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TMCNet:  DIGIPATH,INC. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations.

[December 30, 2013]

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.

Overview 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be paid on or before March 31, 2014 and interest shall accrue from the date of any advances on any principal amount withdrawn, and on accrued and unpaid interest thereon, at the rate of eight percent (8%) per annum, compounded annually.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 Revolving Note.


(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.

-19- 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 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 revenues.

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 related-party payable.

-20- The following is a summary of the Company's cash flows provided by (used in) operating, investing, and financing activities for 2013 and 2012: 2013 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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