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QSAM Biosciences, Inc. - Quarter Report: 2014 December (Form 10-Q)

UNITED STATES

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 December 31, 2014


[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ____________ to____________


Commission File No. 000-55148


ANPATH GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware

20-1602779

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

 


515 Congress Ave., Suite 1400

Austin, Texas 78701

 (Address of principal executive offices)


(407) 373-6925

 (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 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 [X] No [ ]


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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):


Large accelerated filer [  ]  Accelerated filer [  ]   Non-accelerated filer [  ]  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 [   ] No [X]




1




APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS


Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.


Not applicable.


APPLICABLE ONLY TO CORPORATE ISSUERS


Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date:


January 27, 2015 - Common – 12,801,390

January 27, 2015 - Preferred – none

PART I


Item 1.  Financial Statements


The financial statements of the registrant required to be filed with this Quarterly Report on Form 10-Q were prepared by management and commence below, together with related notes. In the opinion of management, the financial statements fairly present the financial condition of the registrant.




2





ANPATH GROUP, INC

 

 

 

 

 

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

March 31, 2014

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash

$

              5,795

 

$

                    395

 

Prepaid expenses

 

        9,163

 

 

               26,885

 

 

TOTAL CURRENT ASSETS

 

      14,958

 

 

               27,280

 

 

 

 

 

 

 

 

TOTAL ASSETS

$

       14,958

 

$

               27,280

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable and accrued expenses

$

87,171

 

$

               85,415

 

Derivative liability

 

163,470

 

 

-

 

Note payable - current portion

 

      5,000

 

 

             219,254

 

Debentures , net of discount of $272,636 and $ 0

 

300,930

 

 

-

 

Advance from stockholder

 

       71,270

 

 

               71,270

 

 

TOTAL CURRENT LIABILITIES

 

 627,841

 

 

             375,939

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

     627,841

 

 

             375,939

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 5,000,000 shares authorized, no shares issued and outstanding

 

             -

 

 

                         -

 

Common stock, $0.0001 par value; 100,000,000 shares authorized, 12,801,390 and 12,001,390 shares issued and outstanding

 

           1,280

 

 

                 1,200

 

Additional paid-in capital

 

    5,554,579

 

 

          5,314,659

 

Accumulated deficit

 

    (6,168,742)

 

 

       (5,664,518)

 

 

TOTAL STOCKHOLDERS' DEFICIT

 

       (612,883)

 

 

       (348,659)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$

          14,958

 

$

               27,280







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



3





ANPATH GROUP, INC

 

 

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Three Months Ended

 

 

 Nine Months Ended

 

 

 

 

 

December 31,

 

 

December 31,

 

 

 

 

 

2014

 

2013

 

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

Payroll

$

     2,873

$

    35,224

 

$

    76,210

$

  4,381,047

 

 

Professional fees

 

     16,068

 

   8,127

 

 

  334,075

 

  36,438

 

 

Product development and regulatory

 

      5,607

 

   6,393

 

 

    10,970

 

   11,938

 

 

Directors and officers insurance

 

    3,934

 

    3,935

 

 

     11,802

 

   11,803

 

 

Occupancy and office

 

       1,030

 

      1,210

 

 

   3,383

 

 14,846

 

 

State and local taxes

 

          -

 

       -

 

 

    2,896

 

      1,795

 

 

 

Total Expenses

 

 29,512

 

  54,889

 

 

 439,336

 

 4,457,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

  (29,512)

 

 (54,889)

 

 

 (439,336)

 

(4,457,867)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

    (138,043)

 

           -

 

 

  (288,124)

 

  (45,000)

 

 

Gain on derivative liability

 

172,241

 

-

 

 

584,391

 

-

 

 

Loss on debt extinguishment

 

-

 

         -

 

 

(361,155)

 

   (80,000)

 

 

 

Total Other Income (Expense)

 

   34,198

 

         -

 

 

  (64,888)

 

  (125,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

$

  4,686

$

(54,889)

 

$

 (504,224)

$

(4,582,867)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC NET LOSS PER SHARE

$

 (0.00)

$

  (0.01)

 

$

    (0.04)

$

       (0.44)

 

DILUTED NET LOSS PER SHARE

$

 (0.00)

$

  n/a

 

$

    n/a

$

       n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER

      OF COMMON SHARES

 

 

 

 

 

 

 

 

 

 

 

OUTSTANDING,

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

12,801,390

 

11,901,390

 

 

12,469,754

 

10,420,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED

 

13,857,754

 

11,901,390

 

 

12,469,754

 

10,420,055

 




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



4





ANPATH GROUP, INC

 

 

 

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 Nine Months Ended

 

 

 

December 31,

 

 

 

2014

 

2013

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$

(504,224)

$

(4,582,867)

 

Adjustments to reconcile net loss to net cash used by operations

 

 

 

 

 

 

Stock issued for services

 

 

          240,000

 

  4,300,000

 

Gain on derivative liability

 

 

(584,391)

 

-

 

Amortization of debt discount

 

 

   272,636

 

       45,000

 

Loss on extinguishment of debt

 

 

361,155

 

 80,000

 

Prepaid expenses

 

 

       17,722

 

      (7,960)

 

Accounts payable & accrued expenses

 

 

1,756

 

      (25,901)

Net cash used by operating activities

 

 

      (195,346)

 

     (191,728)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Proceeds from note payable

 

 

                  -

 

200,000

 

 

Proceeds from debentures

 

 

210,000

 

-

 

 

Payment of note payable

 

 

(9,254)

 

 

 

 

Proceeds from the sale of common stock

 

 

-

 

25,000

 

 

Advances from stockholder

 

 

                  -

 

11,000

Net cash provided by financing activities

 

 

        200,746

 

    236,000

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

            5,400

 

    44,272

 

 

 

 

 

 

CASH - Beginning of period

 

 

          395

 

        2,042

 

 

 

 

 

 

CASH - End of period

 

$

          5,795

$

    46,314

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW DISCLOSURES:

 

 

 

 

 

 

Interest expense

 

$

                  -

$

                  -

 

Income taxes

 

$

                  -

$

                  -

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES::

 

 

 

 

 

 

Debt discount  on conversion option and warrants

 

$

        386,706

$

                  -

 

Conversion of note payable

 

$

-

$

25,000



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



5




ANPATH GROUP, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014 AND March 31, 2014


NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS


The accompanying unaudited financial statements of Anpath Group, Inc. (“Anpath” or “the Company”) for the Nine months ended December 31, 2014 have been prepared in accordance with generally accepted accounting principles in the United States of America, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim financial information. Accordingly, the financial statements do not include all information and footnotes required by generally accepted accounting principles in the United States for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed interim financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s March 31, 2014 Annual Report on Form 10-K.The principal business of Anpath Group, Inc. (hereinafter “the Company”) is a holding company. The Company’s sole subsidiary is EnviroSystems, Inc. (hereinafter “ESI”).


The Company through its subsidiary, ESI, plans to begin producing disinfecting, biocidal, sanitizing, and cleaning products designed to help prevent the spread of infectious microorganisms and control the growth of these disease-causing microbes, while minimizing the harmful effects to people, animals, surfaces and the environment. ESI intends to exploit its technology platform through the development and licensing/private labeling of its technology in several product categories.  The Company’s chemical emulsion technology will permit ESI to offer a wide range of disinfectant/biocides/sanitizer/cleaner/antiseptic products for a variety of applications and markets. The Companys primary focus is the market introduction of GeoTru Geobiocide, for use in the oil and gas industry, specifically for hydraulic fracturing and microbial control in fracking fluids.  ESI will also opportunistically seek to license/private label its technology/products for surface disinfection.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Development stage


The company has limited operations and is considered to be in the development stage. In the year ended March 31, 2014, the Company elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915):  Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage.


NOTE 3 – GOING CONCERN


As shown in the accompanying financial statements, we have incurred net losses of $504,224 and $4,582,867 for the nine months ended December 31, 2014 and 2013, respectively. In addition, we have an accumulated deficit of $6,168,742 and a working capital deficit of $612,883 as of December 31, 2014. These conditions raise substantial doubt as to our ability to continue as a going concern. In response to these conditions, we may raise additional capital through the sale of equity securities, through an offering of debt securities or through borrowings from financial institutions or individuals. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.


NOTE 4 – DEBENTURES


On July 2, 2014, we closed a financing by which one accredited investor purchased two Original Issue Discount Senior Secured Convertible Debentures due March 31, 2015 and a Common Stock Purchase Warrant to purchase a total of 2,905,000 shares at $0.35 per share, exercisable for a period of five years.  The first Debenture, in the principal amount of $215,250 was issued in exchange for the Company’s Secured Promissory Note in the principal amount of $205,000 and the second Debenture, in the principal amount of $220,500, was sold for the sum of $210,000.  The company evaluated the first Debenture under the guidance found is ASC 470 and determined that the addition of the conversion option was substantive and as a result the company accounted for the transaction as an extinguishment of debt.  The company recorded the pro-rata fair value of warrants issued as a loss on the extinguishment of debt in the amount of $361,155. 




6





The debentures contained an Original issue discount of $20,750, additionally the conversion option on the debentures had a fair value of $357,721 and the 2,905,000 debenture warrants had a fair value of $731,118.  The company recorded a discount on the notes $407,456.  The company is amortizing the discount through the maturity date of the note, as of December 31, 2014 the company recorded $272,636 as amortization of debt discount.


NOTE 5 – COMMON STOCK


On July 23, 2014, we issued 400,000 shares of unregistered common stock to Lane Ventures, Inc., a consulting firm, for services rendered in the amount of $120,000.


On July 23, 2014 we also agreed to issue 400,000 shares of unregistered common stock to GreenBlock Capital LLC, a consulting firm, for services rendered in the amount of $120,000. Christopher Spencer, The President and Chairman of the Board is a principal and member of this consulting firm.   


NOTE 6 – FAIR VALUE MEASURE AND DERIVATIVE LIABILITIES


The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:


Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;


Level 2

Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and


Level 3

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).


The following table sets forth the Company’s consolidated financial assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


 

 

Total

 

Level 1

 

Level 2

 

Level 3

LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Liabilities

 

                    163,470

 

                            -

 

                            -

 

                163,470


On July 2, 2014, the Company issued debentures that were convertible into shares of common stock. The debentures conversion price will be adjusted depending on various circumstances. The conversion options embedded in these instruments contain no explicit limit to the number of shares to be issued upon settlement and as a result are classified as liabilities under ASC 815. Additionally, the company issued in connection with the debentures 2,905,000 warrants to purchase the company common stock.  The conversion price will be adjusted depending on various circumstances, and as there is no explicit limit to the number of shares to be issued upon settlement they are classified as liabilities under ASC 815.  The conversion option and warrants had a fair value of $1,088,839 of which $386,706 was classified as a debt discount on the debentures and $340,978 was recorded as a day 1 loss on the fair value of the derivative liability as the total discount is capped at the fair value of the debt.  The change in fair value from the grant date to the balance sheet date was recorded as a gain in the income statement of $925,369.




7




The following is a reconciliation of the conversion option liability and embedded warrant liability for which Level 3 inputs were used in determining fair value:


Beginning balance March 31, 2014

 

 

 

 

 

 

 

 $                         -

 

 

 

 

 

 

 

 

 

Additions due to new convertible debt and warrants

 

 

 

 

 

 

 

             1,088,839

 

 

 

 

 

 

 

 

 

Mark to market of debt derivative

 

 

 

 

 

 

 

              (925,369)

 

 

 

 

 

 

 

 

 

Debt derivative as of December 31, 2014

 

 

 

 

 

 

 

 $             163,470


The Company’s conversion option liabilities are valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs. These consolidated financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy. The Company uses the Black Scholes Option Pricing Model to value its derivatives based upon the following assumptions: dividend yield of -0-%, volatility of 54%, risk free rate of 0.0257% and an expected term of .75 years to 4.75 years.


NOTE 7 – STOCK WARRANTS


A summary of the status of the Company’s stock warrants as of December 31, 2014 is presented below:


  

December 31, 2014

Warrants outstanding at beginning of year

-

Warrants granted

2,905,000

Warrants exercised

-

Warrants canceled

-

Warrants outstanding at end of year

2,905,000


The following table summarizes the information about the stock Warrants as of December 31, 2014:


Range of

Exercise Price

  

Number

Outstanding

  

Weighted Average

Remaining

Contractual Life

Years

  

Weighted Average

Exercise Price

(Total shares)

  

Number

Exercisable

  

Weighted Average

Exercise Price

(Exercisable

shares)

$

.35

 

2,905,000

 

4.50

 

$

.35

 

2,905,000

 

$

.35





8




Item 2.  Management’s Discussions and Analysis of Financial Condition and Results of Operations.


Forward-looking Statements


Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.


Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.


Accordingly, results actually achieved may differ materially from expected results in these statements.  Forward-looking statements speak only as of the date they are made.  We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.


Plan of Operation


Subject to raising a sufficient amount of working capital either through equity offerings, debt offerings or a combination thereof, estimated to be $2 million, the Company, through its wholly-owned subsidiary, ESI, plans to begin producing disinfecting, biocidal and cleaning products designed to help prevent the spread of infectious microorganisms and control the growth of these disease-causing microbes, while minimizing the harmful effects to people, animals, surfaces and the environment.  In furtherance of this goal, on May 14, 2013, we issued to one accredited investor a Secured Promissory Note in the principal amount of $205,000, and in June 2013, a note holder converted $25,000 of his note payable into 31,250 “unregistered” and “restricted” shares of our common stock. In addition, in August, 2013, we sold to an accredited investor a total of 31,250 “unregistered” and “restricted” shares of our common stock at a price of $0.80 per share, for aggregate gross proceeds of $25,000.  On July 2, 2014, we closed a financing by which one accredited investor purchased two Original Issue Discount Senior Secured Convertible Debentures due March 31, 2015 (the “Debentures”) and a Common Stock Purchase Warrant to purchase a total of 2,905,000 shares of the Company’s common stock at a price of $0.35 per share, exercisable for a period of five years (the “Warrant”).  The first Debenture, in the principal amount of $215,250 was issued in exchange for the Company’s Secured Promissory Note in the principal amount of $205,000 in reliance on Sections 3(a)(9) and 4(a)(2) of the Securities Act of 1933, as amended, and the second Debenture, in the principal amount of $220,500, was issued in consideration of the sum of $210,000.  See our Current Report on Form 8-K dated June 27, 2014, and filed with the SEC on July 2, 2014.  


We will rely on third party manufacturers to produce our products.  We have not yet entered into any arrangements in this regard.  We will rely on only two manufacturers, Clariant Corporation and Swan Chemical, to supply us with EPA-required PCMX, which is the biocide used in our products.  If either of these manufacturers is unable to supply us with PCMX in the quantities or on the terms that we require, it could have a material adverse effect on our business.  We can provide no assurance that we will be able to obtain EPA-required grade PCMX in the future.  


Results of Operation


For The Three Months Ended December 31, 2014 Compared to The Three Months Ended December 31, 2013.


Our operating expenses decreased to $29,512 during the quarterly period ended December 31, 2014, from $54,889 in the year-ago period.  This decrease was driven principally by a decrease in payroll of $32,351 and an increase in professional fees of $7,941in the December quarter as compared to the year-ago period In the prior quarter our employees agreed to cease compensation payments for September 2014 through December 2014 in exchange for common stock to be issued in January 2015.  We also paid legal and accounting fees for the preparation of SEC filings and in connection with debenture financing arrangements. We had a loss from operations of $29,512 in the



9




three months ended December 31, 2014 compared to a loss from operations of $54,889 in the three months ended December 31, 2013.  


For the three months ended December 31, 2014, we had net income of $4,686, or $0.00 per share, as compared to a net loss of $54,889, or $0.01 per share, during the year-ago period.


For The Nine Months Ended December 31, 2014 Compared to The Nine Months Ended December 31, 2013.


Our operating expenses decreased to $439,336 in the nine-month period ended December 31, 2014, from $4,457,867 in the year-ago period.  This decrease was driven principally by a decrease in payroll to $76,210 in the nine month period ending December 31, 2014, as compared to $4,381,047 in the year-ago period due to the recognition of a $4,300,000 expense for the issuance of 5,375,000 shares of our common stock as compensation to our majority stockholder as well as directors, executive officers, employees and consultants in the December 31, 2013, quarter.  Our professional fees also increased to $334,075 in the nine months ended December 31, 2014, as compared to $36,438 in the year-ago period. In the December 31, 2014, quarter we issued 800,000 shares of unregistered common stock to consultants with a value of $240,000. We also paid legal and accounting fees for the preparation of SEC filings and in connection with debenture financing arrangements. We had a loss from operations of $439,336 in the nine months ended December 31, 2014 compared to a loss from operations of $4,457,867 in the nine months ended December 31, 2013.  


For the nine months ended December 31, 2014, our net loss was $504,224, or $0.04 per share, as compared to a net loss of $4,582,867, or $0.44 per share, during the year-ago period.


Liquidity


The Company had cash on hand of $5,795 as of December 31, 2014.  We believe that this cash on hand will be not be sufficient to meet our expenses through the end of our 2014 fiscal year.   We believe that we will require a total of approximately $2 million in order to begin producing and distributing our cleaning products. We will have to seek additional financing through either a private placement of our stock or through debt financing.  While management expects to be able to raise the required funds, there is no guarantee that we can obtain adequate financing.  Our ability to achieve a level of profitable operations and/or additional financing may affect our ability to continue as a going concern.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.


Not required.


Item 4.  Controls and Procedures.


Evaluation of disclosure controls and procedures


Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q.  In designing and evaluating the disclosure controls and procedures, our 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.  In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.  The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.


Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2014, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. This material deficiency is due to a lack of adequate internal controls and the absence of an audit committee.



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Changes in internal control over financial reporting


There were no changes in our internal controls over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.


PART II - OTHER INFORMATION


Item 1.  Legal Proceedings.


On September 27, 2013, Susan Ladeau filed a Complaint against the Company and ESI in the Superior Court of the County of Iredell, North Carolina, seeking payment of wages of approximately $25,000, together with vacation pay, the value of health insurance benefits and medical expenses collectively totaling approximately $12,000, and the issuance of 40,000 shares of the Company’s common stock.  The case was designated Case No. 13CV 02277.  The Company and ESI dispute Ms. Ladeau’s claims and have filed an answer to the Complaint.  Discovery is complete and a pretrial hearing was held in December 2014. We expect a trial date to be set in 2015.


Item 1A.  Risk Factors.


Not required.


Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.


During the quarterly period ended December 31, 2014, we have not issued any unregistered securities that have not already been disclosed in a Current Report on Form 8-K.


Item 3.  Defaults Upon Senior Securities.


None; not applicable.


Item 4.  Mine Safety Disclosures.


Not applicable.


Item 5.  Other Information.


None; not applicable.


Item 6.  Exhibits.


Exhibit No.                          Identification of Exhibit


31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by J. Lloyd Breedlove, Chief Executive Officer.

31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by Stephen J. Hoelscher, Chief Financial Officer.

32

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 provided by J. Lloyd Breedlove, Chief Executive Officer and Stephen J. Hoelscher, Chief Financial Officer.

101.INS

XBRL Instance Document

101.PRE.

XBRL Taxonomy Extension Presentation Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.SCH

XBRL Taxonomy Extension Schema




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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized


ANPATH GROUP, INC.


Date:

February 17, 2015

 

By:

/s/J. Lloyd Breedlove

 

 

 

 

Chief Executive Officer and President


Date:

February 17, 2015

 

By:

/s/ Stephen J. Hoelscher

 

 

 

 

Stephen J. Hoelscher, Chief Financial Officer and Secretary





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