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.

10

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

11

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.

12