QSAM Biosciences, Inc. - Annual Report: 2015 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended:  March 31, 2015

or

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

For the transition period from

Commission file number 000-55148

ANPATH GROUP, INC.

(Exact Name of registrant as specified  in its charter)

515 Congress Ave., Suite 1400

Austin, Texas 78701

 (Address of principal executive offices)

(407)373-6925

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if  the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [  ]   No [X]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.

(1) Yes [X] No [  ]     (2) 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 [ ]

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Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company:

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

Yes [  ] No [X]

State the aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was last sold, or the average bid and asked price of such common stock, as of the last business day of the Registrant's most recently completed second fiscal quarter.

September 30, 2014 - $376,586.  There are approximately 4,707,329 shares of common voting stock of the Registrant beneficially owned by non-affiliates on September 30, 2014.  There is a limited public market for the common stock of the Registrant, so this computation is based upon the closing bid price of $0.08 per share of the Registrant's common stock on the OTC Bulletin Board.

APPLICABLE ONLY TO REGISTRANTS 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 Section 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.   X  Yes        No

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

June 24, 2015:  Common – 12,846,390

Documents incorporated by reference: See Item 15.

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FORWARD-LOOKING STATEMENTS

In this Annual Report on Form 10-K, references to “Anpath” the “Company,” “we,” “us,” “our” and words of similar import refer to Anpath Group, Inc., a Delaware corporation, unless the context requires otherwise.

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this report. These factors include, among others:

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our ability to raise capital;

·

our ability to successfully implement our business plan;

·

declines in general economic conditions in the markets where we may operate; and

·

significant competition in the markets where we may operate.

You should read any other cautionary statements made in this Annual Report as being applicable to all related forward-looking statements wherever they appear in this Annual Report. We cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should read this Annual Report completely, and it should be considered in light of all other information contained in the reports or registration statement that we file with the Securities and Exchange Commission (the “Commission” or the “SEC”), including all risk factors outlined therein. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

JUMPSTART OUR BUSINESS STARTUPS ACT DISCLOSURE

We qualify as an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act by the Jumpstart Our Business Startups Act (the “JOBS Act”). An issuer qualifies as an “emerging growth company” if it has total annual gross revenues of less than $1.0 billion during its most recently completed fiscal year, and will continue to be deemed an emerging growth company until the earliest of:

As an emerging growth company, we are exempt from various reporting requirements. Specifically, we are exempt from the following provisions:

Under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies.  

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PART I

ITEM 1.  BUSINESS

Business Development

Organization and Other Corporate Developments

Anpath Group, Inc. (“Anpath,” the “Company,” “we,” “us,” and “our,” or words of similar import) was organized pursuant to the laws of the State of Delaware on August 26, 2004, under the name “Telecomm Sales Network, Inc.,” with an authorized capital of 105,000,000 shares, of which 100,000,000 shares were designated as common stock, par value $0.0001 per share, and 5,000,000 shares were designated as preferred stock, par value $0.0001 per share.  We were formed for the purpose of engaging in any lawful act or activity allowed under the General Corporation Law of the State of Delaware (the “Delaware Law”).

At its inception, the Company intended to provide sales channel and marketing consulting and support services to telecommunications companies worldwide.  On January 10, 2006, the Company completed the acquisition of EnviroSystems, Inc., a Nevada corporation (“ESI”), under the terms of an Agreement and Plan of Merger dated November 11, 2005, as amended.  Upon the completion of this transaction, ESI became a wholly-owned subsidiary of the Company.  The Company effectuated the ESI acquisition in order to commercialize ESI’s nano-emulsion biocide technology platform, known as EcoTru Ready to Use (“EcoTru RTU”).  The Company has no independent operations and will conduct all of its business through its wholly-owned subsidiary, ESI.

On January 12, 2007, we filed with the Delaware Secretary of State a Certificate of Amendment to our Certificate of Incorporation, by which we changed our name to “Anpath Group, Inc.”

The Company’s revenues from the sale of its disinfecting, sanitizing and cleaning products were insufficient to meet its outstanding debt obligations.  As a result, on May 20, 2010, we filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware, under Case No. 10-11652.  On November 22, 2010, the Bankruptcy Court entered an order confirming the Company’s first amended plan of reorganization (the “Plan”).  The Plan became effective and the Company consummated its reorganization and emerged from Chapter 11 on December 23, 2010.  The terms of the Plan were disclosed in the Company’s Current Report on Form 8-K, dated December 23, 2010, which was filed with the SEC on the same date.  Emerging from Chapter 11 bankruptcy, the Company had no outstanding debt, stock options or warrants or preferred stock.  The Company had 12,627,520 outstanding shares of common stock upon its emergence from Chapter 11.

On December 28, 2010, we filed with the Commission a Form 15 suspending our duty to file reports with the SEC under Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Upon effectiveness of our Registration Statement on Form 10, as amended, on April 20, 2014, we became obligated to file such reports under Section 13 of the Exchange Act.

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On January 6, 2011, the Company filed with the Delaware Secretary of State an Amended and Restated Certificate of Incorporation to prohibit the issuance of any non-voting equity securities to the extent prohibited by Section 1123(a)(6) of Title 11 of the U.S. Bankruptcy Code.  

When the Company emerged from Chapter 11 bankruptcy in December, 2010, it had sufficient cash on hand to sustain operations for approximately nine months.  In October 2011, ESI ceased its normal operations because cash provided by operations was not sufficient for ESI to pay for its continuing expenses and the Company had advanced or expended all the funds available to it. In late 2011 and early 2012, some orders were shipped using inventory in stock. After ceasing normal operations, the Company conducted its minimal operations from the offices or homes of its officers.  During this time period, the Company was able to keep current with its renewal fees due to the EPA.  In 2013, we resumed limited operations when additional funding was received. The Company continues these operations in a virtual manner from the officers and directors other offices or home offices.  

On February 28, 2013, we filed with the Delaware Secretary of State a Certificate of Amendment to effectuate a reverse split of our issued and outstanding shares of common stock in the ratio of one post-split share in exchange for every two pre-split shares of common stock, while retaining the par value of $0.0001 per share, with appropriate adjustments in the additional paid-in capital and stated capital accounts of the Company, and with all fractional shares that would otherwise result from such reverse split being rounded up to the nearest whole share.  Unless indicated otherwise, the foregoing adjustment to our capital stock has been taken into account in all computations herein.

The Report of Independent Registered Public Accounting Firm issued in connection with our audited financial statements for the fiscal years ended March 31, 2015 and 2014, expressed substantial doubt about our ability to continue as a going concern, due to our history of operating losses and our working capital deficiency.  We have an accumulated deficit of $6,250,988 as of March 31, 2015.  See the Index to Financial Statements, Item 8 of this Annual Report.  

Copies of our initial Certificate of Incorporation and all amendments and restatements thereto were filed with our Registration Statement on Form 10 as Exhibits 3.1 through 3.4, respectively, and our Amended and Restated Bylaws were filed with such Registration Statement as Exhibit 3.5 and are incorporated herein by reference.  See the Exhibit Index, Item 15 of this Annual Report.

Developments subsequent to our year ended March 31, 2015

On May 14, 2015, our Board of Directors and stockholders owning a majority of our issued and outstanding shares unanimously adopted a resolution to authorize a reverse stock split of all of the outstanding shares of our Common Stock at a ratio of not less than 1-for-2 and not greater than 1-for-7, with the exact ratio to be established at the discretion of the Board (a “Reverse Stock Split”), and granting the Board the discretion to change the Company’s name to comport with such new business, product or industry as the Company may engage in the future, without stockholder approval.  The amendments to our Certificate of Incorporation that will effectuate these matters will be filed and become effective no sooner than June 30, 2015, or a date that is at least 21 days after the date of the mailing of the Company’s Information Statement with respect to these matters.

The Board of Directors shall have the sole discretion to effect the Reverse Stock Split, or not to effect the Reverse Stock Split if they conclude that it is not in the best interest of the stockholders of the Company.  Providing this authority to the Board rather than mere approval of an immediate Reverse Stock Split, as well as the availability of a range of Reverse Stock Split ratios, would give the Board flexibility to react to market conditions and act in the best interests of the Company and our stockholders.

On May 29, 2015, Lloyd J. Breedlove resigned as our President and CEO.  There were no disagreements with Mr. Breedlove on any matter related to the Company’s operations, policies or practices.  

Business

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

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begin producing disinfecting, biocidal, disinfecting 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 3013, 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.  In addition, 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 (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, and the second Debenture, in the principal amount of $220,500, was issued in consideration of the sum of $210,000.   See the subheading “Recent Sales of Unregistered Securities,” Item 5 of this Report.

The Company estimates that it will need $2 million in net proceeds either through equity offerings, debt offerings and a combination thereof. The Company intends to use the funds as follows:

(1)  This figure does not take into account the payment of any commission, legal fees or other costs that may be associated with any such offering.

From the working capital estimated to be $2,000,000, we anticipate that the following significant steps will be funded during the following 12 months:

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The following table identifies the various milestones that we intend to meet over the next 12 months, subject to receipt of sufficient funding:

GeoTru Milestones

Milestone

Timeline

1.  Individual state EPA registration renewals

180 days (16 states:  30-180 days/state)

2.  Production of initial “field testing” batch

60 days

3.  Product marketing materials/website revision

60 days

4.  Engage distributor(s)

30 days

5.  Promotion campaign

90 days

6.  Miscellaneous testing

15-30 days each

EcoTru Milestones

Milestone

Timeline

1.  Individual state EPA registration renewals

12 months

2.  Production of initial batch

60 days

3.  Conclude license agreement with aviation partner

60 days

4.  Support advanced materials compatibility testing

60 days

5.  Engage industrial cleaning distributor/license partner

180 days

6.  Engage five former domestic customers

180 days

7.  Complete distributor agreement for Japan

180 days

8.  Identify EU distributor/license partner

270 days

The name “Anpath Group, Inc.” was chosen to more closely align the name of the Company with current products and future initiatives in the industrial microbial control and infection prevention industries.  The name “Anpath,” literally translated, means “the absence of disease.”  It consists of the Greek prefix “an,” meaning “without,” and the Greek root “path,” meaning disease.  It was adopted to improve the Company’s ability to build brand recognition and at the same time to permit the addition of other businesses that may target different approaches to our core mission:  Provide a healthier today and a safer tomorrow through knowledgeable people and innovative infection prevention, decontamination, and health science and industrial technologies, products, and services.

The Company has developed and has trade secret rights and patents pending to what it believes to be a unique and proprietary chemical emulsion biocide technology platform. Subject to the receipt of sufficient working capital either through equity offerings, debt offerings or a combination thereof, estimated at $2 million, Anpath plans to begin producing biocidal, disinfecting and cleaning products that it believes will help prevent the spread of infectious microorganisms while offering a favorable profile for health and environmental effects.  

The ESI formulation was used by the Washington Metropolitan Area Transit Authority, Jan-Pro Cleaning Systems and other companies in the commercial market until ESIceased its normal operations in 2011.  Moreover, the product was used by many airlines and conformed to all testing per the AMS1453 specifications, demonstrating its non-corrosive nature.

Primary Technology Platform:

Subject to receipt of funding as discussed above, Anpath plans to fully develop the ESI parachlorometaxylenol (PCMX)-based chemical emulsion technology platform. PCMX is the broad spectrum, fast acting active ingredient at the heart of the ESI technology.  The characteristics of this technology permit the introduction of biocides that are both efficacious, possessing the ability to destroy a wide-range of disease-causing microorganisms, and at the same time possess a favorable profile for health and environmental effects.  This combination makes the resultant products ideal for use in a wide range of markets that are in need of disinfection and microbial control with reduced threat to users and people in the use area, treated surfaces, and the environment

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in general.  The Company has trade secrets and patents pending related to the formulations and production of these chemical emulsion products, specifically the use of PCMX, which we believe offer significant barriers to competition.

Anpath PCMX Chemical Emulsion Product Characteristics:

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Efficacious disinfectants/biocides/sanitizers/cleaners that are gentle to use (achieve bio-decontamination without toxic  & corrosive chemicals)

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Kill a wide range of infectious microorganisms

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Minimal Skin, Eye, Pulmonary, Oral or Dermal Irritation

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Patents pending and trade secret manufacturing processes offer barrier to competition

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Non-corrosive — As a demonstration of potential surface compatibility, previous ESI products are included in the Boeing Qualified Products List (QPL) and conform with AMS-1452A, 1453 & D6-7127 Aircraft Corrosion Specifications, which relate to a broad series of testing protocols and recommended acceptance criteria in the aerospace industry for non-corrosion and materials compatibility

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Clean/sanitize/disinfect/microbial control/treat while minimizing the harmful effects to people, animals, surfaces and the environment

Principal products or services and their markets

Anpath 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 Anpath to offer a wide range of biocide, disinfectant/sanitizer and cleaning products for a variety of applications and markets. The Company’s 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.  Anpath will also opportunistically seek to license/private label its technology/products for surface disinfection.

Geo-Biocides

At a time when the need for increased oil/gas production and environmental concerns are colliding, Anpath has focused on a more environmentally correct solution for geobiocides with its GeoTru Geobiocide.

The increased utilization of well stimulation and enhanced oil recovery methods is expected to provide a wide range of opportunities for the suppliers of both formulated oilfield chemicals and their raw materials. Additionally, U.S. well stimulation material demand continues to grow.  A February, 2014, report from BCC Research LLC of Wellesley, Massachusetts notes that from 2013 to 2018, the compound annual growth rate for fracking fluids will reach 7.4%. The report estimates the U.S. market for fracking fluids at $18.4 billion in 2012 and $26 billion in 2013, with growth to nearly $37.3 billion by 2018.  

Hydraulic fracturing consists of pumping into the formation very large volumes of fresh water that generally has been treated with a friction reducer, biocides, scale inhibitor, and surfactants, and contains sand and granular products as propping agents. The water treating fluid maximizes the horizontal length of the fracture while minimizing the vertical fracture height. The fractures, which are held open by the proppants, result in increased surface area, which further results in increases in the desorption of the gas from the shale and increases in the mobility of the gas. The result is more efficient recovery of a larger volume of the gas-in-place.

Many of the chemicals used in the treated water are considered toxic and potentially harmful. GeoTru is the result of a project initiated by Anpath to produce a proprietary biocide for use in the oil and gas industry.  Specifically our goal was to produce a safe oil/gas field biocide that provided effective control of microorganisms and was environmentally correct. Reflecting this goal; GeoTru is safe to ship and handle, non-flammable with no explosion hazard, and with surface active properties.  Due to EPA labeling requirements, we are not able to state on our label that GeoTru is biodegradable, although we have data showing that it is biodegradable.  GeoTru is designed to function in the oil field environment; it is compatible with the varying water types found in field operations as well as elevated water temperatures and varying total dissolved solid concentrations and high levels of salinity, while providing effective control of microorganisms. 

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Development of GeoTru is a result of Anpath’s proprietary PCMX emulsion technology platform. Unique to this platform, the GeoTru formulation consists of a high yet safe and easy to work with PCMX concentration with compatible “nature-based” surfactants and solubilizers. This formulation is readily diluted with field waters and further addresses the needs for biocide solution penetration into the porous and layered geological formations for release of oil and gas reserves. Extensive development efforts have been undertaken to address the production needs in the field.  PCMX (also referred to as parachlorometaxylenol and chloroxylenol) has a very long history of use as an antimicrobial, over 60 years. Since it is a very hydrophobic agent it is compatible with nonaqueous oil and natural gas reserves. PCMX is neither an oxidizing agent nor aldehyde, making it compatible and viable in waters with organic loads and not readily inactivated.  It has a history of industrial applications including use in adhesives, paints, leather, paper, and textiles. PCMX is also a very gentle and safe antimicrobial as seen by its history of use as an antiseptic agent for hand soaps, hand sanitizers, lotions, surgical scrubs, surface disinfectants, deodorizer air fresheners, nail infection treatment agents, hair and body shampoos, and acne medications; all at concentrations significantly higher than would be used for oil and gas exploration, production, and stimulation operations. PCMX is not known to be carcinogenic nor an endocrine disruptor nor to cause antimicrobial resistance. Because of its hydrophobic nature and low solubility in water it is emulsified to make it water soluble and to permit its intimate contact with the water bearing microorganisms and effectively control their growth.

In the oil/gas field environment GeoTru is added to aqueous fluids, such as but not limited to fracking fluids, to control the growth of microorganisms that produce acids and hydrogen sulfide as examples that sour the well and its products and are causes of corrosion. Without the biocide addition, the wells and products lose appreciable commercial value. GeoTru has been tested in-house and in independent laboratories. In independent testing the biocidal efficacy has been shown and in in-house testing the severe conditions such as elevated temperature and high salinity and presence of dissolved solids has shown the product to be stable. In addition to such testing the product has been designed to have a low toxicity profile as evidenced by the product being classified by the EPA as Toxicity Category IV (the least toxic category rated by the EPA) in 5 of 6 tests including oral, inhalation, and dermal exposure. It is non-sensitizing to skin and there are no special handling requirements except routine eye protection. The product is non-carcinogenic and environmentally friendly, is produced with a very high percentage of renewable sources, has a low potential for bioaccumulation, and is safe for the environment. The product has a high flashpoint, low freezing point, is not self-igniting, and does not present an explosion hazard.

GeoTru is registered with the United States Environmental Protection Agency (EPA):  Biocide for the control of microorganisms including bacteria, algae, and fungi in oil and gas exploration and production operations including enhanced recovery systems (such as hydraulic fracturing) and industrial water systems.

GeoTru’s registration (EPA Reg No 70791-3) is supported by in-house testing and commissioned outside independent laboratory antibacterial, antifungal testing, chemistry evaluations, and toxicological testing.  Based on EPA Data Reviews for Acute Inhalation Toxicity and Dermal Sensitization Testing dated July 22, 2010, and July 23, 2010, respectively, GeoTru meets EPA Requirements for Toxicity Category IV for no special warnings or precautionary statements required for harmful ingestion, inhalation, and dermal effects. A patent is pending.

Surface Disinfectants

The Company also intends to reintroduce its broad-spectrum hospital-grade disinfectant, EcoTru^®.  EcoTru is a non-corrosive, non-irritating, non-flammable multi-purpose, effective Broad Spectrum disinfectant and deodorizing cleaner.  It is a gentle disinfecting method and does not require protective clothing or special ventilation and has no special handling requirements.  The Master Label that was attached as an exhibit to the EPA’s Notice of Pesticide Registration dated September 2, 2011, indicates that EcoTru  “Meets EPA Requirements for Toxicity Category IV (no special warnings or precautionary statements required for harmful dermal, ocular, inhalation or ingestion effects).”  When initially introduced, management performed its own review of the EPA’s web site and determined that EcoTru was  the first product of its kind to to be listed as a Toxicity Category IV product.  This new, revised formulation addresses the same needs and has a broader efficacy spectrum. It is a ready-to-use bactericide and virucide shown to be effective against numerous microorganisms such as, Avian Influenza A and MRSA. EcoTru is registered with the EPA (EPA Reg. No. 70791-4).  A patent is pending.

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Distribution Methods of the Products or Services

The Company plans to maximize its market distribution relationships in several ways. While the oil and gas industry opportunity is significant, the market for GeoTru is focused on opportunities in the areas of hydraulic fracturing and related oil and gas exploration and production activities that will continue to display growth for years to come, as indicated in the BCC Research report cited above.  With its high growth profile, hydraulic fracturing has become a highly visible portion of the U.S. energy industry.  We have developed strong relationships with several oil and gas industry chemical distribution partners and intend to leverage those relationships through distribution agreements.  As of the date hereof, we have not entered into any such arrangements.  Additionally, the Company is in contact with certain private and state organizations promoting the economic benefits of hydraulic fracturing. Management believes that GeoTru offers the ideal combination of safety and efficacy and should help allay public fears related to the environmental impact of chemicals used in fracking.

Our surface disinfectant technology is widely accepted by industries that place a premium on material compatibility and safety in general, for example, the airline industry.  The stringent requirements placed on materials compatibility favor our technology versus more traditional disinfectants.  Our surface disinfectant has proven to be very compatible with a wide range of materials as evidenced by the results of the testing against AMS-1453, AMS-1452A & D6-7127 specifications.  Further, the Toxicity Category IV demonstrates a higher level of safety since it requires no protective clothing, no special ventilation, is non-flammable and has no special handling requirements. Our EcoTru distribution model directs us to partner with industry focused distribution leaders; in selective cases we will seek a combined manufacturing/distribution arrangement. Currently, we are in negotiation with a leading provider to the worldwide airline industry.  Our intent is to license the rights to our product, and our potential partner is considering the value of private labeling the product.  Our manufacturing process is a two-part process, initially producing a concentrate and then dilution to a ready-to-use disinfectant.  By design, we can produce the concentrate, maintaining trade secrets, and ship to manufacturing/distribution partners and they in turn can produce RTU on a just-in-time basis.  This addresses two important issues and will provide ESI and its designated distribution partners with significant advantages. First, there will be a drastic reduction in freight costs since the concentrate produces significantly greater RTU volumes, and second, there will be better inventory management since the concentrate has no shelf life.  The products listed on the website are ready-to-use products.  A substantial part of our strategic plan is to partner with industry focused distribution entities that have manufacturing capabilities.  Under this plan, ESI will sell concentrate to our distribution partner(s) and on a just-in-time basis, the partner will complete the manufacturing process and package for distribution.  Our product is made in two steps and the result of the initial phase is a concentrate.  The second phase involves dilution and packaging.  One of the advantages of selling concentrate to select partners is that the concentrate has no shelf-life (as opposed to the RTU product) and can be produced on an as needed basis and thus maximize shelf-life for the final RTU product.  Additionally, we can ship the concentrate internationally and save significant shipping costs since the dilution ratio is 25:1.  These advantages are particularly important in serving international markets.  In the past, we have sold products to a number of international markets, particularly in Asia.  We have had distribution partners in Japan and Korea and have sold product to a number of Asian airlines.

The Company has identified several distribution options, to include:  (i) engaging conventional distributors seeking a safer, more environmentally correct disinfectant; (ii) industry-focused distribution; (iii) large, individual customers such as the Washington Metropolitan Area Transit Authority; and (iv) license agreements with focused industry leaders and international markets.  A draft licensing agreement is under consideration.

Status of any Publicly Announced New Product or Service

None; not applicable.

Competitive Business Conditions and Smaller Reporting Company's Competitive Position in the Industry and Methods of Competition

The market for products such as ours is highly competitive and we face competition from a number of companies, most of which have substantially greater brand name recognition and financial, research and development, production and other resources than we do.

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Consumer, Institutional, Hospitality and Military

In the consumer and institutional markets our primary competitors include Johnson & Johnson, Ecolab, Inc., Clorox, Sensible Life Products, and Proctor & Gamble, and others all of which have products with recognized national brands that include Clorox, Lysol, Pine Sol, and industry specific products. Products used in the consumer markets and certain institutional markets like the hospitality industry generally compete based upon price. To date, relatively higher per unit costs of our product as compared to our competitors has limited our ability to compete in these markets. We believe an increased awareness of the need for safer biocides with environmentally correct profiles will aid our principal competitive advantages; comparatively favorable toxicity profile, efficacy, and environmental profile.

Oil and Gas

There are over 35 dominant major oilfield chemical suppliers, led by the likes of Dow Chemical, BASF and Rhodia, with a remaining fragmented set of smaller competitors. Biocides are required to be used in aqueous environments such as the fracking fluids that are used for oil and gas production.  Besides our product, which is the only known biocide for this application that is based on PCMX, there are a number of other biocides being used in the industry that are sold by the dominant major oilfield chemical suppliers and smaller companies and that may be competitive with our product. Current competitive products are conventional biocides: glutaraldehydes, quats, sodium hypochlorite (bleach) and chlorine dioxide.   In 2011, the Company’s management reviewed the EPA’s web site and determined that competitive biocides are very toxic and do not carry the Toxicity Category IV labeling. Special handling is required and some must be generated on-site.  Glutaraldehyde is the most commonly used biocide for hydraulic fracturing based on usage volume in 2013.  The BCC Research report cited above notes that the use of glutaraldehyde in the industry has a questionable future since environmental advocacy groups have included it on the list of fracking chemicals with 10 or more harmful health effects. Electrochemically activated salt water has been used and is available; a green oxidizing technology, but expensive and easily prone to inactivation.  The relevant trend is toward a reduction in the use of toxic biocides as increased environmental regulations make biocide applications more and more costly, and the potential for regulation requiring “greener” biocides a real possibility.

Though there are many disinfectant products that are EPA-registered, when used as directed, the majority of these products incorporate chemicals that can be toxic, corrosive and potentially damaging to the environment. Anpath eliminates the effectiveness-safety trade-off faced by consumers in the current market place. Through a proprietary formulation method using parachlorometaxylenol (PCMX), the company offers effective disinfecting solutions with active ingredient concentration levels at one-to-two orders of magnitude lower than those of other disinfectants, eliminating any toxic or corrosive effects. Unlike many competing products, Anpath PCMX based chemical emulsion products do not require special handling or precautions, including no precautions for skin, eye, pulmonary, oral or dermal irritation. Additionally, products are nonflammable and environmentally responsible. Anpath has formulated both its EcoTru and GeoTru product with nature-based actives.  

Competitive Product Characteristics:

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Accelerated Peroxides & Bleach

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Highly corrosive – protective gear required

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Toxic - causes chemical burns

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Pulmonary and ocular irritant

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Must preclean for efficacy

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Quaternary Ammonium Compounds (Quats)

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Limited efficacy

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Toxic & Irritating

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Corrosive

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Limited biodegradation

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Ortho-Phenyl Phenol

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Highly toxic & irritating – protective gear required

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–

Corrosive

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Carcinogenic

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Limited biodegradation

Sources and Availability of Raw Materials and Names of Principal Suppliers

The majority of the raw materials for all ingredients used in production of ESI products are readily available from a number of sources.  The active ingredient, parachlorometaxylenol (PCMX) is available in multiple quality grades but the EPA registered grade PCMX used to produce our products has traditionally been offered by available from two sources; Clariant Corporation, a Swiss based company with US headquarters in Charlotte, NC, and Thomas Swan, a British based company with US headquarters in Lyndhurst, NJ.  ESI has good relationships with each company.  We have negotiated a manufacturing arrangement with Surfactants International,  and Surfactants International has conducted trial runs and agreed to all of our quality control procedures. Further, consideration for the supply of raw materials was addressed during the development of our two flagship products, GeoTru and EcoTru.  In both cases, we were able to formulate using some variation in raw materials and likewise we have registered these multiple formulations with the EPA.  However, in the event that Clariant and/or Swan were to cease providing PCMX, our plan of operations would be adversely affected.  See the Risk Factor “ESI will rely upon only two suppliers for parachlorometaxylenol (“PCMX”), the active ingredient in the Company’s products” of this Annual Report.

Dependence on One or a Few Major Customers

Traditionally, ESI has sold product to a few major customers, however these customers are in industries that place a high premium on the advantages of ESI PCMX-based chemical emulsion technology.  We plan to target these industries for broader distribution within the industry.  Additionally, following our strategic plan to partner through industry-based exclusive manufacturing/distribution arrangements we intend to more closely align our goals with those of our partners.

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration

We currently have two patent applications submitted with the United States Patent and Trademark Office. Patent application number 13/555,799 is based on our “Biocide Formulations for Oil and Gas Production, Mineral Slurries, and Material Composite Additives.”  Patent application number 13/970,704 addresses “Emulsion Disinfecting, Sanitizing, and Cleaning Compositions Made with Hydrophobic Agents.”  We are currently waiting for responses from the patent office examiner.  We do not believe that our business is dependent upon obtaining patents on our technology due to the existence of nondisclosure agreements and our maintenance of trade secrets. However, having patents on our technology would provide an addition level of protection in this regard.

Need for any Governmental Approval of Principal Products or Services

See the disclosure under the caption “Costs and Effects of Compliance with Environmental Laws,” below.  

Effect of Existing or Probable Governmental Regulations on the Business

Smaller Reporting Company

We are subject to the reporting requirements of Section 13 of the Exchange Act and the disclosure requirements of Regulation S-K of the Commission, as a “smaller reporting company.”  That designation relieves us of some of the informational requirements of Regulation S-K.

Sarbanes/Oxley Act

We are also subject to the Sarbanes-Oxley Act of 2002.  The Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence.  It also requires steps to enhance the direct responsibility of senior members of management

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for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act has substantially increased our legal and accounting costs.

Exchange Act Reporting Requirements

Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to shareholders of the Company at a special or annual meeting thereof or pursuant to a written consent will require the Company to provide the Company’s shareholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the Commission at least 10 days prior to the date that definitive copies of this information are forwarded to the Company’s shareholders.

We are required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the Commission on a regular basis, and are required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K.

Emerging Growth Company

Anpath is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act.  As long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding an annual nonbinding advisory vote on executive compensation and seeking nonbinding stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We will remain an “emerging growth company” for up to five years, although we would cease to be an “emerging growth company” prior to such time if we have more than $1 billion in annual revenue, more than $700 million in market value of our common stock is held by non-affiliates or we issue more than $1 billion of non-convertible debt over a three-year period.

Research and Development Costs During the Last Two Fiscal Years

During the fiscal years ended March 31, 2015, and 2014, we incurred product development and regulatory costs totaling $10,970 and $12,879, respectively.  

Cost and Effects of Compliance with Environmental Laws

Disinfectant products such as ours are classified as “pesticides” and are subject to regulation by the United States Environmental Protection Agency (the “EPA”), pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”) as amended by the Food Quality Protection Act (“FQPA”) of 1996. FIFRA generally requires that before any entity can sell or distribute any pesticide in the United States, it must obtain a registration

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from the EPA. After completing the registration process and submission of all required data, an applicant's proposed product label is stamped when accepted by the EPA and returned to the registrant for use upon the registered product package. Anyone who sells/distributes a pesticide (including antimicrobial products) also must register that product in every state in which it intends to sell/distribute the product.  Once assigned an EPA registration number the product must then be initially registered in every such state.  Each state has the authority to request a submission similar to the federal submission and go through the same type review process.  The vast majority of states require a simple package noting the EPA registration number, stamped label, a copy of all labels and  a fee.  There are a few notable exceptions, California being the most demanding.   

Facilities at which a pesticide is produced also must be listed with the EPA. Upon registration, an establishment number is assigned. Annual pesticide production reports are required to be submitted to the EPA and other books and records must be maintained indicating the amount produced, repackaged/relabeled for the past year, amount sold/distributed for the past year within and outside of the U.S., and the amount to be produced/repackaged/ relabeled for the current year. Pesticide maintenance fees are required for registered products. Failure to pay registration and annual maintenance fees or provide necessary test data when requested by the EPA could result in the cancellation of an EPA registration.

EPA regulations also require registrants to report to the EPA new information concerning adverse effects associated with their products.

We have three products registered with the EPA, EcoTru® Revised,  EnviroTru®and GeoTru™ assigned EPA Registration Nos. 70791-4,  70791-2, and 70791-3, which have EPA registered labels. All are in compliance and annual federal maintenance fees are current.  EnviroTru  has been  registered in all of the 50 States in the United States and the District of Columbia; however, for strategic reasons related to the introduction of EcoTru, we may not renew these state registrations.  GeoTru was registered in 16 states, which comprise the vast majority of hydraulic fracturing activity, and we expect to renew these registrations.   The state renewal fees for all states and the District of Columbia range from approximately $75 to approximately $940 per state, and we estimate annual state fees at about $13,000 per product per year, if registered in all states.  The Company plans to begin the EcoTru state registration in 2014, subject to receipt of sufficient funding to pay registration fees and fees and penalties for past due registrations, which we estimate will total approximately $100,000.  in the majority of states this is a simple process and entails the submission of an application and the payment of a fee as well as payment of penalties for past due registrations.  All ESI products will be produced in EPA-registered manufacturing facilities. The Company has not entered into a manufacturing agreement to produce its products.

In addition to the formulae that have been US EPA registered, one animal product (EquineTru® Skin and Hoof Treatment) has been cleared for marketing by the FDA. In an effort to focus our resources on what we believe to be our higher market value products, we have chosen to not pursue the EnviroTru formulation or the EquineTru formulation at this time.

Although to date we have not had substantial international sales of our products, when we do sell products in foreign jurisdictions, we will be subject to foreign regulations. For example, before we can introduce our products into certain markets in the United Kingdom, such products must be listed on the United Kingdom's National Registry. We expect that we will have to register our products in other foreign jurisdictions before we can commence sales in such jurisdictions. Compliance with foreign requirements could require substantial expenditures and effort.

Number of Total Employees and Number of Full Time Employees

As of the date of this Annual Report, we have no full-time employees and three part-time employees, including our executive officers.

Additional Information

You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  You may also find this Annual Report and all reports that we file electronically with the SEC at their Internet site www.sec.gov.  Please call the SEC at 1-202-551-8090 for further

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information on this or other Public Reference Rooms.  This Annual Report, and our SEC reports or other registration statements, once filed, will also be available from commercial document retrieval services, such as Corporation Service Company, whose telephone number is 1-800-222-2122.

ITEM 1A.  RISK FACTORS

Risks Related to Our Company

A number of factors could affect the business of Anpath and/or its operating subsidiary, ESI.  Any factor which could adversely affect the business of ESI could, by extension, have a negative effect on the Company’s own financial performance.  Among these potential factors are the following:

The Company will need to raise capital to fund operations, and its failure to obtain funding when needed may force the Company to delay, reduce or eliminate product development efforts.

The Company will need to obtain operating capital either through equity offerings, debt offerings or a combination thereof, of approximately $200,000 initially before it can commence its planned business operations.  The Company will need an additional operating capital of approximately $1,800,000 over the next 12 months to continue its planned business operations. In addition if, in the future, the Company is not capable of generating sufficient revenues from operations and its capital resources are insufficient to meet future requirements, the Company may have to raise funds to permit ESI to continue the commercialization, marketing and sale of its products.  We presently have no committed sources of funding and we have not entered into any agreements or arrangements with respect to our fundraising efforts.  The Company cannot be certain that funding will be available on acceptable terms, or at all. To the extent that the Company raises additional funds by issuing equity securities, its stockholders may experience significant dilution.  Any debt financing, if available, may involve restrictive covenants that impact its ability to conduct business.  If the Company is unable to raise additional capital if required or on acceptable terms, ESI may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more of its products, restrict its operations or obtain funds by entering into agreements on unattractive terms.

To date Anpath and ESI have had significant operating losses, an accumulated deficit and have had limited revenues and they do not expect to be profitable for at least the foreseeable future, and Anpath and ESI cannot predict when they  might become profitable, if ever

Anpath and ESI have been operating at a loss each year since the Company’s and ESI’s inception, and the Company and ESI expects to continue to incur losses for the next 12 to 18 months.  Historically, ESI has had limited revenues.  We had no revenues in the years ended March 31, 2015 and 2014. Further, ESI may not be able to generate significant revenues in the future.  We realized a loss of $496,742 in fiscal 2015.  ESI will need to generate significant revenues in order to achieve and maintain profitability.  ESI may not be able to generate sufficient revenue to pay the advances made by the Company or achieve profitability in the future.  Even if the Company and ESI do achieve profitability, they may not be able to sustain or increase it.  If ESI is not able to generate revenues sufficient to fund ESI’s operations through product sales or if the Company is not able to raise sufficient funds through investments by third parties, it could result in the Company’s and ESI’s inability to continue as a going concern and, as a result, the Company’s Investors could lose their entire investment.

Our financial statements contain an “auditor’s ‘going concern’ opinion”

The Independent Auditor’s Report issued in connection with our audited financial statements for the fiscal years ended March 31, 2015 and 2014, expressed substantial doubt about our ability to continue as a going concern, due to our history of operating losses and our working capital deficiency.  As of March 31, 2015, our accumulated deficit totaled $6,250,988.  See the Index to Financial Statements, Item 8 of this Annual Report.  

With the exception of two patent applications on proprietary technology, ESI relies primarily upon trade secret protection to protect its intellectual property; it may be difficult and costly to protect its proprietary rights and ESI may not be able to ensure their protection.

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With the exception of one patent application, ESI has not applied for patent protection for its proprietary formulas and nano-emulsion technology and has decided instead to rely upon trade secret protection to protect such intellectual property.  Trade secrets are difficult to protect and while ESI uses reasonable efforts to protect its trade secrets, it cannot assure that its employees, consultants, contractors or scientific advisors will not, unintentionally or willfully, disclose its trade secrets to competitors or other third parties.  In addition, courts outside the United States are sometimes less willing to protect trade secrets.  Moreover, ESI’s competitors may independently develop equivalent knowledge, methods and know-how.  If ESI is unable to defend its trade secrets and/or its patents pending from illegal use, or if ESI’s competitors develop equivalent knowledge, it could have a material adverse effect on ESI’s business.

Any infringement of ESI’s proprietary rights could result in significant litigation costs, and any failure to adequately protect its proprietary rights could result in ESI’s competitors’ offering similar products, potentially resulting in loss of a competitive advantage and decreased revenue.  Existing patent, copyright, trademark and trade secret laws afford only limited protection.  In addition, the laws of some foreign countries do not protect ESI’s proprietary rights to the same extent as do the laws of the United States.  Therefore, ESI may not be able to protect its proprietary rights against unauthorized third party use.  Enforcing a claim that a third party illegally obtained and is using ESI’s trade secrets and patents pending knowledge could be expensive and time consuming, and the outcome of such a claim is unpredictable.  Litigation may be necessary in the future to enforce its intellectual property rights, to protect ESI’s trade secrets and patents pending or to determine the validity and scope of the proprietary rights of others.  This litigation could result in substantial costs and diversion of resources and could materially adversely affect the future operating results of ESI – thereby negatively affecting the financial performance of the Company as well.

Potential claims alleging infringement of third party's intellectual property by ESI could harm ESI’s ability to compete and result in significant expense to ESI and loss of significant rights.

From time to time, third parties may assert patent, copyright, trademark and other intellectual property rights to technologies that are important to ESI’s business.  Any claims, with or without merit, could be time-consuming, result in costly litigation, divert the efforts of ESI’s technical and management personnel, cause product shipment delays, disrupt ESI’s relationships with ESI’s customers or require ESI to enter into royalty or licensing agreements, any of which could have a material adverse effect upon the ESI’s operating results and thus the Company’s financial performance.  Royalty or licensing agreements, if required, may not be available on terms acceptable to ESI.  If a claim against ESI is successful and ESI cannot obtain a license to the relevant technology on acceptable terms, license a substitute technology or redesign ESI’s products to avoid infringement, business, financial condition and results of operations of both ESI and the Company would be materially adversely affected.

ESI operates in a highly regulated industry, which may delay the introduction of new products, cause withdrawal of products from the market, and have other adverse consequences.

Pursuant to applicable environmental and safety laws and regulations, ESI is required to obtain and maintain certain governmental permits and approvals for ESI’s products.  Permits and approvals may be subject to revocation, modification or denial under certain circumstances.  While ESI believes it is in compliance in all material respects with such environmental and safety laws, there can be no assurance that ESI’s operations or activities will not result in administrative or private actions, revocation of required permits or licenses, or fines, penalties or damages, which could have an adverse effect on ESI.  In addition, the Company cannot predict the extent to which any legislation or regulation may affect the market for ESI’s products or its cost of doing business.

ESI’s products will continue to be subject to periodic random inspection and testing by the EPA and ESI cannot be certain that such tests will not result in further EPA letters of inquiry or other actions.

ESI’s products will continue to be subject to periodic inspection and testing by the EPA and other authorities, where applicable, and must comply at all times with the EPA and state regulations.  If ESI fails an EPA inspection and/or test, or otherwise fail to comply with statutory and regulatory requirements, ESI could be subject to possible legal or regulatory action, such as suspension of sales, suspension of manufacturing, and seizure of products or voluntary recall of products.  Further, such a failure could result in the imposition of market restrictions through labeling changes or in product removal.  If compliance with regulatory requirements is not maintained or if

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problems concerning safety or effectiveness of ESI’s products occur following reauthorization by the EPA, ESI’s ability to market its products may be withdrawn.  Further, if products selected for random testing by the EPA have not been properly stored, then the EPA tests may result in a finding that ESI’s products do not meet the efficacy standards on the labels.  If EPA testing results in findings that its products do not meet EPA standards, it could have a material adverse effect on ESI’s business, reputation and results of operation and, by extension, the Company.

The Company has relied almost entirely on external financing to fund operations and acquisitions to date.

Because the Company has never generated meaningful revenue and currently operates at a loss, the Company is completely dependent on the continued availability of financing in order to continue its business.  There can be no assurance that financing sufficient to enable the Company and its subsidiaries to continue their operations will be available to the Company.  The Company’s failure to obtain financing or to produce levels of revenue to meet its financial needs could result in its inability to continue as a going concern and, as a result, the Company’s stockholders could lose their entire investment.

ESI will rely upon third party manufacturers to produce its products, making it vulnerable to supply disruptions which could harm its business.

ESI will rely upon third party manufacturers to produce its products.  If these manufacturers are unable to manufacture product in quantities ESI requires or that meets its specifications, or if they raise their prices, it could have a material adverse effect on ESI’s sales and results of operation.  In addition, in the event of any of the foregoing, ESI could be required to seek new manufacturers.  In such event, ESI cannot be certain that it will find alternative third party manufacturers who will manufacture product on similar economic terms. ESI’s costs of goods sold could increase, with an adverse effect on ESI’s sales and results of operations.

ESI will rely upon only two suppliers for parachlorometaxylenol (“PCMX”), the active ingredient in the Company’s products.

ESI will rely upon Clariant Corporation and Swan Chemical to provide it with EPA-required grade PCMX, which is the biocide used in ESI’s products.  Both Clariant and Swan are traditional suppliers of EPA-required grade PCMX in the United States.  If Clariant or Swan is unable to supply ESI with EPA-required grade PCMX in the quantities and on the economic terms that ESI requires, it could have a material adverse effect on ESI’s business.  We can provide no assurance that we will be able to obtain EPA-required grade PCMX in the future.   

ESI  lacks significant sales, marketing and distribution capabilities and depends on third parties to market and distribute its product both in the United States and Internationally.

ESI does not have an internal sales organization dedicated solely to sales and marketing of its product and therefore it will have to rely upon third party distributors to market and sell its product.  These third parties may not be able to market ESI’s product successfully or may not devote the time and resources to marketing that ESI requires. ESI will also rely upon third party carriers to distribute and deliver its product.  As such, deliveries are to a certain extent out of ESI’s control.  If ESI chooses to develop its own sales, marketing or distribution capabilities, it will need to build a marketing and sales force with technical expertise and with supporting distribution capabilities, which will require a substantial amount of management and financial resources that may not be available.  If ESI or a third party is not able to adequately sell and distribute its product, ESI’s business will be materially harmed.

ESI will face competition in its markets from a number of large and small companies, most  of which have greater financial, research and development, production and other resources than the Company has.

ESI’s products will face competition from products which may be used as an alternative or substitute therefor.  In addition, the Company competes with several large companies in the disinfectant and biocide business. To the extent that these companies, or new entrants into the market, offer comparable disinfectant/biocide products at lower prices, ESI’s business could be adversely affected.  ESI’s competitive position is based principally on its nano-emulsion technology, product quality and product safety.  ESI’s competitors can be expected to continue to improve the design and performance of their products and to introduce new products with competitive performance

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characteristics.  There can be no assurance that ESI will have sufficient resources to maintain its current competitive position.

The Company may not be able to manage its growth effectively, which could adversely affect its operations and financial performance.

The ability to manage and operate its business as the Company executes its development and growth strategy will require effective planning.  Significant growth could strain the Company’s internal resources and could adversely affect its financial performance.  The Company expects that its efforts to grow will place a significant strain on its personnel, management systems, infrastructure and other resources.  The Company’s ability to manage future growth effectively will also require it to successfully attract, train, motivate, retain and manage new employees and continue to update and improve its operational, financial and management controls and procedures.  If the Company does not manage its growth effectively, its operations could be adversely affected, resulting in slower growth and a failure to achieve or sustain profitability.

The Company’s future success depends on retaining its existing key employees and hiring and assimilating new key employees.  The loss of key employees or the inability to attract new key employees could limit its ability to execute its growth strategy, resulting in lost sales and a slower rate of growth.

The Company’s success depends in part on its ability to retain key employees including its executive officers and its chief technologist, Paul S. Malchesky, D.Eng. It would be difficult for the Company to replace any one of these individuals.  In addition, as the Company grows, it may need to hire additional key personnel.  The Company may not be able to identify and attract high quality employees or successfully assimilate new employees into its existing management structure.

ESI cannot predict the impact of its proposed marketing efforts.  If these efforts are unsuccessful, ESI may not earn enough revenue to become profitable.

ESI’s success will depend on investing in marketing resources and successfully implementing its marketing plan.  ESI’s proposed business plan includes hiring marketing personnel and a dedicated sales force and developing a comprehensive marketing plan for its product.  Such a marketing plan may include attending trade shows and making private demonstrations, advertising and promotional materials, advertising campaigns in both print and broadcast media, and advertising/promotion-related operations.  ESI cannot give any assurance that these marketing efforts will be successful.  If they are not, revenues may be insufficient to cover its fixed costs and ESI may not become profitable.

Because Arthur R. Batson owns a majority of our outstanding common stock, he can elect our directors without regard to other stockholders’ votes.

Arthur R. Batson beneficially owns 6,718,535 shares of our common stock, representing approximately 52% of our outstanding shares.  As a result of his majority interest, Mr. Batson can elect all of our directors, who in turn elect all executive officers, without regard to the votes of other stockholders.  Mr. Batson’s voting control also gives him the ability to authorize change in control transactions, amendments to our Articles of Incorporation, and other matters that may not be in the best interest of our minority stockholders.  In this regard, Mr. Batson has absolute control over our management and affairs.  See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Risks Related To Our Common Stock

Our common stock is quoted on the OTC Markets and there is an extremely limited trading market for our common stock.

Our common stock is quoted on the OTC Markets. There is extremely limited and sporadic trading of our common stock and no assurance can be given, when, if ever, an active trading market will develop or, if developed, that it will be sustained. As a result, investors in our common stock may be unable to sell their shares. 

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The price of our common stock may fluctuate significantly, which could lead to losses for stockholders.

The securities of public companies can experience extreme price and volume fluctuations, which can be unrelated or out of proportion to the operating performance of such companies. We expect our common stock price will be subject to similar volatility. Any negative change in the public's perception of the prospects of our company or companies in our market could also depress our common stock price, regardless of our actual results. Factors affecting the trading price of our common stock may include:

If securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our stock could decline.

The trading market for our common stock may be affected by research and reports that industry or financial analysts may in the future publish about us or our business, over which we will have no control. There are many large, well-established publicly traded companies active in our industry and market, which means it will unlikely that we will receive widespread, if any, analyst coverage. Furthermore, if one or more of the analysts who in the future elect to cover us, downgrade our stock, our stock price would likely decline rapidly.

We have no intention to pay dividends on our common stock.

For the foreseeable future, we intend to retain future earnings, if any, to finance our operations and do not anticipate paying any cash dividends with respect to our common stock. As a result, investors should not expect to receive dividends on any of the shares of our common stock purchased by them, for a long period of time, if ever.

The application of the “penny stock” rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

As long as the trading price of our common stock is below $5.00 per share, the open-market trading of our common stock will be subject to the “penny stock” rules. The penny stock rules impose additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1 million or annual income exceeding $200,000 or $300,000 together with their spouses). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchaser’s written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability or decrease the willingness of broker-dealers to sell our common stock, and may result in decreased liquidity of our common stock and increased transaction costs for sales and purchases of our common stock as compared to other securities.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

Not required for smaller reporting companies.

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ITEM 2:  PROPERTIES

Anpath conducts its business from the office of its CFO, Stephen J. Hoelscher, rent free.  This office space consists of approximately 2,500 square feet located at 515 Congress Ave., Suite 1400, Austin Texas.  The address on our website, 5575 S. Semoran Blvd., Suite 5012, Orlando Florida  32822, is the office address of our majority stockholder, Arthur R. Batson, and our telephone number, 407-373-6925, is Mr. Batson’s office address.  These are the address and telephone number to which inquiries about our products are made.

ITEM 3:  LEGAL PROCEEDINGS

Except as indicated below, we are not a party to any pending legal proceeding and, to the knowledge of our management; no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or affiliate of ours or owner of record or beneficially of more than five percent of our common stock is a party adverse to our Company or has a material interest adverse to us in any proceeding.

On April 10, 2015, which is subsequent to the end of the period covered by this Report, the Superior Court of the County of Iredell, North Carolina, in the case designated Case No. 13CV 02277, entered judgment in favor of plaintiff Susan Ladeau in the sum of $29,634, together with interest at the rate of 8% on that sum, compounded annually until paid in full.  

ITEM 4:  MINE SAFETY DISCLOSURES

None; not applicable.

NOTE 9 – SUBSEQUENT EVENTS