UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 ~~June~~September 30, 2009

o	TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 000-53350

AXIS TECHNOLOGIES GROUP, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	26-1326434
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

2055 So. Folsom Street, Lincoln, NE 68522

(Address of principal executive offices)

(402) 476-6006

(Issuer’s telephone number)

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 o No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

	Large accelerated filer o	Accelerated filer o

	Non-accelerated filer o	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The registrant has 64,446,779 shares of $0.001 par value common stock outstanding as of ~~November~~April 2015, ~~2009~~2010.

INDEX

Axis Technologies Group, Inc.

FORM 10-Q

For The ~~Six~~Nine-Month Period Ended ~~June~~September 30, 2009

INDEX

PART I - FINANCIAL INFORMATION
ITEM 1	CONSOLIDATED FINANCIAL STATEMENTS	~~CONSOLIDATED~~Page ~~FINANCIAL STATEMENTS~~3	~~Page 3~~
ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	~~MANAGEMENT'S~~Page ~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~14	~~Page 14~~
ITEM 4T	CONTROLS AND PROCEDURES	~~CONTROLS~~Page ~~AND PROCEDURES~~19	~~Page 19~~
PART II - OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS	~~LEGAL~~Page ~~PROCEEDINGS~~20	~~Page 20~~
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	~~UNREGISTERED~~Page ~~SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~20	~~Page 20~~
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	~~DEFAULTS~~Page ~~UPON SENIOR SECURITIES~~20	~~Page 20~~
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	~~SUBMISSION~~Page ~~OF MATTERS TO A VOTE OF SECURITY HOLDERS~~20	~~Page 20~~
ITEM 5	OTHER INFORMATION	~~OTHER~~Page ~~INFORMATION~~20	~~Page 20~~
ITEM 6	EXHIBITS	~~EXHIBITS~~Page 20	~~Page 21~~
SIGNATURES		Page 21	~~Page 21~~

~~Index~~INDEX

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Axis Technologies Group, Inc.

Consolidated Balance Sheets

	June 30,			December 31,
	September 30,			December 31,
	2009			2008
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash	$	189,~~907~~286		$	12,205
Accounts receivable		~~118~~62,~~380~~796			150,609
Inventory		~~259~~231,~~310~~173			337,566
Inventory deposits		96,397			58,497
Prepaid expenses		5249,~~547~~920			3,412
Total Current Assets		~~545~~449,~~541~~572			562,289
PROPERTY AND EQUIPMENT
Property and equipment		18,~~188~~668			18,188
Less: accumulated depreciation		(14,~~097~~700	)		(12,899	)
Net Property and Equipment		43,~~091~~968			5,289
OTHER ASSETS
Patents, net of accumulated amortization of $3,053 and $2,627, respectively		13,984			14,410
Patents, net of accumulated amortization of $3,266 and $2,627, respectively		13,771			14,410
Deferred financing costs, net		7840,~~703~~067			180,300
Total Other Assets		9253,~~687~~838			194,710
TOTAL ASSETS	$	~~642~~507,~~319~~378		$	762,288
The accompanying notes are an integral part of these consolidated financial statements.

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

~~Index~~INDEX

Axis Technologies Group, Inc.

Consolidated Balance Sheets (Conintued)

	June 30,			December 31,
	September 30,			December 31,
	2009			2008
	(Unaudited)			(Audited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable	$	~~106~~146,~~256~~188		$	145,108
Accrued expenses		96179,~~684~~059			92,053
Notes payable		~~300~~294,~~000~~667			-—
Convertible note payable, net of discount totaling $344,095 and $788,288, respectively		813,312			600,601
Convertible note payable, net of discount totaling $241,798 and $788,288, respectively		1,262,832			600,601
Accrued salary - officers/stockholders		~~546~~622,~~313~~613			485,637
Total Current Liabilities		12,~~862~~505,~~565~~359			1,323,399
STOCKHOLDERS' DEFICIT
STOCKHOLDERS’ DEFICIT
Common stock, $0.001 par value, 500,000,000 shares authorized, 64,446,779 and 62,267,767 shares issued and outstanding, respectively		64,447			62,268
Additional paid-in capital		3,~~621~~622,~~007~~542			3,202,261
Stock issuable		66,600			66,600
Accumulated deficit		(45,~~972~~751,~~300~~570	)		(3,892,240	)
Total Stockholders' Deficit		(1,220,246	)		(561,111	)
Total Stockholders’ Deficit		(1,997,981	)		(561,111	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	~~642~~507,~~319~~378		$	762,288
The accompanying notes are an integral part of these consolidated financial statements.

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

~~Index~~INDEX

Axis Technologies Group, Inc.

Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended						For the ~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2009			2008			2009			2008
Sales, net	$	~~200~~56,~~402~~851		$	~~163~~183,~~083~~769		$	~~327~~384,~~453~~305		$	~~285~~469,~~792~~561
Cost of goods sold		~~147~~46,~~373~~984			~~150~~129,~~372~~737			~~242~~289,~~814~~798			~~246~~376,~~741~~478
Gross profit		539,~~029~~867			1254,~~711~~032			8494,~~639~~507			3993,~~051~~083
Operating expenses		~~209~~174,~~280~~788			~~218~~333,~~180~~292			~~410~~585,~~908~~695			~~364~~697,~~348~~640
Loss from operations		(~~156~~164,~~251~~921	)		(~~205~~279,~~469~~260	)		(~~326~~491,~~269~~188	)		(~~325~~604,~~297~~557	)
Other income (expense):
Interest income		7—			21,~~445~~508			2627			23,~~453~~961
Interest expense		(~~440~~614,~~994~~352	)		(~~212~~312,~~778~~576	)		(~~753~~1,~~817~~368,169	)		(~~215~~528,~~698~~274	)
Total other income (expense)		(~~440~~614,~~987~~352	)		(~~210~~311,~~333~~068	)		(~~753~~1,~~791~~368,142	)		(~~213~~524,~~245~~313	)
Net loss before income taxes		(~~597~~779,~~238~~273	)		(~~415~~590,~~802~~328	)		(1,~~080~~859,~~060~~330	)		(~~538~~1,~~542~~128,870	)
Income tax provision		-—			-—			-—			-—
Net loss	$	(~~597~~779,~~238~~273	)	$	(~~415~~590,~~802~~328	)	$	(1,~~080~~859,~~060~~330	)	$	(~~538~~1,~~542~~128,870	)
Net loss per common share (basic and diluted)	$	(0.~~009~~012	)	$	(0.~~007~~009	)	$	(0.~~017~~029	)	$	(0.~~009~~018	)
Weighted average shares outstanding: basic and diluted		63,100,337			62,267,767			62,686,352			62,184,360
Weighted average shares outstanding:
The accompanying notes are an integral part of these consolidated financial statements.
basic and diluted		64,446,779			62,267,767			63,279,609			62,212,366

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

~~Index~~INDEX

Axis Technologies Group, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Six Months Ended
	For the Nine Months Ended
	June 30,
	September 30,
	2009			2008
Cash flows from operating activities:
Net loss	$	(1,~~080~~859,~~060~~330	)	$	(~~538~~1,~~542~~128,870	)
Adjustments to reconcile net loss to net cash (used in) operations:
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization		12,~~624~~440			23,~~214~~016
Share-based compensation		68,~~912~~448			37,~~906~~029
Issuance of common stock for services		47,500			18,600
Amortization of original issue discount		44,419			15,015
Accretion of loan default interest charges		384,723			—
Amortization of debt issuance costs		101,597			34,743
Amortization of original issue discount		55,889			37,537
Non-cash interest expense related to issuance of warrants and beneficial conversion features		534,805			135,135
Amortization of debt issuance costs		140,233			85,857
Non-cash interest expense related to issuance of warrants and beneficial conversion features		625,631			337,838
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		3287,~~229~~813			(1798,~~224~~911	)
Decrease in inventory and inventory deposits		40,356			33,552
(Increase) decrease in inventory and inventory deposits		68,493			(147,819	)
(Increase) in prepaid expenses		(4946,~~135~~508	)		(4,~~899~~212	)
(Decrease) in accounts payable		(38,852	)		(17,253	)
Decrease in accounts payable		1,080			79,961
Increase (decrease) in accrued salary officers/stockholders		60,676			(959	)
Increase in accrued salary-officers/stockholders		136,976			47,610
Increase in accrued expenses		487,~~631~~006			~~184~~15,169
Net cash (used in) operating activities		(293,298	)		(335,528	)
Net cash used in operating activities		(259,606	)		(747,195	)
Cash flows from investing activities:
Purchase of property and equipment		-(480	)		(1,094	)
Net cash (used in) investing activities		-			(1,094	)
Net cash used in investing activities		(480	)		(1,094	)
Cash flows from financing activities:
Cash proceeds from convertible notes payable, net of original issue discount of $138,889 and transaction fees of $32,000		-—			1,218,000
Debt issuance costs		-—			(203,572	)
Net borrowings (repayments) on note payable		-			(195,074	)
Net repayments on note payable		—			(195,074	)
Proceeds from issuance of notes payable		300,000			-
Repayments on notes payable		(42,833	)		—
Net cash provided by financing activities		300,000			819,354
Proceeds from issuance of notes payable		300,000			—
Net increase in cash and cash equivalents		6,702			482,732
Net cash provided by financing activities		257,167			819,354
Net (decrease) increase in cash and cash equivalents		(2,919	)		71,065
Cash and cash equivalents at beginning of period		12,205			14,528
Cash and cash equivalents at end of period	$	189,~~907~~286		$	~~497~~85,~~260~~593
Supplemental cash and non-cash flow information:
Cash paid for interest	$	7082,~~647~~814		$	542,~~879~~084
Deferred financing costs paid with the issuance of common stock	$	-—		$	8582,~~800~~100
Convertible debt discount recorded for warrant and beneficial conversion feature	$	-—		$	1,250,000
Conversion of convertible note payable to common stock	$	231,482		$	-—
The accompanying notes are an integral part of these consolidated financial statements.

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

~~Index~~INDEX

Axis Technologies Group, Inc.

Notes to Consolidated Financial Statements

NOTE 1:

BASIS OF PRESENTATION

The accompanying unaudited consolidated financial information has been prepared by Axis Technologies Group, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, it does not include all of the information and notes required by accounting principles generally accepted in the Untied States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of this financial information have been included. Financial results for the interim period presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period. This financial information should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2008.

NOTE 2:

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization: Riverside Entertainment, Inc ("“Riverside"”) was incorporated in the State of Delaware. On September 18, 2006, Riverside entered into a Share Exchange and Acquisition Agreement whereby it agreed to issue 45,000,000 shares of its common stock to acquire all of the outstanding shares of Axis Technologies, Inc. ("“Axis"”), a private corporation incorporated in 2003 in the State of Delaware. At the time of the share exchange transaction, Riverside was a non-reporting public company and had no current operations. Axis has developed and sells a daylight harvesting fluorescent lighting ballast that uses natural lighting to reduce electricity consumption. The Company'’s market for advertising and selling the product currently lies within North America.

Upon completion of the transaction on October 25, 2006, Axis became a wholly-owned subsidiary of Riverside and Riverside changed its name to Axis Technologies Group, Inc. (the "“Company"”). Since this transaction resulted in the existing shareholders of Axis acquiring control of Riverside, the share exchange transaction has been accounted for as an additional capitalization of Riverside (a reverse acquisition, with Axis being treated as the accounting acquirer for financial statement purposes.)

The operations of Axis are the only continuing operations of the Company. In accounting for this transaction, Axis was deemed to be the purchaser and parent company for financial reporting purposes. Accordingly, its net assets were included in the consolidated balance sheet at their historical value.

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Axis Technology, Inc. All inter-company transactions and balances have been eliminated in the consolidation.

Management Estimates: The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the period. Actual results could differ from those estimates.

Customer Concentrations and Accounts Receivable: The accounts receivable arise in the normal course of business of providing services to customers. Accounts are written-off as they are deemed uncollectible based upon a periodic review of the accounts. As of ~~June~~September 30, 2009 ~~and 2008~~, we have estimated that accounts receivable is fully collectible, and thus, ~~has~~ have not established an allowance for doubtful accounts.

Concentrations of credit risk with respect to accounts receivable arise because the Company grants unsecured credit in the form of trade accounts receivable to its customers.

~~Index~~INDEX

AtConcentrations ~~June 30, 2009, one customer accounted for 71%~~ of ~~sales~~credit ~~and~~risk ~~81%~~with ofrespect ~~outstanding~~ to accounts receivable~~. At~~ ~~June~~arise ~~30,~~because ~~2008,~~the ~~two~~Company ~~customers~~grants ~~accounted~~unsecured ~~for 64%~~credit ofin ~~sales~~the ~~and~~form ~~72%~~ of ~~outstanding~~trade accounts receivable to its customers.

~~Supplier~~At ~~Concentrations~~September ~~and Inventory: The Company maintains its inventory~~30, ~~consisting primarily of finished goods~~2009, onone acustomer ~~perpetual~~accounted ~~basis~~for ~~utilizing~~37% ~~the~~of ~~first-in first-out~~sales ~~(FIFO)~~and ~~method. Inventories~~three ~~have~~customers ~~been~~accounted ~~valued~~for at71% ~~the lower~~ of ~~cost~~ oroutstanding ~~market~~accounts receivable. ~~Management~~At ~~has~~September ~~not recorded an obsolescence reserve for inventory at June~~ 30, ~~2009~~2008, ~~and~~two ~~December~~customers ~~31,~~accounted ~~2008,~~for as56% ~~all~~of ~~inventory~~sales ~~is considered usable~~ and ~~market~~76% ~~value~~of isoutstanding ~~above~~accounts ~~cost~~receivable.

Supplier Concentrations and Inventory: The Company maintains its inventory, consisting primarily of finished goods, on a perpetual basis utilizing the first-in first-out (FIFO) method. Inventories have been valued at the lower of cost or market. Management has not recorded an obsolescence reserve for inventory at September 30, 2009, and December 31, 2008, as all inventory is considered usable and market value is above cost.

The Company purchases 100% of its inventory from suppliers located in China.

Revenue Recognition: The Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable, collectibility is reasonably assured and delivery has occurred per the contract terms.

Warranty and return costs are estimated and accrued based on historical rates. Management has determined that a warranty reserve of $36,~~003~~000 is required at ~~June~~September 30, 2009, and no warranty reserve was recorded at December 31, 2008.

Deferred Financing Costs: Deferred financing costs relate to the convertible debt instrument issued by the Company on April 25, 2008. The financing costs are being amortized using the effective interest method over the term of the debt instrument to April 2010.

Income Taxes: The Company ~~provides~~accounts for ~~income~~deferred ~~taxes~~tax ~~under~~assets ~~Statement of~~and ~~Financial~~liabilities ~~Accounting~~under ~~Standards~~the Noliability method. Deferred ~~109,~~tax ~~Accounting~~liabilities are recognized for ~~Income~~temporary ~~Taxes~~differences ~~("SFAS No.~~that ~~109")~~will asresult ~~clarified~~in bytaxable ~~FIN~~amounts Noin future years. Deferred 48tax ~~which~~assets ~~requires~~are ~~the~~recognized ~~use~~for ofdeductible antemporary ~~asset~~differences and ~~liability~~ ~~approach~~tax inoperating ~~accounting~~loss ~~for~~and ~~income~~tax ~~taxes~~credit carryforwards. Deferred tax assets and liabilities are ~~recorded~~measured ~~based~~using on the ~~differences~~enacted ~~between~~tax ~~the financial~~rates ~~statement~~expected ~~and~~to ~~tax~~apply ~~bases~~to oftaxable ~~assets~~income ~~and~~in ~~liabilities~~the ~~and~~periods ~~the~~in ~~tax~~which ~~rates~~the ~~in effect~~deferred ~~when~~tax ~~these~~asset ~~differences~~or ~~are~~liability is expected to ~~reverse.~~be ~~SFAS~~realized Noor settled. We ~~109~~assess ~~requires~~ the ~~reduction~~ oflikelihood that our deferred tax assets bywill be recovered from future taxable income and record a valuation allowance ~~if,~~to ~~based~~reduce onour ~~the weight~~deferred oftax ~~the~~assets ~~available~~to ~~evidence,~~the itamounts iswe ~~more~~believe ~~likely~~to ~~than~~be ~~not~~realizable. We concluded that ~~some~~a orfull ~~all~~valuation ~~of the~~allowance against our U.S. deferred tax assets ~~will~~was ~~not~~appropriate beas ~~realized. At~~of ~~June~~September 30, 2009 and December 31, 2008~~, the Company has recorded a full valuation allowance against its deferred tax assets~~. The Company’s 2006, 2007 and 2008 tax years are open for examination by the IRS.

~~FIN~~Effect ~~No. 48~~of ~~requires~~Recently ~~the~~Issued ~~recognition~~Accounting ofStandards: aEffective ~~financial~~September ~~statement~~15, ~~benefit~~2009, ofthe aCompany ~~tax~~adopted ~~position only~~a ~~after~~new ~~determining~~accounting standard that establishes the ~~relevant~~Financial ~~tax~~Accounting ~~authority~~Standards ~~would~~Board ~~more~~(“FASB”) ~~likely~~Accounting ~~than not~~Standards ~~sustain~~Codification (“ASC”) as the ~~position~~exclusive ~~following~~reference anto ~~audit. For~~be ~~tax~~applied ~~positions meeting~~in the ~~more-likely-than-not~~preparation ~~threshold~~of financial statements in conformity with GAAP. Accordingly, ~~the~~all ~~amount~~references to legacy guidance issued under previously recognized authoritative literature have been removed in the ~~financial~~ ~~statements~~third isquarter of fiscal 2009. As the ~~largest~~ASC ~~benefit~~was ~~that~~not ~~has~~intended ato ~~greater~~change ~~than~~or ~~fifty percent~~alter ~~likelihood~~existing ofGAAP, ~~being~~it ~~realized~~did ~~upon~~not ~~ultimate~~have ~~settlement~~any ~~with~~impact on the ~~relevant tax~~Company’s ~~authority~~results of consolidated operations or financial position.

Effect of Recently Issued Accounting Standards: In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (“FAS 168”). While FAS 168 is not intended to change accounting principles generally accepted in the United States, it will change the way the Company references these accounting principles in its Consolidated Financial Statements and Notes. FAS 168 is effective for interim or annual reporting periods ending after September 15, 2009. The adoption of FAS 168 will change the Company’s disclosures.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)” (“FAS 167”). This statement amends the timing, and considerations, of analyses performed to determine if the Company’s variable interests give it a controlling financial interest in a variable interest entity, as well as requires additional disclosures. FAS 167 is effective as of the first annual reporting period beginning after November 15, 2009, for interim periods within the first annual reporting period and thereafter. The Company is currently evaluating the impact of adopting FAS 167.

Index

In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events” (“FAS 165”). FAS 165 establishes general standards of accounting and disclosures for events that occur after the balance sheet date, but before financial statements are issued. Application of FAS 165 is required for interim or annual financial periods ending after June 15, 2009. The adoption of FAS 165 changed the Company’s disclosures.

In April 2009, the FASB issued FASB Staff Position No. FAS 107-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP 107-1”). FSP 107-1 amends Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments,” and requires disclosures about fair value of financial instruments for interim and annual reporting periods. FSP 107-1 is effective for interim reporting periods ending after June 15, 2009. The Company’s adoption of FSP 107-1 resulted in no additional disclosures.

NOTE 3:

LIQUIDITY/GOING CONCERN

The Company has incurred significant operating losses during its periods of operation. At ~~June~~September 30, 2009, the Company reports a negative working capital position of $12,~~317~~055,~~024~~787 and an accumulated deficit of $45,~~972~~751,~~300~~570. It is management'’s opinion that these facts raise substantial doubt about the Company'’s ability to continue as a going concern without additional financing through debt or equity.

INDEX

In order to meet its working capital needs through the next twelve months, the Company plans to seek additional outside debt or equity financing to support the planned increase in revenues via new channels and products over the next year. However, the Company is uncertain such financing will be available on terms favorable to the Company if at all. If adequate funds are not available or not available on acceptable terms, we may have to curtail our operations and may be unable to fund expansion, develop or enhance products or respond to competitive pressures.

NOTE 4:

ACCRUED SALARY – OFFICERS/STOCKHOLDERS

Certain officers/stockholders of the Company have elected to forego a certain portion of their salary due to limited operating funds over the past several years. These amounts do not accrue interest and are due and payable to these officers/stockholders as funds become available in the future. The total balance owed as of ~~June~~September 30, 2009 and December 31, 2008 is $~~546~~622,~~313~~613 and $485,637, respectively.

NOTE 5:

NOTES PAYABLE

On March 25, 2009, the Company entered into a debt instrument security agreement with Gemini Master Fund, Ltd. (“Gemini”), pursuant to which the Company issued a 10% Senior Secured ~~note~~Note in the principal amount of $150,000 (the “Note”) for working capital ~~monies~~funds. The note iswas past due at September 30, 2009; however, the note was refinanced on December 30, 2009 by adding the obligation with the convertible note payable as discussed in Note 6. The note has a mandatory default amount where the principal of the obligation increases 25% and ~~demand~~the ~~can~~stated beinterest ~~made~~rate ~~for payment~~increases to 24% if the note is in ~~full~~default. The note was deemed in default in July 2009 and an interest charge of $37,500 was recorded for the three month period ended September 30, 2009. The note balance increased to $187,500.

On May 20, 2009, the Company issued a promissory note with Mid-America Funding Company generating net cash proceeds of $150,000 for working capital purposes. In connection with the note payable, the Company issued 1,000,000 shares of its common stock to be held in escrow as collateral for the loan. Additionally, the Company assigned a customer purchase order totaling $247,500 to the issuer as additional collateral on the note. The note bears interest at a monthly rate of 2% of the outstanding balance. The note is past due and demand can be made for payment in full. The note has a balance of $107,167 at September 30, 2009.

Index

NOTE 6:

CONVERTIBLE NOTE PAYABLE

On April 25, 2008, the Company entered into a debt instrument security agreement with Gemini Master Fund LTD (“Gemini”), pursuant to which Gemini was issued a 10% Senior Secured Convertible Promissory Note in the principal amount of $1,388,889 (the “Note”). The face amount of the Note of $1,388,889 was reduced by an original issue discount of $138,889 and other issuance costs of $32,000 to arrive at net proceeds of $1,218,000.

In connection with the Note, the Company also incurred additional financing costs of $203,572 which were paid out of the net proceeds to third-party placement agents and issued 50,000 shares of common stock valued at $0.31 per share to these same agents. The Company is obligated to issue to the placement agents for this transaction an additional 180,000 shares valued at $0.37 per share totaling $66,600 which have not been issued as of ~~June~~September 30, 2009. The share price of which was based on the five day average closing price of the Company’s common stock prior to the closing date of the Note.

The Note has a maturity date of April 25, 2010, and is secured by all assets of the Company. The Note accrues interest at a rate of 10% per annum, and such interest is payable on a quarterly basis commencing July 26, 2008, with the principal balance of the Note, together with any accrued and unpaid interest thereon, due in twelve monthly installments beginning May 1, 2009. The Company has the option to make the installment payments in cash or in common stock shares at a conversion price equal to the lesser of $0.26 or 80% of the lowest closing bid price occurring 10 trading days immediately preceeding the date at which the price is determined. The May and June 2009 installment payments were made through issuance of stock. This resulted in a beneficial conversion feature valued at $135,031 being charged as non-cash interest expense for the three-month period ended June 30, 2009. The Note is convertible at the option of the holder at any time into shares of the Company's common stock at an initial conversion price of $0.26 per share. The conversion price is subject to a weighted-average anti-dilution adjustment in the event the Company issues equity or equity-linked securities at a price below the then-applicable conversion price. The Note can be converted into a maximum of 4.9~~% of the Company’s outstanding common stock on the date of conversion.~~

INDEX

The note has a mandatory default amount where the principal of the obligation increases by 30% and the stated interest rate increases to 24% if the note payments are in default. The note was deemed in default in July 2009. The principal balance of the note was increased by $347,223 due to this default.

The Note is convertible at the option of the holder at any time into shares of the Company’s common stock at an initial conversion price of $0.26 per share. The conversion price is subject to a weighted-average anti-dilution adjustment in the event the Company issues equity or equity-linked securities at a price below the then-applicable conversion price. The Note can be converted into a maximum of 4.9% of the Company’s outstanding common stock on the date of conversion.

Additionally, the terms of the Securities Purchase Agreement issued in connection with the Note provides that until such time as Gemini no longer holds any of the securities or underlying securities purchased, the Company cannot issue shares of common stock, securities convertible into common stock, or debt obligations involving a variable rate transaction (meaning there is a conversion, exercise or exchange price that is contingent on trading prices or other factors) or a transaction where a purchaser of securities is granted the right to receive additional securities in the future on terms better than those presently being granted to the purchaser. Further, until such time as Gemini no longer holds any of the securities or underlying securities purchased, if the Company issues common stock or securities convertible into common stock on terms that Gemini deems to be more favorable than the terms received by Gemini, Gemini may require the Company to amend the Securities Purchase Agreement and related documents to give Gemini the benefit of the more favorable terms.

Under the terms of the Note and as additional consideration for the loan, the Company issued Gemini a five-year warrant to purchase up to 5,341,880 shares of its common stock at an exercise price of $0.26 per share (the “Warrant”) which was deemed to have a fair value of $861,778. The Company used the Black-Scholes-Merton pricing model as a method for determining the estimated fair value of the Warrant issued. The following assumptions were used to estimate the fair value of the Warrant:

§■ risk free interest rate of 3.2%;

§■ expected life of 2 years;

§■ no expected dividends;

§■ and volatility of 147%.

Index

The expected life of the Warrant was determined to be the full-term of the warrant. The risk-free interest rate is based on the Federal Reserve Board’s constant maturities of U.S. Treasury bond obligations with terms comparable to the expected life of the Warrant valued. The Company’s volatility is based on the historical volatility of the Company’s stock.

The fair value of the Warrant was recorded as a discount to the Note and ~~will~~is be being amortized to interest expense over the term of the Note using the effective interest method. Due to the Company not having an effective Form 10 registration statement by February 25, 2009, the Warrant provides for a cashless exercise in which the holder will be entitled to the number of shares equal to the difference between the volume weighted average price as defined in the Note agreement, and the exercise price of the Warrant multiplied by the number of shares issuable upon exercise of the Warrant divided by the volume weighted average price. The Warrant also provides for a weighted-average anti-dilution adjustment to the exercise price in the event the Company issues equity or equity-linked securities at a price below the then-applicable exercise price.

INDEX

The Company may be obligated to issue an additional five-year warrant at an exercise price of $0.26 per share to a placement agent if all or a portion of the shares in the underlying Warrant attached to the Note are exercised by the holder. For every 100 shares exercised by the holder, the placement agent will receive a warrant to purchase 7 additional shares up to a maximum of 373,932 shares. The fair value for these conditional warrants will be recorded by the Company if and when the original Warrant is exercised by the holder.

The ~~application~~ of the provisions of EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF 00-27, Application of Issue 98-5 to Certain Convertible Instruments, resulted in the proceeds of the loan ~~being~~ were allocated based on the relative fair value of the loan and warrants as of the commitment date. Then the Company calculated the intrinsic value of the beneficial conversion feature embedded in the Note. As the amount of the beneficial conversion feature exceeded the fair value allocated to the loan, the amount of the beneficial conversion feature to be recorded was limited to the proceeds allocated to the loan. Accordingly, the beneficial conversion feature was calculated to be $388,222 and was recorded as an additional discount on the Note and will be recognized over the term of the Note using the effective interest method ~~following the guidance in EITF 00-27, Issue 6~~.

The following summarizes the convertible note balance as of June 30, 2009:
Original gross proceeds received in 2008	$	1,388,889
Less: original issue discount at time of issuance of notes		(138,889	)
Net proceeds prior to paying transaction costs		1,250,000
Less: value assigned to beneficial conversion feature and warrants		(1,250,000	)
Add: amortization of original issue discount, beneficial conversion feature and warrants		1,044,794
Less: amounts converted to common stock		(231,482	)
Balance at June 30, 2009 (face value of $1,157,407)	$	813,312

The following summarizes the convertible note balance as of September 30, 2009:

The effective interest rate of the Note was 88% as of June 30, 2009. The note is past due and demand can be made for payment in full.

Original gross proceeds received in 2008	$	1,388,889
Less: original issue discount at time of issuance of notes		(138,889	)
Net proceeds prior to paying transaction costs		1,250,000
Less: value assigned to beneficial conversion feature and warrants		(1,250,000	)
Add: amortization of original issue discount, beneficial conversion feature and warrants		1,147,091
Add: mandatory default charge		347,223
Less: amounts converted to common stock		(231,482	)
Balance at September 30, 2009 (face value of $1,504,630)	$	1,262,832

The effective interest rate of the Note was 119% as of September 30, 2009.

On December 30, 2009, the Company entered into an Amendment Agreement and an Amended and Restated 10% Senior Secured Convertible Note with Gemini. The Gemini Note Payable, as discussed in Note 5, accrued interest to date, and the increase in principal for the default terms were consolidated into this agreement. This resulted in the stated value of the consolidated loan to be $1,884,097 on December 30, 2009. In addition, the new agreement fixed the conversion share price of the debt to equity at a price of $0.10 per share and is now convertible on or after February 1, 2010. Previously, the note had a variable conversion rate. All other terms remained consistent with those described above.

NOTE 7:

STOCKHOLDERS' ’ DEFICIT

On June 24, 2009, the Company issued 964,506 shares of common stock for the conversion of $115,741 in principal on the Gemini Convertible Note at a conversion price of $0.12 per share per the terms of the agreement.

Index

On May 4, 2009, the Company issued 964,506 shares of common stock for the conversion of $115,741 in principal on the Gemini Convertible Note at a conversion price of $0.12 per share per the terms of the agreement.

On May 1, 2009, the Company issued 250,000 shares of its common stock at a fair value of $0.19 per share to a consultant for prepaid marketing services with a total value of $47,500.

Restricted Stock: For the three month period ended March 31, 2008, the Company awarded 60,000 shares of time-based restricted stock (non-vested) shares to certain employees of the Company. As a condition of the award, the employees must be employed with the Company in order to continue to vest in their shares over an 18-month period. The fair value of the non-vested shares is equal to the fair market value on the date of grant which was estimated to be $0.31 and will be amortized ratably over the vesting period.

The Company recorded $2,060 and $6,912 of compensation expense in the consolidated statements of operations related to vested shares (restricted stock) for the three and six month periods ended June 30, 2009. For the three and six month periods ended June 30, 2008, the Company recorded $3,090 and $3,906 of related compensation expense.11

~~A summary of the status of non-vested restricted shares and remaining unearned compensation as of June 30, 2009, is set forth below:~~INDEX

	RestrictedShares			WeightedAverageFair Value		UnrecognizedCompensation			WeightedAverageRecognition Period(Months)
Outstanding, December 31, 2008		27,261		$	0.31	$	8,448
Granted		-			-		-
Vested		(22,299	)		0.31		(6,912	)
Outstanding, June 30, 2009		4,962		$	0.31	$	1,536			2.2

The Company recorded $1,536 and $8,448 of compensation expense in the consolidated statements of operations related to vested shares (restricted stock) for the three and nine month periods ended September 30, 2009. For the three and nine month periods ended September 30, 2008, the Company recorded $3,123 and $7,029 of related compensation expense.

A summary of the status of non-vested restricted shares and remaining unearned compensation as of September 30, 2009, is set forth below:

									Weighted
				Weighted					Average
	Restricted			Average		Unrecognized			Recognition Period
	Shares			Fair Value		Compensation			(Months)
Outstanding, December 31, 2008		27,261		$	0.31	$	8,448
Granted		—			—		—
Vested		(27,261	)		0.31		(8,448	)

Outstanding, September 30, 2009		—		$	—	$	—			—

NOTE 8:

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

The Company computes earnings ~~per share in accordance with FASB Statement of Financial Accounting Standards No. 128, Earnings Per Share~~ (~~“SFAS 128”~~loss)~~. SFAS~~ ~~128 requires companies to compute earnings~~ per share under two different methods, basic and diluted, and ~~present~~presents per share data for all periods in which statements of operations are presented. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common stock and common stock equivalents outstanding.

The following table provides a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share for the quarters ended ~~June~~ September 30, 2009 and 2008.

	Three Months Ended						~~Six~~Nine Months Ended
	June 30						June 30
	September 30						September 30
	2009			2008			2009			2008
Basic earnings per share calculation:
Net loss to common shareholders	$	(~~597~~779,~~238~~273	)	$	(~~415~~590,~~802~~328	)	$	(1,~~080~~859,~~060~~330	)	$	(~~538~~1,~~542~~128,870	)
Weighted average of common shares outstanding		6364,~~100~~446,~~337~~779			62,267,767			6263,~~686~~279,~~352~~609			62,~~184~~212,~~360~~366
Basic net loss per share	$	(0.~~009~~012	)	$	(0.~~007~~009	)	$	(0.~~017~~029	)	$	(0.~~009~~018	)
Diluted earnings per share calculation:
Net loss to common shareholders	$	(~~597~~779,~~238~~273	)	$	(~~415~~590,~~802~~328	)	$	(1,~~080~~859,~~060~~330	)	$	(~~538~~1,~~542~~128,870	)
Weighted average of common shares outstanding		6364,~~100~~446,~~337~~779			62,267,767			6263,~~686~~279,~~352~~609			62,~~184~~212,~~360~~366
Stock warrants, and convertible debt (1)		-—			-—			-—			-—
Diluted weighted average common shares outstanding		6364,~~100~~446,~~337~~779			62,267,767			6263,~~686~~279,~~352~~609			62,~~184~~212,~~360~~366
Diluted net loss per share	$	(0.~~009~~012	)	$	(0.~~007~~009	)	$	(0.~~017~~029	)	$	(0.~~009~~018	)

(1)The computation of diluted net loss per share as of September 30, 2009 and 2008, does not differ from the basic computation because potentially dilutive conversion shares related to the convertible debt promissory note of 12,102,698 and 5,341,000, respectively, would be anti-dilutive. Additionally, potentially dilutive issuable securities of warrants, totaling 5,341,000 were anti-dilutive as of September 30, 2009 and 2008.

~~Index~~INDEX

(1)The computation of diluted net loss per share as of June 30, 2009 and 2008, does not differ from the basic computation because potentially dilutive conversion shares related to the convertible debt promissory note of 9,645,058 and 5,341,000, respectively, would be anti-dilutive. Additionally, potentially dilutive issuable securities of warrants, totaling 5,341,000 were anti-dilutive as of June 30, 2009 and 2008.

NOTE 9:

SUBSEQUENT EVENTS

~~The Company~~Amended ~~has~~Gemini ~~evaluated for disclosure subsequent events that have occurred up to December 23, 2009, the date of issuance of the financial statements.~~Note

On December 30, 2009, the Company entered into an Amendment Agreement and an Amended and Restated 10% Senior Secured Convertible Note with Gemini; thereby the Convertible Note Payable, as discussed in Note 6, and related Note Payable to Gemini were amended. The Note Payable, as discussed in Note 5, accrued interest to date, and the increase in principal for the default terms were consolidated into this agreement. This resulted in the stated value of the loan to be $1,884,097 on December 30, 2009. In addition, the new agreement fixed the conversion share price of the debt to equity at a price of $0.10 per share and is now convertible on or after February 1, 2010. All other terms remained consistent with those described in Note 5 and 6. Additionally, in connection with the financing agreement that the Company entered into on April 22, 2010 (see further information in the next paragraph), the Gemini consolidated loan was further extended to a maturity date of July 1, 2010.

IRC Financing Agreement

On April 22, 2010, the Company, IRC - Interstate Realty Corporation (“IRC”), and DHAB, LLC (“DHAB”) entered into an Axis Joint Venture Agreement (the “JV Agreement”), thereby forming a joint venture partnership between the Company and IRC. The primary purpose of the Joint Venture is to facilitate and make funds available for the Company to acquire inventory and sell such inventory to customers on a temporary basis until the contemplated equity transaction, as further described below, is completed in its entirety. This joint venture structure is being set up only to secure IRC’s interest for their willingness to advance funds to the Company to purchase inventory. Specifically, IRC will advance funds up to $778,000 for the purchase of inventory from manufacturer, which inventory will be delivered to customers of the Company in connection with two separate purchase orders for 12,000 units of inventory, each. Payments made by customers for the units will be deposited in a bank account from which IRC will be promptly repaid for all sums advanced by IRC for the purchase of the inventory from manufacturers and for related reasonable costs and expenses incurred by IRC. IRC will also receive a fee of $50,000 as consideration for providing or arranging for the inventory purchases.

In connection with the JV Agreement, the Company issued DHAB an aggregate of 163,192,720 shares of its common stock in return for a Promissory Note from DHAB in the principal amount of $6,000,000. The issued DHAB shares are being held by the Company until payment on the obligation is received. The Promissory Note bears no interest and is due on July 1, 2010. If an event of default occurs under the Promissory Note, the Company’s sole remedy is to cancel the shares. As DHAB pays such obligation to the Company, the Company will release the equivalent number of shares of the DHAB stock on a prorated basis as is represented by the sums so paid on a $0.04 per share basis. DHAB will not have any voting rights pertaining to the DHAB stock, other than to shares that the Company has released as security. The JV Agreement provides that the Company will not issue or agree to issue any additional shares of its common stock prior to July 20, 2010. Any proceeds received on the promissory note, must be used to repay the note payable to Gemini (see notes 5 and 6) in full, prior to any other use.

~~Index~~INDEX

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the unaudited financial statements and related notes that appear elsewhere in this Form 10-Q filing and in conjunction with our audited financial statements and related notes that appear in our Form 10-K filed with the Securities and Exchange Commission on April 15, 2009.

Forward Looking Statements and Information

This document contains "“forward-looking statements"” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as " “believes,"” "“expects,"” "“anticipates,"” "“intends,"” "“plans,"” "“estimates,"” "“should,~~" "~~” “likely"” or similar expressions, indicates a forward-looking statement.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future results may differ materially from those expressed in the forward-looking statements. Many of the factors that will determine these results are beyond our ability to control or predict. Stockholders are cautioned not to put undue reliance on any forward-looking statements, which speak only to the date made.

Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, or performance and underlying assumptions and other statements, which are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demands and acceptance, changes in technology, economic conditions, the impact of competition and pricing, and government regulation and approvals. The Company cautions that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. Some of the key factors which could cause actual results to vary from those the Company expects include changes in product prices, the timing of planned capital expenditures, availability of acquisitions, operational factors, the condition of the capital markets generally, as well as our ability to access them, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business.

Our expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis, including without limitation, our examination of historical operating trends, data contained in our records and other data available from third parties. There can be no assurance, however, that our expectations, beliefs or projections will result, be achieved, or be accomplished. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no duty to update these forward-looking statements.

Overview

Axis Technologies Group, Inc. is in the business of developing and marketing energy-saving electronic components for the commercial lighting sector. Our primary products are self-contained electronic, dimming and daylight harvesting fluorescent ballasts. A “ballast” is an electronic component that regulates voltage in lighting. We develop, test, and patent unique technology to create energy efficient products that meet federal energy code standards and encourage ~~Green~~“green” initiatives for high-profile companies. Extensive testing is conducted to ensure product reliability and energy-saving properties. We have obtained and own the patent rights for our ballasts’ unique control system and have trademarked our slogan “The Future of Fluorescent Lighting”. Underwriters Laboratory (“UL”), the lighting industry’s certification authority, has approved our products for use in the United States and Canada.

Our current and primary product is the patented T8 Axis Daylight Harvesting Dimming Ballast (the “Axis Ballast”). This ballast uses simple technology that transforms the standard ballast, into a dynamic energy saving system that can reduce lighting energy costs by up to 70% over a magnetic ballast utilizing T12 lamps and up to 42% over traditional electronic ballasts. The Axis Ballast utilizes an individual photo sensor to automatically adjust the amount of electrical current flowing to the light fixture and then dims or increases lighting in conjunction with the amount of available sunlight. Based on our knowledge, the Axis Ballast is the only ballast on the market that has automatic dimming controls integrated into each ballast. We believe this feature reduces the costs of acquisition and installation over that of competing dimming systems, which require that first, a dimming ballast must be acquired along with a separate control system, and a separate photocell; then all components must be “hard-wired” together and “commissioned” or “balanced” in order to operate properly. The Company believes that this extra equipment and labor for competing systems can increase the cost of acquisition and installation over that of the T8 ballast system. We have recently completed a redesign of our T8 ballast which is awaiting UL approval.

~~Index~~INDEX

We have under development a high-output T5HO ballast that capitalizes on the features of our current T8 Axis Ballast. When development is complete, this product will be submitted to UL for testing and approval. T5 fluorescent lamps are used mainly in “high-bay” fixtures which are installed in warehouses, gymnasiums, etc., in conjunction with skylights. These high-output T5 lamps in conjunction with an Axis dimming ballast would be an energy-saving choice for these applications.

Also under development is our next generation ballast, which utilizes PLC (power line carrier), or a wirelessly addressable, load shedding ballast, and offers power companies the ability to reduce the lighting load (load shedding) for their customers during peak demand periods. Most utility companies charge their customers a surcharge or “peak demand” charge during those times of day when the load on the power plants are at the highest. Usually this means the power companies must start up higher cost generators, and/or buy power from the electrical grid at even higher rates. This ballast allows the consumer or the power company to reduce the output of the ballast. The consumer who installs this ballast can agree to participate in the power company’s Peak Demand Reduction Program which can offer reduced electric rates. Certain utility companies have expressed interest in working with Axis to complete the development of the load shedding ballasts in order to provide for the installation of the ballasts in their customers'’ facilities; however, we have entered into no formal agreements with any such utility companies to date.

Power companies nation-wide are being pressured to reduce their greenhouse gas emissions and reduce energy consumption. There are many states that have passed legislation that require lighting controls, and in some cases (California for example), have requirements that new construction projects and major lighting retrofits incorporate daylight harvesting. These regulations are specific to lighting, and there are many further regulations in place from cities and states, that require government buildings to save a certain amount of all forms of energy by specified dates. We believe that the Axis dimming ballast system can help greatly in achieving these energy-reduction goals.

Our target market is small to large commercial users of fluorescent lighting including office buildings, wholesale and retail buildings, hospitals, schools and government buildings. We have arrangements with sales representatives, electrical distributors, electrical contractors, retrofitters, ESCO’s (Energy Service Companies), and OEM’s (Original Equipment Manufacturers) to market, distribute and install the Company’s products. Through these arrangements, sales to contractors, distributors, ESCO’s and OEM’s are made through purchase orders submitted by them to the Company. However, we have not entered into any written agreements regarding on-going or future sales involving any of these parties.

Our revenues consist primarily of sales of our T8 fluorescent ballasts to electrical distributors and OEM’s for placement in commercial and governmental buildings. Our next generation ballast is expected to be sold primarily to utility companies in addition to our existing customer market.

Recent increases in energy costs have spurred many government agencies and private companies to work towards decreasing their energy consumption. This “green” movement has helped to increase the awareness of our product. Our company is dedicated to helping our nation reduce its energy consumption and greenhouse gas emissions.

The second quarter sales figures were less than anticipated due mainly to delays in getting our redesigned T8 ballast to market. Axis has contracted with a new supplier from China to help in the development and manufacture of this updated ballast. The UL has taken longer than predicted to assess our newly designed ballast as it has several improvements over our previous design that necessitated additional testing. We ultimately received UL approval in June 2009.

~~Index~~INDEX

The third quarter 2009 sales figures were less than anticipated due mainly to our belief that customers were waiting to purchase in hopes of acquiring Federal Stimulus money to invest in products like those of the Company and due to our limited operating funds to purchase more product and to adequately market and sell our products. Axis has contracted with a new supplier from China to help in the development and manufacture of this updated ballast. The UL has taken longer than predicted to assess our newly designed ballast as it has several improvements over our previous design that necessitated additional testing. We ultimately received UL approval in June 2009.

Results of Operation

Three-month period ended ~~June~~ September 30, 2009 compared to three-month period ended ~~June~~September 30, 2008:

Consolidated net sales for the quarter ended ~~June~~September 30, 2009 and 2008 totaled $~~200~~56,~~402~~851 and $~~163~~183,~~083~~769, respectively, for ana ~~increase~~decrease of $37126,~~319~~918. ~~This~~We ~~increase~~believe the decrease is due to ~~increased~~ ~~product~~customers ~~awareness~~waiting asto purchase in hopes of acquiring Federal Stimulus money to invest in products like those of the Company. ~~continues~~Additionally, we had very limited operating funds to adequately market ~~its~~and ~~ballasts nationwide~~sell. Cost of goods sold for the quarter ended ~~June~~September 30, 2009 and 2008 was $~~147~~46,~~373~~984 and $~~150~~129,~~372~~737, respectively, a decrease of $282,~~999~~753. The decrease is primarily due to athe ~~reduction~~decrease in ~~freight~~sales ~~costs~~for 2009 compared to 2008. After deducting costs of goods sold, including warehouse salaries and allocated overhead, we finished the quarter ended ~~June~~September 30, 2009 with $539,~~029~~867 in gross profit, compared to a gross profit of $1254,~~711~~032 for the quarter ended ~~June~~September 30, 2008, ana ~~increase~~decrease of $4044,~~318~~165. Gross profit as a percentage of sales for the quarter ended ~~June~~September 30, 2009 was 2617.54%, compared to 729.84% for the quarter ended ~~June~~September 30, 2008, a 1812.70% ~~increase~~ decrease in gross profit as a percentage of sales. Our ~~increased~~ decreased sales volume ~~has~~resulted ~~allowed~~in usless ~~to improve our~~ overall gross profit by covering relatively fixed and unchanged overhead costs.

For the quarter ended ~~June~~September 30, 2009, operating expenses totaled $~~209~~174,~~280~~788 compared to $~~218~~333,~~180~~292 for the quarter ended ~~June~~September 30, 2008, a decrease of $8158,~~900~~504. The operating expenses were ~~considered~~lower ~~comparable~~due ~~between~~to ~~periods~~a decrease in personnel costs as the Company has been monitoring expenses and we have reduced professional fees associated with accounting and related regulatory service needs in 2009.

For the quarter ended ~~June~~September 30, 2009, interest expense was $~~440~~614,~~994~~352 compared to $~~212~~312,~~778~~ 576 for the quarter ended ~~June~~September 30, 2008, an increase of $~~228~~301,~~216~~776. This increase was the result of the Company ~~issuing~~incurring inadditional ~~April~~interest ~~2008, a convertible note payable that had significant transaction~~ costs ~~that~~by ~~are~~ being ~~amortized~~in todefault ~~interest~~with ~~expense and~~its ~~debt~~Convertible ~~discounts~~Note ~~related~~Payable-Gemini ~~to an original issue discount, warrants issued~~ and ~~a beneficial~~Notes ~~conversion~~Payable-Gemini ~~feature~~beginning ~~that are being accreted over the term of the debt to interest expense. Additionally, installment payments were made during the quarter through the issuance of discounted common stock resulting~~ in ~~$135,031~~ ~~of non-cash interest expense. Non-cash interest expense attributable to these transaction costs for~~ the quarter ended ~~June~~September 30, 2009. ~~totaled~~We ~~$404,082 compared~~incurred todefault charges totaling $~~184~~384,~~898~~723 for the ~~quarter~~three months ended ~~June~~September 30, ~~2008~~2009. ~~The~~Additional details of this note are listed in Note 5 and 6 to the consolidated financial statements of the Company.

For the quarter ended ~~June~~September 30, 2009, the net loss was $~~597~~779,~~238~~273 compared to a net loss of $~~415~~590,~~802~~328 for the quarter ended ~~June~~September 30, 2008, an increase of $~~181~~188,~~436~~945. This increase in net loss is attributable to the differences, as described above.

~~Six~~Nine-month period ended ~~June~~ September 30, 2009 compared to ~~three~~nine-month period ended ~~June~~September 30, 2008:

Consolidated net sales for the ~~six~~nine-month period ended ~~June~~September 30, 2009 and 2008 totaled $~~327~~384,~~453~~ 305 and $~~285~~469,~~792~~561, respectively, for ana ~~increase~~decrease of $4185,~~661~~256. ~~This~~We ~~increase~~believe the decrease is due to ~~increased~~ ~~product~~customers ~~awareness~~waiting asto purchase in hopes of acquiring Federal Stimulus money to invest in products like those of the Company. ~~continues~~Additionally, we had very limited operating funds to adequately market ~~its~~and ~~ballasts nationwide~~sell. Cost of goods sold for the ~~six~~nine-month period ended ~~June~~ September 30, 2009 and 2008 was $~~242~~289,~~814~~798 and $~~246~~376,~~741~~478, respectively, a decrease of $386,~~927~~680. The decrease is primarily due to a reduction in inbound overseas freight costs and a decrease in sales. After deducting costs of goods sold, including warehouse salaries and allocated overhead, we finished the ~~six~~nine-month period ended ~~June~~September 30, 2009 with $8494,~~639~~507 in gross profit, compared to a gross profit of $3993,~~051~~083 for the ~~six~~nine-month period ended ~~June~~September 30, 2008, an increase of $451,~~588~~424. Gross profit as a percentage of sales for the ~~six~~ nine-month period ended ~~June~~September 30, 2009 was 2524.86%, compared to 1319.78% for the ~~six~~ nine-month period ended ~~June~~September 30, 2008, a 124.18% increase in gross profit as a percentage of sales. ~~Our~~ The ~~increased~~increase ~~sales~~in ~~volume~~gross ~~has~~profit ~~allowed~~is us due to ~~improve~~lower ~~our~~inbound ~~overall~~overseas ~~gross~~freight ~~profit~~costs byand ~~covering~~we ~~relatively~~have ~~fixed~~been ~~and~~able ~~unchanged overhead~~to ~~costs~~increase our product selling prices in 2009.

~~Index~~INDEX

For the ~~six~~ nine-month period ended ~~June~~September 30, 2009, operating expenses totaled $~~410~~585,~~908~~ 695 compared to $~~364~~697,~~348~~640 for the ~~six~~nine-month period ended ~~June~~September 30, 2008, ana ~~increase~~ decrease of $46111,~~560~~945. For the ~~six~~nine-month period ended ~~June~~September 30, 2009 compared to the ~~six~~nine-month period ended ~~June~~September 30, 2008, ~~professional~~the ~~fees~~operating ~~increased~~expenses ~~by approximately~~were ~~$61,000~~lower ~~and~~due ~~existing~~to ~~management~~a ~~employees~~decrease ~~salaries~~in personnel costs as the Company has been monitoring expenses and ~~wages increased~~we byhave ~~approximately~~reduced ~~$26,000. These~~professional ~~increases~~fees ~~were~~associated ~~offset~~with ~~by decreases~~accounting inand ~~other~~regulatory ~~various~~service ~~operating~~needs ~~expenses~~in 2009.

For the ~~six~~ nine-month period ended ~~June~~September 30, 2009, interest expense was $~~753~~1,~~817~~368,169 compared to $~~215~~528,~~698~~274 for the ~~six~~nine-month period ended ~~June~~September 30, 2008, an increase of $~~538~~839,~~119~~895. This increase was the result of the Company issuing in April 2008 a convertible note payable that had significant transaction costs that are being amortized to interest expense and debt discounts related to an original issue discount, warrants issued and a beneficial conversion feature that are being accreted over the term of the debt to interest expense. In addition, there was a beneficial conversion feature on debt payments made through issuance of stock in May and June of 2009 resulting in $135,031 of non-cash interest expense. Non-cash interest expense for the ~~six~~nine-month period ended ~~June~~September 30, 2009 included $~~680~~1,~~821~~206,476 compared to $~~184~~461,~~893~~232 for the ~~six~~nine-month period ended ~~June~~September 30, 2008, attributable to the amortization of the original issue discount, beneficial conversion feature, debt issuance costs, ~~and~~ warrant discounts and default charges. The details of this note are listed in Note 6 to the consolidated financial statements of the Company.

For the ~~six~~ nine-month period ended ~~June~~September 30, 2009, the net loss was $1,~~080~~859,~~060~~330 compared to a net loss of $~~538~~1,~~542~~128,870 for the ~~six~~nine-month period ended ~~June~~September 30, 2008, an increase of $~~541~~730,~~518~~460. This increase in net loss is attributable to differences, as described above.

Assets, Liabilities and Employees; Research and Development

As of ~~June~~ September 30, 2009, the Company has total current assets of $~~545~~449,~~541~~572, which ~~includes $18,907~~consists ofprimarily ~~cash, $118,380~~ of accounts receivable, ~~$259,310 of inventory, $96,397 of inventory deposits~~ and ~~$52,547 of prepaid expenses~~inventory. As of ~~June~~September 30, 2009, the Company also has $183,~~188~~968 of property and equipment, ~~less~~net ~~accumulated depreciation~~ of ~~$14~~accumulated depreciation,~~097,~~ and total other assets of $9253,~~687~~838, consisting primarily of debt financing costs.

As of ~~June~~ September 30, 2009, the Company has total liabilities, consisting entirely of current liabilities, totaling $12,~~862~~505,~~565, including $106,256 of accounts payable, $96,684 of accrued expenses, $813,312 of convertible note payable, $300,000 of notes payable, and $546,313 of accrued salary of officers/stockholders~~359.

As of ~~June~~ September 30, 2009, the Company has a working capital deficit of $12,~~317~~055,~~024~~787.

At ~~June~~ September 30, 2009, our ballast inventory represented 4045.46% of our total assets. Inventory is manufactured in China and is shipped to our warehouse in Lincoln, Nebraska. The time from ordering the product to receipt of the product can exceed 60 days. We are currently working to reduce this turnaround time to 45 days. We maintain our inventory at levels that are deemed reasonable based upon projected sales.

At this time, we do not anticipate purchasing or selling any significant equipment or other assets in the near term. Neither do we anticipate any imminent or significant changes in the number of our employees. We may, however, increase the number of independent sales representatives in the event that we expand into other markets or our current market significantly increases.

We expect that we will invest time, effort, and expense in the continued development and refinement of our current and next generation ballasts, through our relationships with lighting labs and the power companies.

Liquidity and Capital Resources; Anticipated Financing Needs

For the ~~six~~ nine-months ended ~~June~~September 30, 2009, we incurred a net operating loss aggregating $1,~~080~~859,~~060~~330 which was the result of our efforts to secure funding to cover working capital needs, marketing and advertising efforts to increase product awareness, business development and other activities as discussed above.

Net cash of $293,298 was used in operating activities during the six-month period ended June 30, 2009, compared to $335,528 in cash used in operating activities during the period ended June 30, 2008. Net cash used in operating activities for the six-month period ended June 30, 2009 is primarily attributable to the $945,029 net loss, partially offset by $44,419 of amortization of original issue discount, $101,597 of amortization of debt issuance cost, $534,805 of non-cash interest expense related to issuance of warrants and beneficial conversion features.

~~Index~~INDEX

WeNet ~~had~~cash ~~no investing~~of $259,606 was used in operating activities ~~for~~during the ~~six~~nine-month period ended ~~June~~September 30, 2009, ~~and~~compared to $1747,~~094~~195 in cash used in operating activities during the period ended September 30, 2008. Net cash used in operating activities for the ~~six~~nine-month period ended ~~June~~September 30, ~~2008~~2009 is primarily attributable to the $1,859,330 net loss, partially offset by $55,889 of amortization of original issue discount, $140,233 of amortization of debt issuance cost, $1,010,354 of non-cash interest expense related to issuance of warrants and beneficial conversion features, and interest added to debt currently in default. Additionally, the two primary officers continued to defer a significant portion of their salary which totaled $136,976.

~~Net~~We ~~cash of~~had $~~300,000~~480 ~~was~~of ~~provided~~investing ~~by financing~~ activities ~~during~~for the ~~six~~nine-month period ended ~~June~~September 30, 2009, ~~compared~~and to $~~819~~1,~~354~~094 ~~of cash provided by financing activities~~ for the ~~period ended June 30, 2008. Cash flows from financing activities for the six~~nine-month period ended ~~June~~September 30, ~~2009 consisted entirely of proceeds from notes payable totaling $300,000~~2008.

~~More specifically,~~Net ~~March 25, 2009, the Company received~~ cash ~~proceeds~~ of $~~150~~257,~~000~~167 ~~on a~~was 90provided ~~day~~by ~~10%~~financing ~~Senior~~activities ~~Secured~~during ~~Note. Additionally, on May 20, 2009,~~ the ~~Company~~ ~~issued~~nine-month aperiod ~~note~~ended ~~payable~~September ~~for $150~~30,~~000~~ ~~in cash proceeds~~2009, ~~which~~compared ~~note~~to ~~bears interest at a monthly rate of 2% and is due upon demand or the fulfillment of a customer purchase order totaling~~ $~~247~~819,~~000. In~~354 ~~addition to this funding and future working capital generated through anticipated revenue increases from the sale~~ of ~~our~~cash ~~current~~provided ~~ballasts,~~by wefinancing ~~expect~~activities ~~to seek additional capital funding of approximately $2,000,000~~ for the ~~final~~period ~~development~~ended ~~and introduction~~September ~~of our next generation ballast~~30, ~~to pay off our convertible note with Gemini Master Fund, Ltd~~2008. ~~(as~~Cash ~~described~~flows infrom ~~Note~~financing 6activities ~~to the consolidated financial statements), and~~ for the ~~purchase~~nine-month ofperiod anended ~~adequate~~September ~~supply~~30, ~~of inventory. If~~2009 wewere ~~succeed~~due into ~~raising~~proceeds ~~this~~from ~~money~~notes ~~over~~payable ~~the~~totaling ~~next three to six months~~$300,000 itless ~~should~~payments ~~give~~made uson ~~the~~these ~~liquidity~~notes ~~and~~of ~~resources to fund operations for the foreseeable future~~$42,833.

~~Additional financing~~More ~~may~~specifically, ~~not~~on beMarch ~~available~~25, on2009, ~~terms~~the ~~favorable~~Company toreceived uscash proceeds of $150,000 ~~especially~~on ina ~~light~~90 ~~of current~~day ~~debt~~10% ~~and~~Senior ~~equity~~Secured ~~markets~~Note. IfAdditionally, ~~additional~~on ~~funds~~May ~~are~~20, ~~raised~~2009, by the ~~issuance~~Company ofissued ~~our~~a ~~equity~~note ~~securities~~payable for $150,000 ~~such~~in ascash ~~through~~proceeds, ~~the~~which ~~issuance~~note ~~and/or exercise~~bears interest at a monthly rate of ~~common~~2% ~~stock~~and ~~warrants,~~is ~~then~~due ~~existing~~upon ~~stockholders~~demand ~~will~~or ~~experience dilution~~the fulfillment of ~~their~~a ~~ownership~~customer ~~interest~~purchase order totaling $247,000. In Ifaddition ~~additional~~to ~~funds~~this ~~are~~funding ~~raised~~and byfuture ~~the issuance~~working ofcapital ~~debt~~generated orthrough ~~other~~anticipated ~~types~~revenue ofincreases ~~(typically~~from ~~preferred)~~the ~~equity~~sale ~~instruments, then~~of weour ~~may~~current beballasts, ~~subject~~we expect to ~~certain~~obtain ~~limitations~~capital infunding ~~our~~of ~~operations~~approximately $6,000,000 for the final development and ~~issuance~~introduction of ~~such~~ ~~securities~~our ~~may~~next ~~have~~generation ~~rights~~ballast, ~~senior~~ to ~~those~~pay ofoff ~~the~~our ~~then~~convertible ~~existing~~note ~~holders~~with ~~of our~~Gemini ~~common~~Master ~~stock~~Fund, Ltd. If(as ~~adequate~~described ~~funds~~in ~~are~~Note ~~not~~6 ~~available~~to orthe ~~not~~consolidated ~~available~~financial ~~on acceptable terms~~statements), weand ~~may~~for ~~have~~the topurchase ~~curtail~~of ~~our~~an ~~operations~~adequate ~~and~~supply ~~may~~of beinventory. If ~~unable~~we ~~to fund~~succeed ~~expansion~~in raising this money over the next couple of months, ~~develop~~it orshould ~~enhance~~give ~~products~~us orthe ~~respond~~liquidity and resources to ~~competitive pressures~~fund operations for the foreseeable future.

However, additional financing may not be available on terms favorable to us, especially in light of current debt and equity markets. If additional funds are raised by the issuance of our equity securities, such as through the issuance and/or exercise of common stock warrants, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt or other types of (typically preferred) equity instruments, then we may be subject to certain limitations in our operations, and issuance of such securities may have rights senior to those of the then existing holders of our common stock. If adequate funds are not available or not available on acceptable terms, we may have to curtail our operations and may be unable to fund expansion, develop or enhance products or respond to competitive pressures.

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based on its financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. Management reviews its estimates on an on going basis. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. While the Company’s critical accounting policies are described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2008, management believes the following accounting policies to be critical to the judgments and estimates used in the preparation of its financial statements:

INDEX

Revenue Recognition: We recognize revenue when persuasive evidence of an arrangement exists, transfer of title has occurred, the selling price is fixed or determinable, collectibility is reasonably assured and delivery has occurred per the contract terms.

Warranty and return costs are estimated and accrued based on historical rates.

Accounts Receivable and Allowance for Doubtful Accounts: Accounts receivable arise in the normal course of business by providing products to our customers. Accounts are written-off as they are deemed uncollectible based upon a periodic review of the accounts. ~~As of June 30, 2009 and 2008, we have estimated that accounts receivable is fully collectible, and thus, has not established an allowance for doubtful accounts.~~

18Supplier Concentrations and Inventory: We maintain our inventory on a perpetual basis utilizing the first-in first-out (FIFO) method. Inventories have been valued at the lower of cost or market.

Index

Supplier Concentrations and Inventory: We maintain our inventory on a perpetual basis utilizing the first-in first-out (FIFO) method. Inventories have been valued at the lower of cost or market. We have not recorded an obsolescence reserve for inventory at June 30, 2009 and 2008 as all inventory is considered usable and market value is above cost.

Deferred Financing Costs: Costs and discounts related to the convertible note payable issued by the Company on April 25, 2008, are being amortized and accreted using the effective interest method over the term of the debt instrument to April 2010 (see Note 6 of the consolidated financial statements).

Recently Issued Accounting Pronouncements

In June 2009, the ~~FASB issued Statement of~~ Financial Accounting Standards ~~No.~~Board ~~168,~~ (“~~The~~ FASB”) ~~Accounting~~issued ~~Standards~~authoritative ~~Codification~~guidance ~~and~~codifying ~~the~~generally ~~Hierarchy~~accepted ofaccounting ~~Generally~~principles ~~Accepted Accounting~~in ~~Principles”~~the United States (“~~FAS 168~~GAAP”). While ~~FAS~~the ~~168~~guidance iswas not intended to change ~~accounting principles generally accepted in the United States~~GAAP, it ~~will~~ did change the way the Company references these accounting principles in ~~its~~ the Notes to Consolidated Financial Statements ~~and Notes~~. ~~FAS~~ ~~168~~This isguidance was effective for interim orand annual reporting periods ending after September 15, 2009. The Company’s adoption of ~~FAS~~this ~~168~~authoritative ~~will~~guidance ~~change~~as ~~the~~of ~~Company’s~~ September 30, 2009 changed how it references GAAP in its disclosures.

OFF BALANCE SHEET ARRANGEMENTS

None.

ITEM 4T. CONTROLS AND PROCEDURES

Management’s Report Onon Internal Control ~~Over~~over Financial Reporting

Under the supervision of, and the participation of, our management, including our Chief Executive Officer and Principal Financial Officer, we have conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

Based on this evaluation and taking into account that certain material weaknesses that existed as of December 31, 2008 and continue to exist at September 30, 2009, our Chief Executive Officer and Principal Financial Officer have each concluded that our disclosure controls and procedures were not effective. As a result of this conclusion, the financial statements for the period covered by this Quarterly Report on Form 10-Q were prepared with particular attention to the material weaknesses in internal control over financial reporting previously disclosed. Notwithstanding the material weaknesses in internal controls that continue to exist as of September 30, 2009, we have concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, the financial position, results of operations and cash flows of the Company as required for interim financial statements.

~~Index~~INDEX

Based on this evaluation and taking into account that certain material weaknesses existed as of December 31, 2008, our Chief Executive Officer and Principal Financial Officer have each concluded that our disclosure controls and procedures were not effective. As a result of this conclusion, the financial statements for the period covered by this Quarterly Report on Form 10-Q were prepared with particular attention to the material weaknesses in internal control over financial reporting previously disclosed. Notwithstanding the material weaknesses in internal controls that continue to exist as of June 30, 2009, we have concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, the financial position, results of operations and cash flows of the Company as required for interim financial statements.

Changes in Internal Controls

During the fiscal quarter ended ~~June~~September 30, 2009, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management has concluded that the material weaknesses in internal control as described in Item 9A(T) of the Company’s Form 10-K for the year ended December 31, 2008, have not been remediated. Due to the small number of employees dealing with general administrative and financial matters and the expenses associated with increases to remediate the disclosure controls and procedures that have been identified, the Company continued to operate without changes to its internal controls over financial reporting for the period covered by this Quarterly Report on Form 10-Q while continuing to seek the expertise it needs to remediate the material weaknesses.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS ONUPON SENIOR SECURITIES

~~None~~The Company, as of September 30, 2009, was in default on all three of its loan agreements. The Company has a Note Payable to Mid-America Funding Company with a balance of $107,167 at September 30, 2009. The entire balance is past due.

The Company has a Note Payable to Gemini Master Fund, Ltd in the amount of $150,000. The entire balance, including interest, is past due. In addition, a $37,500 default charge was added to the note in July 2009. This note was renegotiated in December 2009.

The Company has a Convertible Note Payable to Gemini Master Fund, Ltd with a face value of $1,504,630. The Company was delinquent, beginning in July 2009, of making scheduled principal and interest payments of $115,741 per month. A default charge of $347,223 was added to the note in July 2009. This note was renegotiated in December 2009.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

~~On August 25, 2009, John Hanson resigned as a director of Axis Technologies Group, Inc~~None. (the “Company”). On August 26, 2009, David Petersen also resigned as a director of the Company. There were no reasons given by Mr. Hanson or Petersen included with their resignations. There was no disagreement or dispute between Mr. Petersen and the Company regarding operations, policies, or practices which led to his resignation. However, with respect to Mr. Hanson, the Company believes Mr. Hanson had disagreements with the Company’s management on operations, policies and practices of the Company including when and how often to hold shareholders meetings; therefore, we believe these disagreements led to his resignation . Mr. Hanson’s and Mr. Petersen’s resignations were effective immediately. The remaining directors did accept their resignations.

~~There were~~ITEM ~~no additional items that occurred during the period of this report which would have been required to be reported in a Form 8-K which have not been reported~~6. EXHIBITS


Exhibit Number		Description

10.1		Promissory Note, dated May 20, 2009 with MidAmerica Funding Co., Inc.

10.2		Amendment Agreement, dated December 30, 2009 with Gemini Master Fund, Ltd.

10.3		Amended and Restated 10% Senior Secured Convertible Note, dated December 30, 2009 with Gemini Master Fund, Ltd.

31.1		Certification of Chief Executive Officer of Axis Technologies Group, Inc. required by Rule 13a-14(1) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer of Axis Technologies Group, Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer of Axis Technologies Group, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

32.2		Certification of Principal Financial Officer of Axis Technologies Group, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

~~Index~~INDEX

ITEM 6 . EXHIBITS

Exhibit
Number		Description
31.1		Certification of Chief Executive Officer of Axis Technologies Group, Inc. required by Rule 13a-14(1) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer of Axis Technologies Group, Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer of Axis Technologies Group, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.
32.2		Certification of Principal Financial Officer of Axis Technologies Group, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

SIGNATURES

~~In accordance~~Pursuant ~~with~~to the requirements of the Securities ~~and~~ Exchange Act of 1934, the ~~Registrant~~ registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Axis Technologies Group, Inc.

Date: ~~December 23~~April 30, ~~2009~~2010

By:	/s/ Kipton Hirschbach
	Kipton Hirschbach
	Chief Executive Officer

By:	/s/ James Erickson
	James Erickson
	Chief Accounting Officer and
	Principal Financial Officer

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