual satisfaction of WRPAP and the Company. To the extent we are
        unable
        to resolve this dispute, an unfavorable outcome, including a judgment against
        the Company and its assets, could materially adversely affect our financial
        condition, add to our cash flow shortages and limit our ability to continue
        to
        operate as a going concern.




Other than the foregoing, there have been no material changes in our risk
      factors from those disclosed in Part I, Item 1A "Risk Factors," of our
      annual report on Form 10-K for the fiscal year ended June 30, 2006.
      Please refer to that section for disclosures regarding the risks and
      uncertainties relating to our business.






24




**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
            Articles
                Supplementary to Certificate of Incorporation of the Company designating
                the Series B Convertible Preferred Stock, incorporated by reference
                to Exhibit 3.5 to the Company's Registration Statement on
                Form S-1 filed on September 21, 2006 (File
                No. 333-137500).3.6
            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).3.7
            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.





25


**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 21, 2007




26