DIGIPATH,INC. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion should be read in conjunction with the
Financial Statements and notes thereto included in Item 8 of Part II of this
Annual Report on Form 10-K.
DigiPath, a Nevada corporation, was incorporated on October 5, 2010 in Nevada.
During January, 2011, the Company no longer was considered a development stage
company as it began recognizing revenue for its advisory services to a handful
of healthcare clients.
On February 14, 2011, we entered into a Revolving Promissory Note (the
"Revolving Note") with NYX Capital Advisors, Inc. ("NYX"). Eric Stoppenhagen,
our CEO, has voting and investment control over the securities owned by NYX
Capital Advisors, Inc. as he is the sole owner. Under the terms of the
Revolving Note, NYX agreed to advance to the Company, from time to time and at
the request of the Company, amounts up to an aggregate of $500,000 until March
31, 2014. All advances shall be paid on or before March 31, 2014 and interest
shall accrue from the date of any advances on any principal amount withdrawn,
and on accrued and unpaid interest thereon, at the rate of eight percent (8%)
per annum, compounded annually. The Company's obligations under the Revolving
Note will accelerate upon a bankruptcy event of the Company, any default by the
Company of its payment obligations under the Revolving Note or the breach by the
Company of any provision of any material agreement between the Company and the
noteholder. As of September 30, 2013, $294,051 was deemed outstanding under the
(b) Business of Issuer
DigiPath develops and sells the next generation of affordable, innovative, and
reliable digital pathology solutions for 2nd opinion, consultation, tumor board,
archiving, and educational purposes for improved workflow, analysis and data
mining in support of pathology in academic medical centers, reference
laboratories, biopharma organizations, and life science research institutions.
Digital pathology image-based information environment enabled by computer
technology that allows for the management of information generated from a
digital slide. Digital pathology is enabled in part by virtual microscopy, which
is the practice of converting glass slides into digital slides that can be
viewed, managed, and analyzed. Pathology is the study and diagnosis of disease.
Our digital pathology products, PathScope™, PathCloud™, PathReview™,
PathConsult™, PathXL Tutor™, and PathXL Simulate™ provide a digital platform to
share and store archive tissue images.
Plan of Operations
DigiPath plans to provide the next generation of affordable, innovative, and
reliable digital pathology solutions and advisory services.
Recently Issued Accounting Pronouncements
Refer to the notes to the financial statements for a complete description of
recent accounting standards which we have not yet been required to implement and
may be applicable to our operation, as well as those significant accounting
standards that have been adopted during the current year.
Critical Accounting Policies
The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America ("US GAAP")
requires management to make estimates, judgments and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of
expenses during the reporting period. On an ongoing basis, we evaluate our
estimates which are based on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances. The
result of these evaluations forms the basis for making judgments about the
carrying values of assets and liabilities and the reported amount of expenses
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions. The following accounting policies
require significant management judgments and estimates.
We base our estimates on historical experience and various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. There can be no
assurance that actual results will not differ from these estimates.
Fiscal Years 2013 and 2012
Results from Operations
Revenues for the years ending 2013 and 2012 were $567,192 and $391,700,
respectively. These revenues consisted of product sales for 2012 related to the
sale of our digital pathology solutions.
Cost of Sales
Cost of sales for the years ending 2013 and 2012 were $303,954 and $222,216,
respectively. The increase in cost of sales were attributed to the increase in
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $574,822 and $479,153 for 2013
and 2012, respectively. The expenses consisted primarily of cost of marketing,
professional fees and travel expenses.
Interest Income and Other, Net
Interest expense was $13,618 and $16,022 for 2013 and 2012, respectively, which
related to interest accrued on borrowings from the related party revolving note
payable. Exchange loss for 2013 was $4,445.
Liquidity and Capital Resources
As of September 30, 2013, the Company had assets equal to $255,336, comprising
of cash, accounts receivable, inventory and equipment. The Company's current
liabilities as of September 30, 2013 were $802,258 comprising of accounts
payable, accrued expenses, notes payable, accrued interest payable, and
The following is a summary of the Company's cash flows provided by (used in)
operating, investing, and financing activities for 2013 and 2012:
Operating Activities $ (103,424 ) $ (63,679 )
Investing Activities - (41,311 )
Financing Activities (56,784 ) 130,000Net increase / (decrease) on Cash $ (160,208 ) $ 25,010
To the extent the Company has a net loss, the Company is dependent upon the
receipt of capital investment or other financing to fund its ongoing operations
and to execute its business plan. In addition, the Company is dependent upon it
related party revolving note payable facility to provide continued working
capital funding and capital resources. If continued funding and capital
resources are unavailable at reasonable terms, the Company may not be able to
implement its plan of operations.
Commitments and Contractual Obligations
We currently do not have any material commitments and contractual obligations.
Off-Balance Sheet Arrangements
As of September 30, 2013, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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