UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-Q  (Mark One)  X.QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: December 31, 2014  OR  ..TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________  Commission File Number 000-27023  ACCELPATH, INC.(Formerly - TECHNEST HOLDINGS, INC.)(Exact name of registrant as specified in its charter)  Delaware45-5151193(State or other jurisdiction of incorporation or organization )(IRS Employer Identification No.)  137 National Plaza, Suite 300, National Harbor, MD 20745(Address of principal executive offices and zip code)240-273-3295(Registrants telephone number, including area code)  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to filed such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X. No .  Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes X. No .  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  Large accelerated filer.Accelerated filer.Non-accelerated filer. (Do not check if a smaller reporting company)Smaller reporting companyX.  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes . No X.  As of February 23, 2015, there were 685,019,378 shares of common stock, $0.001 par value, of the registrant issued and outstanding.    FORM 10-Q TABLE OF CONTENTS December 31, 2014    PagePART I.  FINANCIAL INFORMATION:3Item 1.Financial Statements3Consolidated Balance Sheets at December 31, 2014 and June 30, 20143Consolidated Statements of Operations for the Three Months Ended December 31, 2014 and 20135Consolidated Statements of Operations for the Six Months Ended December 31, 2014 and 20136Consolidated Statement of Changes in Stockholders Deficit for the Period of June 30, 2012 through December 31, 20147Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2014 and 20139Notes to Interim Financial Statements11Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations24Item 3.Quantitative and Qualitative Disclosure about Mark Risk29Item 4.Controls and Procedures29PART II  OTHER INFORMATION31Item 1.Legal Proceedings31Item 2.Unregistered Sales of Equity Securities and Use of Proceeds31Item 3.Defaults upon Senior Securities31Item 4.Mine Safety Disclosures31Item 5.Other Information31Item 6.Exhibits32SIGNATURES33  STATEMENTS CONTAINED IN THIS FORM 10-Q, WHICH ARE NOT HISTORICAL FACTS CONSTITUTE FORWARD-LOOKING STATEMENTS AND ARE MADE UNDER THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. YOU CAN IDENTIFY THESE STATEMENTS BY FORWARD-LOOKING WORDS SUCH AS "MAY", "WILL", "EXPECT", "ANTICIPATE", "BELIEVE", "ESTIMATE", "CONTINUE", AND SIMILAR WORDS. YOU SHOULD READ STATEMENTS THAT CONTAIN THESE WORDS CAREFULLY. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q ARE BASED ON INFORMATION AVAILABLE TO US ON THE DATE HEREOF, AND WE ASSUME NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. EACH FORWARD-LOOKING STATEMENT SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN PART I, ITEM 1, OF THIS QUARTERLY REPORT AND WITH THE INFORMATION CONTAINED IN ITEM 2, TOGETHER WITH MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTAINED IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 2014, INCLUDING, BUT NOT LIMITED TO, THE SECTION THEREIN ENTITLED "RISK FACTORS."  2    AccelPath, Inc. (Formerly Technest Holdings, inc.) Consolidated Balance Sheets  December 31June 3020142014(Unaudited)AssetsCurrent assetsCash and cash equivalents$4,223$26,640Accounts Receivable4,384−Inventory142,549−Deferred Financing costs1,4421,470Other Current Assets34,352−Total current assets186,95028,110Non-Current assetsProperty and equipment - net50,03859,598Other Capitalized costs49,130−Investment in Unconsolidated Subsidiary−1,039,074Goodwill2,145,489−Total non-current assets2,244,6571,098,672Total assets$2,431,608$1,126,782Liabilities and Stockholders' (Deficit)Current LiabilitiesAccounts payable$1,261,579$1,261,579Accrued expenses601,384406,593Accrued compensation351,555371,555Derivative Liability452,21166,962Amounts due to Management of Consolidated Subsidiary334,898−Current portion of notes payable- net of discounts of $158,325 and $126,722 at December 31, 2014  and June 30, 2014 , respectively738,966647,448Non-convertible debt- current360,500−Total current liabilities4,101,0932,754,138Other Long Term Obligations8,500−Total Non-current Liabilities8,500−Total Liabilities4,109,5932,754,138   3    Stockholders' (Deficit)Preferred stock- Series E 5% Convertible; stated value $1,000 per share; -0-  issued and outstanding at December 31, 2014 and June 30, 2014, respectively−−Preferred stock- Series F Convertible; stated value $1,000 per share; 90 shares issued and outstanding at December 31, 2014 and June 30, 201490,00090,000Preferred stock- Series G Convertible; stated value $1,000 per share; No shares issued and outstanding at December 31, 2014 and June 30, 2014−−Preferred stock- Series H Convertible; stated value $1,000 per share; 51 shares issued and outstanding at December 31, 2014 and June 30, 2014−−Preferred stock- Series I Convertible; stated value $1,000 per share; 3,500 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively. Par value $.001, 3,500 shares authorized−4Preferred stock- Series J 10% Convertible; stated value $1,000 per share; No shares issued and outstanding at December 31, 2014 and June 30, 2014. Par value $.001, 3,500 shares authorized1,525,000−Common stock, $0.001 par value, 9,950,000,000 shares authorized; 685,019,378 and 16,485,064 issued and outstanding at December 31, 2014 and June 30, 2014, respectively685,01916,485Additional paid-in capital8,413,8388,447,315Accumulated Deficit(11,728,769)(9,979,082)Total stockholders' (deficit) of AccelPath, Inc.(1,014,912)(1,425,279)Non-Controlling interest(663,073)(202,077)Total stockholders' (deficit)(1,677,985)(1,627,356)Total liabilities and stockholders' (deficit)$2,431,608$1,126,782  See accompanying notes to the financial statements  4    AccelPath, Inc. (Formerly Technest Holdings, inc.) Consolidated Statements of Operations (Unaudited)  Three Months Ended
December 31,20142013Revenues$18,081$54,000Cost of Revenues5,779−Gross Profits12,30254,000Operating ExpensesSelling General and Administrative Expenses238,034367,007Total Operating Expenses238,034367,007Operating Income (Loss)(225,733)(313,007)Other Income (Expense)Interest expense(129,201)(101,709)Loss on Conversion of Debt(202,563)(310,836)Derivative Liability Expense(145,811)−Adjustment to Fair Value of Derivative Liability108,144−Technology licensing Income−−Total Other (Expense) - net(369,431)(412,545)Net Income (Loss)(595,164)(725,552)Net income (Loss) attributable to non-controlling interest$−$−Net Income (Loss) Accelpath, Inc.(595,164)(725,552)Deemed and cash dividends to Preferred Stockholders−($1,139)Net loss applicable to Common shareholders$(595,164)$(726,691)Net loss per common share - basic and diluted$(0.00)$(0.28)Weighted average number of common shares outstanding during the period/year - basic and diluted291,107,7092,626,310  See accompanying notes to the financial statements  5    AccelPath, Inc. (Formerly Technest Holdings, inc.) Consolidated Statements of Operations (Unaudited)


|                                                                                                |  |                               |             |      |   |            
|----------------------------------------------------------------------------------------------- |  | ----------------------------- | ----------- | ---- | - | -----------
|                                                                                                |  | Six Months Ended
December 31,
|                                                                                                |  | 2014                          |             | 2013
|                                                                                                |  |                               |             |      |   |            
|Revenues                                                                                        |  | $                             | 58,581      |      | $ | 108,000    
|                                                                                                |  |                               |             |      |   |            
|Cost of Revenues                                                                                |  |                               | 5,779       |      |   | −          
|                                                                                                |  |                               |             |      |   |            
|Gross Profits                                                                                   |  |                               | 52,802      |      |   | 108,000    
|Operating Expenses                                                                              |  |                               |             |      |   |            
|Selling General and Administrative Expenses                                                     |  |                               | 443,363     |      |   | 712,524    
|Total Operating Expenses                                                                        |  |                               | 443,363     |      |   | 712,524    
|                                                                                                |  |                               |             |      |   |            
|Operating Income (Loss)                                                                         |  |                               | (390,561)   |      |   | (604,524)  
|                                                                                                |  |                               |             |      |   |            
|Other Income (Expense)                                                                          |  |                               |             |      |   |            
|Interest expense                                                                                |  |                               | (292,464)   |      |   | (167,932)  
|Loss on Conversion of Debt                                                                      |  |                               | (367,575)   |      |   | (310,836)  
|Derivative Liability Expense                                                                    |  |                               | (224,521)   |      |   | −          
|Adjustment to Fair Value of Derivative Liability                                                |  |                               | 134,272     |      |   | −          
|Technology licensing Income                                                                     |  |                               | −           |      |   | 6,501      
|                                                                                                |  |                               |             |      |   |            
|Total Other (Expense) - net                                                                     |  |                               | (750,289)   |      |   | (472,267)  
|                                                                                                |  |                               |             |      |   |            
|Net Income (Loss)                                                                               |  | $                             | (1,140,850) |      | $ | (1,076,791)
|                                                                                                |  |                               |             |      |   |            
|Net income (Loss) attributable to non-controlling interest                                      |  |                               | −           |      |   | −          
|                                                                                                |  |                               |             |      |   |            
|Net Income (Loss) Accelpath, Inc.                                                               |  |                               | (1,140,850) |      |   | (1,076,791)
|                                                                                                |  |                               |             |      |   |            
|Deemed and cash dividends to Preferred Stockholders                                             |  |                               | −           |      |   | −          
|                                                                                                |  |                               |             |      |   |            
|Net loss applicable to Common shareholders                                                      |  | $                             | (1,140,850) |      | $ | (1,076,791)
|                                                                                                |  |                               |             |      |   |            
|                                                                                                |  |                               |             |      |   |            
|Net loss per common share - basic and diluted                                                   |  | $                             | (0.01)      |      | $ | (0.52)     
|                                                                                                |  |                               |             |      |   |            
|Weighted average number of common shares outstanding during the period/year - basic and diluted |  |                               | 156,491,873 |      |   | 2,070,198  

See accompanying notes to the financial statements  6    AccelPath, Inc. (Formerly Technest Holdings, inc.) Consolidated Statements of Stockholders (Deficit) For the Period of June 30, 2012 through December 31, 2014 (Unaudited)


|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|-------------------------------------------------------------------- | --------------- | ------------ | ------------ | ------------ | ------------------------ | ------------------- | --------- | ---------- | ------------------- | ----------------------- | ----------------- | --------------------
|                                                                     | Preferred stock | Common Stock | Additional   |              | Non-Controlling Interest | Total Stockholders'
|                                                                     | Series E
($)    | Series F
($) | Series G
($) | Series H
($) | Series I
($)             | Series J
($)        | Shares    | Amount
($) | Paid-In Capital
($) | Accumulated Deficit
($) | in Subsidiary
($) | Equity (Deficit)
($)
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Balance, June 30, 2012                                               | 200,000         | −            | −            | −            | −                        | −                   | 494,313   | 494        | 3,696,178           | (5,493,440)             | (184,602)         | (1,781,370)         
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Sale of Common stock                                                 | −               | −            | −            | −            | −                        | −                   | 2,807     | 3          | 5,997               | −                       | −                 | 6,000               
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Sale of 90 shares of Series F Preferred Stock                        | −               | 90,000       | −            | −            | −                        | −                   | −         | −          | −                   | −                       | −                 | 90,000              
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Warrants issued for Convertible notes payable                        | −               | −            | −            | −            | −                        | −                   | −         | −          | 5,410               | −                       | −                 | 5,410               
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Beneficial conversion feature on notes payable                       | −               | −            | −            | −            | −                        | −                   | −         | −          | 133,222             | −                       | −                 | 133,222             
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Restricted stock award                                               | −               | −            | −            | −            | −                        | −                   | 10,000    | 10         | 20,823              | −                       | −                 | 20,833              
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Conversion of notes payable to common stock                          | −               | −            | −            | −            | −                        | −                   | 947,238   | 947        | 288,973             | −                       | −                 | 289,920             
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Rescission of common shares issued at par                            | −               | −            | −            | −            | −                        | −                   | (12,818)  | (13)       | 13                  | −                       | −                 | (0)                 
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Conversion of 100 shares of Series E Preferred Stock to note payable | (100,000)       | −            | −            | −            | −                        | −                   | −         | −          | −                   | −                       | −                 | (100,000)           
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Cash dividends accrued on Series E Preferred stock                   | −               | −            | −            | −            | −                        | −                   | −         | −          | (5,617)             | −                       | −                 | (5,617)             
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Issuance of Series H Preferred stock                                 | −               | −            | −            | −            | −                        | −                   | −         | −          | 60,000              | −                       | −                 | 60,000              
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Stock-based compensation                                             | −               | −            | −            | −            | −                        | −                   | −         | −          | 526,113             | −                       | −                 | 526,113             
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Net loss                                                             | −               | −            | −            | −            | −                        | −                   | −         | −          | −                   | (1,976,692)             | (17,475)          | (1,994,167)         
|                                                                     |                 |              |              |              |                          |                     |           |            |                     |                         |                   |                     
|Balance, June 30, 2013                                               | 100,000         | 90,000       | −            | −            | −                        | −                   | 1,441,540 | 1,442      | 4,731,112           | (7,470,132)             | (202,077)         | (2,749,656)         

7


|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|-------------------------------------------------------------------- | --------- | ------ | - | - | --- | --------- | ----------- | ------- | ----------- | ------------ | --------- | -----------
|Shares issued for conversion of debt                                 | −         | −      | − | − | −   | −         | 15,043,524  | 15,044  | 1,747,581   | −            | −         | 1,762,624  
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Beneficial conversion feature on notes payable                       | −         | −      | − | − | −   | −         | −           | −       | 497,500     | −            | −         | 497,500    
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Conversion of 100 shares of Series E Preferred Stock to note payable | (100,000) | −      | − | − | −   | −         | −           | −       | −           | −            | −         | (100,000)  
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Cash dividends accrued on Series E Preferred stock                   | −         | −      | − | − | −   | −         | −           | −       | (1,139)     | −            | −         | (1,139)    
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Issuance of Series I Preferred stock                                 | −         | −      | − | − | 4   | −         | −           | −       | 1,039,071   | −            | −         | 1,039,074  
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Stock-based compensation                                             | −         | −      | − | − | −   | −         | −           | −       | 433,190     | −            | −         | 433,190    
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Net loss                                                             | −         | −      | − | − | −   | −         | −           | −       | −           | (2,508,950)  | −         | (2,508,950)
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Balance, June 30, 2014                                               | −         | 90,000 | − | − | 4   | −         | 16,485,064  | 16,485  | 8,447,315   | (9,979,082)  | (202,077) | (1,627,356)
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Shares issued for conversion of debt                                 | −         | −      | − | − | −   | −         | 608,833,551 | 608,834 | (50,547)    | −            | −         | 558,287    
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Shares issued for 3a10 program                                       | −         | −      | − | − | −   | −         | 59,697,000  | 59,697  | (25,345)    | −            | −         | 34,352     
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Fractional shares issued for reverse split                           | −         | −      | − | − | −   | −         | 3,763       | 4       | −           | −            | −         | 4          
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Write-down of Investment in Unconsolidated subsidiary                | −         | −      | − | − | (4) | −         | −           | −       | (1,039,071) | −            | −         | (1,039,074)
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Issuance of Series J Preferred Stock                                 | −         | −      | − | − | −   | 1,525,000 | −           | −       | 620,489     | −            | −         | 2,145,489  
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Accumulated net loss in Village Tea upon acquisition                 | −         | −      | − | − | −   | −         | −           | −       | −           | (608,837)    | −         | (608,837)  
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Establishment of Minority interest in Village Tea Distributors LLC   | −         | −      | − | − | −   | −         | −           | −       | 460,996     | −            | (460,996) | −          
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Net loss                                                             | −         | −      | − | − | −   | −         | −           | −       | −           | (1,140,850)  | −         | (1,140,850)
|                                                                     |           |        |   |   |     |           |             |         |             |              |           |            
|Balance, December 30, 2014                                           | −         | 90,000 | − | − | −   | 1,525,000 | 685,019,378 | 685,019 | 8,413,837   | (11,728,769) | (663,073) | (1,677,985)

See accompanying notes to the financial statements   8    AccelPath, Inc. (Formerly Technest Holdings, Inc.) Consolidated Statements of Cash Flows (Unaudited)  Six Months Ended
December 31,20142013CASH FLOWS FROM OPERATING ACTIVITIES:Net loss$(1,140,850)$(1,076,791)Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Loss from Conversion of debt367,575310,836Stock based compensation−267,402Depreciation and amortization of property and equipment9,5609,560Amortization of Deferred Financing Costs2,527−Amortization of note payable discount263,397139,486Derivative Liability Expense224,521−Adjustment to Fair Value of Derivative Liability(134,272)−Amortization of Original Issue Discount2473,214Accrued interest and legal fees issued for notes18,5873,426Previously Accrued dividends converted to notes payable−13,143Reduction in liabilities for issuance of common stock−12,091Changes in operating assets and liabilities:Decrease (increase) in accounts receivable(4,384)−Decrease (increase) in Inventory(142,549)−Increase (decrease) in Accrued Expenses and other liabilities194,79146,471Increase (decrease) in Accrued Compensation(20,000)−Net cash provided by (used in) operating activities(360,847)(271,162)CASH FLOWS FROM INVESTING ACTIVITIES:Working capital acquired in Village tea Acquisition45,931−Net cash used in investing activities45,931−CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of notes payable, net of deferred financing costs292,500274,000Net cash provided by financing activities292,500274,000Net (Decrease) in Cash(22,417)2,838Cash - Beginning of Period/Year26,6401,201Cash - End of Period/Year$4,223$4,039SUPPLEMENTARY CASH FLOW INFORMATION:Cash paid during the period/year for:Interest$−$−Income Taxes$−$−  9    SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Fair value of common stock warrants issued with convertible notes payable$−$−Fair value of beneficial conversion feature on notes payable$−$274,000Debt discount recorded on convertible debt accounted for as a derivative liability$295,000$−Notes payable,  accrued interest and other fees converted to common stock$198,014$−Preferred Stock- Series E converted to Notes payable, including accrued dividends of $-0- and $14,282, respectively for September 30, 2014 and September 30, 2013$−$114,282Cash dividend accrued on Preferred Stock-Series E$−$1,138Change in Fair Value of Investment in Unconsolidated subsidiary$(1,039,074)$−Common Stock issued for 3a10 program$34,352$−Issuance of Series J Convertible Preferred Stock$1,525,000$−   10    ACCELPATH, INC. (Formerly - TECHNEST HOLDINGS INC.) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED DECEMBER 31, 2014 AND 2013 (Unaudited)  1. OVERVIEW, NATURE OF OPERATIONS AND BASIS OF PRESENTATION  Overview  AccelPath, Inc. (formerly - Technest Holdings, Inc.) (the Company) includes the following entities:  Wholly-owned subsidiaries:  AccelPath, LLC (AccelPath) and Genex Technologies, Inc. (Genex),currently defunct  Majority Owned Subsidiaries:  Village Tea Distribution Company, LLC  70% owned  Minority-owned subsidiaries:  49% owned subsidiary Technest, Inc. (Technest) (see Basis of Presentation below). See discussion below.  The Company currently engages in the business of enabling pathology diagnostics through its AccelPath subsidiary.the Companys Technest subsidiary was in the business of the design, research and development, integration, sales and support of three-dimensional imaging devices and systems but is no longer active.  Acquisition, Name Change, and Domicile Change  On February 7, 2012, the Board of Directors approved and recommended a change in the parent companys name from Technest Holdings, Inc. to AccelPath, Inc. and a change in the domicile of the Company from Nevada to Delaware. The name change and domicile change became effective on May 2, 2012. On March 4, 2011, the Company acquired AccelPath, LLC and it became a wholly-owned subsidiary of the Company. The former members of AccelPath, LLC received an aggregate of 344,604 (86,151,240 pre-split) shares of our common stock and, immediately after the transaction, owned 72.5% of our issued and outstanding common stock. Immediately prior to the merger, the Company had 130,712 (32,678,056, pre-split) shares of common stock outstanding. Following the acquisition, AccelPath, LLC began operating as a wholly-owned subsidiary of the Company.  Operations  AccelPath  We are a technology solutions company providing services that play a key role in the delivery of information for diagnosis of diseases and other pathologic conditions with and through our associated pathologists and strategic alliances. The experienced pathologists and medical institutions with which we partner to manage slide and information delivery prepare comprehensive diagnostic reports of a patients condition and consult with referring physicians to help determine the appropriate treatment. Such diagnostic reports often enable the early detection of disease, allowing referring physicians to make informed and timely treatment decisions that improve their patients health in a cost-effective manner. We seek out referring physicians and histology laboratories in need of pathology interpretations for our associated pathologists and manage slide delivery and develop services for managing the information.  We are focused on providing technology solutions for the anatomic pathology market. Our business model builds upon the expertise of experienced pathologists to provide seamless, reliable and comprehensive pathology and special test offerings to referring physicians using conventional and digital technologies. The pathologists with whom we contract seek to establish long-standing relationships with the referring physicians as a result of focused delivery of our diagnostic services, personalized responses and frequent consultations, and flexible information technology, or IT, solutions that are customizable to the referring physicians or laboratories as well as the pathologists needs. Our IT and communications platform enables us to deliver diagnostic reports to referring physicians generally within 24 hours of slide receipt, helping to improve patient care. In addition, our IT platform enables us to closely track and monitor medical trends from referring physicians.  11    Village Tea Company Distribution, Inc.  On October 16, 2014, AccelPath entered into an Securities Purchase Agreement with the common stock and preferred stock shareholders (the Sellers) of Village Tea Company Distribution, Inc. (Village Tea) holding seventy percent (70%) of common stock and all the Series A Preferred Stock of Village Tea. Village Tea, is a provider of environmentally-friendly exotic teas sourced directly from growers throughout Asia and Africa. Combining exquisite taste with extraordinary health benefits, the Company plans to create a niche presence in the tea market and provide its products through leading health food retail chains, major retailers, specialty shops and its own outlets. Upon the closing of the transaction on October 24, 2014, Village Tea became a majority-owned subsidiary of AccelPath. Accelpath issued 1,525 shares of a newly designated series of convertible preferred stock to the Sellers, Series J. The Series J Preferred Stock has a stated value per share equal to $1,000, shall pay an annual dividend of 10% in cash or common stock, and shall be convertible at the holders option, subject to beneficial ownership limitations, into shares of the common stock of Accelpath at a conversion price equal to eighty percent (80%) of the lowest closing bid price for the Common Stock during the thirty (30) trading days immediately preceding a Conversion Date. Accelpath agreed to assume $538,500.00 worth of the debt obligations of Village Tea in connection with the Agreement. Management of Village Tea agreed to defer the dividend for the period ended December 31, 2014.  See our Form 8-K filed October 16. 2014 for more detail.  Basis of Presentation  The accompanying consolidated financial statements include the operations of the Company, its wholly-owned subsidiary AccelPath, its inactive now defunct wholly-owned subsidiary Genex, its 70% owned consolidated subsidiary, Village Tea and its 49% owned subsidiary Technest. Technest became inactive in the three months ending December 31, 2012. Technest previously conducted research and development in the field of computer vision technology and the Company has the right of first refusal to commercialize products resulting from this research and development. The Companys former Chief Executive Officer beneficially owns 23% of Technest, an employee owns 23% and an unrelated a third party owns 5%. Technest is considered a variable interest entity (VIE) for which the Company is the primary beneficiary.  The Company consolidates all entities in which the Company holds a controlling financial interest. For voting interest entities, the Company is considered to hold a controlling financial interest when the Company is able to exercise control over the investees operating and financial decisions. For variable interest entities (VIEs), the Company is considered to hold a controlling financial interest when it is determined to be the primary beneficiary. For VIEs, a primary beneficiary is a party that has both: (1) the power to direct the activities of a VIE that most significantly impact that entity's economic performance, and (2) the obligation to absorb losses, or the right to receive benefits, from the VIE that could potentially be significant to the VIE. The determination of whether an entity is a VIE is based on the amount and characteristics of the entity's equity.  All significant inter-company balances and transactions have been eliminated in consolidation.  The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, without being audited, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary to make the financial statements not misleading have been included. Operating results for the three months ended December 31, 2014 are not necessarily indicative of the results that may be expected for the year ending June 30, 2015. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2014 filed with the Securities and Exchange Commission.  Recent Accounting Pronouncements  There have been no recently issued accounting pronouncements that have had or are expected to have a material impact on the Companys consolidated financial statements.  12    2. GOING CONCERN UNCERTAINTY AND MANAGEMENTS PLAN  The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation of the Company as a going concern. The Company had a net loss applicable to common shareholders of $1,140,850 for the six months ended December 31, 2014 and a net loss applicable to common shareholders of $2,510,089 for the year ended June 30, 2014. Further, the Company had a working capital deficit of $3,914,143 and a stockholders deficit of $1,677,984 at December 31, 2014. These factors raise substantial doubt about the Companys ability to continue as a going concern.  Management is anticipating revenue growth through expansion of its customer base, and is also actively seeking financing through new and existing investors to fund operations. There is no assurance that the Company can reverse its net losses, or that the Company will be able to raise capital. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.  3. ACCOUNTS PAYABLE  On October 7, 2013, the Circuit Court in the Second Judicial District for Leon County, Florida entered an order approving the stipulation of the parties (the "Stipulation") in the matter of ASC Recap LLC ("ASC") v. Accelpath, Inc. (the "Company"). Under the terms of the Stipulation, the Company agreed to issue to ASC, as settlement of certain liabilities owed by the Company in the aggregate amount of $1,537,455 (the "Claim Amount"), shares of common stock (the "Settlement Shares") as well as a promissory note in the principal amount of the $75,000.00 maturing six months from the date of issuance, as a fee to ASC ('Fee Note"). ASC had purchased the liabilities from the Company's creditors (both affiliated and non-affiliated) with a face amount of $1,537,455. The total amount of liabilities, as reported by the Company in this Form 10-Q for the quarter ended December 31, 2014, was $3,961,093, inclusive of the $1,612,455 representing the Claim Amount and the Fee Note.  Pursuant to the Stipulation entered into by the parties, the Company agreed to issue to ASC, in one or more tranches as necessary, that number of shares of common stock sufficient to generate net proceeds (less a discount of twenty five percent (25%)) equal to the Claim Amount, as defined in the Stipulation. The parties reasonably estimated that, should the Company issue Settlement Shares sufficient to satisfy the entire Claim Amount, the fair market value of such Settlement Shares and all other amounts to be received by ASC would equal approximately $2,145,000. Notwithstanding anything to the contrary in the Stipulation, the number of shares beneficially owned by ASC shall not exceed 9.99% of the Company's outstanding common stock at any one time.  In connection with the issuance of the Settlement Shares, the Company may rely on the exemption from registration provided by Section 3(a)(10) under the Securities Act. To date, the Company has issued 59,697,000 Settlement Shares to ASC. All of these shares were issued after the balance sheet date. As such, the full Claim Amount remains outstanding and payable to ASC at December 31, 2014. Based upon the reported closing trading price of the Company's common stock on February 19, 2015 of $.0001 per share, if all $2,145,000 worth of liabilities were satisfied pursuant to the Stipulation through the issuance of common stock, the Company would issue an aggregate of 2,145,000,000 shares, excluding the 59,697,000 shares already issued.  As of the date of this filing, no proceeds from the sale of these shares have been used to repay creditors. At December 31, 2014, the value of the shares upon issuance is recorded as an Other current asset of $34,352.  13    4. CONVERTIBLE NOTES PAYABLE  Notes payable  related parties and a third parties consist of the following:  December 31,June 30,20142014Note payable  former Managing Member$27,750$27,750Note payable  related corporation4,3004,300Notes payable  stockholders13,00013,000Convertible notes payable777,217729,120Total897,291774,170Convertible notes payable, discount(158,325)(126,722)Total, net of discount738,966647,448Less current portion738,966647,448Long-term debt$−$−  All notes will mature prior to December 31, 2015  During the current fiscal year, the Company has issued $180,000 of notes for consulting purposes and $110,000 in notes for cash.  The consulting notes are comprised of six $30,000 notes which mature between January 1, 2015 and October 1, 2015. They carry no interest and convert into common stock at a 50% discount to the low closing bid price over the prior thirty days  The notes for cash are comprised of six notes which convert into common stock at anywhere between a 42% and 50% discount to the prevailing market price. All notes mature before December 31, 2015.  Derivative Liability Feature on Notes Payable  Prior to the fourth quarter of the prior fiscal year, for conventional convertible debt where the rate of conversion is based on a discount to the prevailing market value, the Company recorded a beneficial conversion feature (BCF) and related debt discount.  The BCF was recorded as a debt discount against the face amount of the respective debt instrument. There would be an offsetting increase to Additional paid in capital as the BCF is deemed to be an increase to equity. The discount would be amortized to interest expense over the life of the debt.  Commencing with the fourth quarter of the prior fiscal year, the Company reconsidered the requirements of the Financial Accounting Standards Board Accounting Standards Classification 820 (FASB ASC 820 or ASC 820) and determined that newly issued debt were derivative financial instruments. As such, a derivative expense was recorded on the issuance of the debt as well as a quarterly mark to market  Interest Expense  Interest expense on notes payable, including amortization of the discount on the convertible notes and the accrual of the Original Issue Discount, was $292,464 and $167,932 for the six months ended December 31, 2014 and 2013, respectively.  14    5. NON-CONVERTIBLE DEBT  The Company issued the following Note Payables:  2013  Eight separate notes form an investor were received in 2013 as follows:  Date IssuedMaturity DateInterest rateAmountFebruary 27,2013June 30, 20148%$1,500March 14, 2013June 30, 20148%$6,500April 23,2013June 30, 20148%$5,000May 9, 2013June 30, 20148%$10,000June 30, 2013June 30, 20148%$7,500July 11, 2013June 30, 20148%$10,000July 29, 2013June 30, 20148%$10,000August 23, 2013June 30, 20148%$13,000Total for 2013$63,500  2012  An investor lent the Company $80,000 for operating expenses throughout the year. These expenses were put forth in a note that matures on January 1, 2015 and carries no interest.  2011  Beverley Reif lent the Company $100,000 on March 15, 2011. The note bore an interest rate of 5% and matured on September 15, 2011. If the note were not paid by maturity, the interest rate would increase to 18%.  Dana Pope lent the Company $57,000 on March 15, 2011. The note bore an interest rate of 5% and matured on September 15, 2011. If the note were not paid by maturity, the interest rate would increase to 18%.  Both of these notes are currently subject to a litigation. See footnote 9 below.  An investor lent the Company $60,000 for operating expenses throughout the year. These expenses were put forth in a note that matures on January 1, 2015 and carries no interest.  Non-Convertible Debt Summary  2011 notes$217,0002012 notes80,0002013 notes63,500Total Non-Convertible Debt$360,500  6. PREFERRED STOCK  Series E  As of December 31, 2014, the Company has -0- outstanding shares of its Series E 5% Convertible Preferred Stock outstanding. During the quarter ended December 31, 2013, the Company exchanged its remaining 100 shares of Series E Preferred Stock plus $14,282 of accrued dividends into a new Secured Note of $114,282 (See Footnote Three above) The Company accrued cash dividends payable of $-0- and $1,139 for the three months ended December 31, 2014 and 2013, respectively. At December 31, 2014, there are no accrued dividends payable included in accrued expenses and other current liabilities.  15    Series F  On September 7, 2012, the Company authorized 100 shares of Series F Convertible Preferred Stock, with a stated value of $1,000. The Series F Preferred is convertible into common stock at any time at the option of the holder. The number of shares of common stock into which one share of Series F Preferred is convertible is determined by (i) dividing $1,000 (the stated value) outstanding by the closing bid price on the trading day immediately prior to the date of the conversion notice (the Conversion Price), and (ii) multiplying by ten; provided that if the closing bid price on such trading day is less than $0.02 per share, then the Conversion Price shall be $0.02. Accordingly, the authorized 100 shares of Series F Preferred are currently convertible into 50,000,000 shares of common stock using a Conversion Price of $0.02.  On September 10, 2012, the Company issued 90 shares of its Series F Preferred Stock for the purchase price of $90,000 to certain existing investors of the Company. The 90 shares of Series F Preferred are currently convertible into 180,000 shares of common stock. The Company determined that there was a beneficial conversion feature of $360,000 for the issuance of the 90 shares of Series F Preferred Stock. The beneficial conversion feature was calculated based on the effective conversion price per share compared to the fair value per share of common stock on the commitment date. This resulted in a deemed dividend in the amount of $360,000 for the three months ended September 30, 2012.  Series G  On September 18, 2012, the Company authorized 1,250 shares of Series G Convertible Preferred Stock, with a stated value of $1,000. The Series G Preferred is convertible into common stock at any time at the option of the holder three months after the date of issuance. After five years from the date of issuance or upon a change of control, the Series G Preferred is automatically converted into shares of common stock. The number of shares of common stock into which one share of Series G Preferred is convertible is determined by dividing $1,000 (the stated value) outstanding by the closing bid price on the trading day immediately prior to the date of the conversion notice (the Conversion Price); provided that if the closing bid price on such trading day is less than $0.02 per share, then the Conversion Price shall be $0.02. Accordingly, the authorized 1,250 shares of Series G Preferred are convertible into 62,500,000 shares of common stock at an assumed Conversion Price of $0.02. As of December 31, 2014 and 2013, there was no Series G Convertible Preferred Stock issued and outstanding.  Series H  The number, designation, rights, preferences and privileges of the Series H Preferred were established by the Board at a meeting on April 2, 2013. The designation, rights, preferences and privileges that the Board established for the Series H Preferred is set forth in a Certificate of Designation that was filed with the Secretary of State of the State of Delaware on April 3, 2013. Among other things, the Certificate of Designation provides that each one share of Series H Preferred has voting rights equal to (x) 0.019607multiplied by the total issued and outstanding Common Stock eligible to vote at the time of the respective vote (the "Numerator"),divided by (y) 0.49,minus (z) the Numerator.  At a meeting of the Board, the Board issued an aggregate of fifty one (51) shares of Series H Preferred to one individual, Shekhar Wadekar, Chief Executive Officer of the Company. As a result of the voting rights granted to the Series H Preferred, the Series H Stockholder holds in the aggregate approximately 50.9989% of the total voting power of all issued and outstanding voting capital of the Company  On March 21, 2014, ownership of the Series H Preferred was transferred to Mr. Steedley, our Chief Executive Officer.  Series I  As previously disclosed, on October 24, 2013, The Company and EIP entered into an Agreement and Plan of Reorganization in which EIP was to become a wholly-owned subsidiary of The Company. On October 9, 2014 EIP gave notice to Accelpath of its intention to terminate the Agreement. As a result, the parties shall take all action required to unwind the transaction, including the return and surrender by The Company of the common stock its holds in EIP, and the return and surrender by EIP of its 3,500 shares of Series I Preferred Stock of The Company. The Company retired all shares of Series I Preferred Stock to treasury. As of the filing date of this report, there are -0- shares issued and outstanding of the Series I Preferred.  See our 8-K filing of October 16, 2014 for more detail  16    Series J  On October 16, 2014, AccelPath entered into an Securities Purchase Agreement with the common stock and preferred stock shareholders (the Sellers) of Village Tea Distributors, Inc. (Village Tea) holding seventy percent (70%) of common stock and all the Series A Preferred Stock of Village Tea. Upon the closing of the transaction on October 24, 2014, Village Tea became a majority-owned subsidiary of AccelPath. Accelpath issued 1,525 shares of a newly designated series of convertible preferred stock to the Sellers, which is designated as Series J Preferred Stock. The Series J Preferred Stock has a stated value per share equal to $1,000, shall pay an annual dividend of 10% in cash or common stock, and shall be convertible at the holders option, subject to beneficial ownership limitations, into shares of the common stock of Accelpath at a conversion price equal to eighty percent (80%) of the lowest closing bid price for the Common Stock during the thirty (30) trading days immediately preceding a Conversion Date. Accelpath agrees to assume the debt obligations of Village Tea in connection with the Agreement.  Management of Village Tea agreed to defer the dividend for the period ended December 31, 2014.  7. COMMON STOCK  Our common stock is listed on the OTCBB and trades under the symbol ACLP. On September 4, 2014, there was a 1:250 reverse split.  During the six months ended December 31, 2014, the Company issued the following shares:  · 608,833,551 shares pursuant to the conversion of debt, accrued interest and related expenses; · 59,697,000 shares pursuant to the 3a10 program; · 3,763 fractional shares associated with the reverse split of September 4, 2014.  On March 7, 2011, the Company entered into an Equity Purchase Agreement. Pursuant to the Equity Purchase Agreement, a third party committed to purchase up to $5,000,000 of common stock over the course of 24 months commencing on the effective date of the registration statement pursuant to the registration rights agreement. The registration statement was declared effective on February 9, 2012. The purchase price of the common stock to be sold pursuant to the Equity Purchase Agreement will be 95% of the average of the lowest three closing bid prices, consecutive or inconsecutive, during the five trading day period commencing on the date a put notice requesting that a third party purchase. On July 19, 2012, the Company received proceeds of $6,000 for the sale of 2,807 (701,754 pre-split) shares of common stock pursuant to the Equity Purchase Agreement with a third party. The registration statement is no longer effective.  8. OPTIONS, WARRANTS AND STOCK-BASED COMPENSATION  2011 Equity Incentive Plan  On March 4, 2011, the Board of Directors adopted the 2011 Equity Incentive Plan and reserved up to 50,000,000 shares of common stock for issuance to employees, directors and consultants, subject to stockholder approval. On February 17, 2012, the stockholders approved the plan. The plan also provides for automatic annual increases on January 1st of each year (commencing on January 1, 2012 and ending on January 1, 2021), in the aggregate number of shares reserved equal to the lesser of (a) five percent of the total number of shares outstanding on December 31st of the preceding year or (b) 3,000,000 shares. As of January 1, 2013, the number of shares reserved under the plan automatically increased to 56,000,000. Under the plan, the Board may grant stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards.  Valuation and amortization method. The fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the vesting period.  Volatility. The Company estimates volatility based on the Companys historical volatility.  Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption.  17    Expected term. The expected term of stock options granted is based on an estimate of when options will be exercised in the future. The Company applied the simplified method of estimating the expected term of the options, as described in the SECs Staff Accounting Bulletins 107 and 110, as the Company has had a significant change in its business operations and the historical experience is not indicative of the expected behavior in the future. The expected term, calculated under the simplified method, is applied to groups of stock options that have similar contractual terms. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted.  Forfeitures. Stock-based compensation expense is recorded only for those awards that are expected to vest. FASB ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term forfeitures is distinct from cancellations or expirations and represents only the unvested portion of the surrendered option. An annual forfeiture rate of 0% was applied to all unvested options as of December 31, 2014 which was managements best estimate. This analysis will be re-evaluated semi-annually and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will be for only those shares that vest.  The following weighted average assumptions were used to estimate the fair value of stock options using the Black-Scholes option pricing model:  Three Months Ended December 31, 2014Three Months Ended December 31, 2013Risk-free interest rate0.62% - 0.72%0.90% - 0.96%Expected dividend yield−−Expected term3.25 - 5.5 years5.5 yearsForfeiture rate0%0%Expected volatility244.90% - 262.52%122.33% - 124.91%  A summary of option activity as of December 31, 2014 and for the three months then ended is presented below. All information is presented pre-split:  OptionsSharesWeighted Average Exercise PriceWeighted Average Remaining Contractual TermAggregate Intrinsic ValueOutstanding at June 30, 2012186,760$15.008.84 years$−Granted−−−−Exercised−−−−Forfeited or expired−−−−Outstanding at June 30, 2013186,760$15.007.84 years$−Granted−−−−Exercised−−−−Forfeited−−−−Exercisable at June 30, 2014 and December 31, 2014186,760$15.006.84 years$−  On April 6, 2011, the Board of Directors granted stock options to purchase 169,450 shares of common stock at an exercise price of $16.25 per share. On May 13, 2011, the Board of Directors granted stock options to purchase 3,000 shares of common stock at an exercise price of $15.00 per share. The weighted average fair value of the options granted was estimated at $14.60 per share. These options vest over three years and have a term of 10 years.  On August 12, 2011, the Board of Directors granted stock options to purchase 480 shares of common stock at an exercise price of $12.50 per share. The weighted average fair value of the options on the date of the grant was estimated at $10.75 per share. These options vest over one year and have a term of 10 years.  On December 14, 2011, the Board of Directors granted stock options to purchase 10,000 shares of common stock at an exercise price of $3.75 per share. The weighted average fair value of the options on the date of the grant was estimated at $2.00 per share. These options vest monthly over 10 months and have a term of 10 years.  18    On January 12, 2012, the Board of Directors granted stock options to purchase 480 shares of common stock at an exercise price of $1.25 per share. The weighted average fair value of the options on the date of the grant was estimated at $1.00 per share. These options vest over one year and have a term of 10 years.  On June 3, 2012, the Board of Directors granted stock options to purchase 3,400 shares of common stock at an exercise price of $13.60 per share. The weighted average fair value of the options on the date of the grant was estimated at $3.88 per share. These options vest over three year and have a term of 10 years.  On March 15, 2012, the Company agreed to issue a restricted stock award of 10,000 shares of common stock to a consultant for services to be rendered with 5,000 shares vesting on June 15, 2012 and 5,000 shares vesting on September 15, 2012. As of December 31, 2014, the shares had not been issued. Consulting expense recorded for the restricted stock award was $29,167 for the year ended June 30, 2012.  Warrants  The Companys outstanding warrants remained in place subsequent to the reverse acquisition. No warrants were exercised during the year ended June 30, 2014 or the quarter ended December 31, 2014. On July 17, 2011, warrants to purchase 200,000 shares at $1.89 per share expired. During the year ended June 30, 2012, the Company issued 2,000,000 warrants in connection with convertible notes payable (see Note 8). The warrants have an exercise price of $2.50 per share, are immediately exercisable and expire in five years from issuance. No warrants were issued, exercised or expired in the year ended June 30, 2014. The Company has reserved 2,075,000 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at June 30, 2014 adjusted for the 1:250 stock split which took effect on September 4, 2014:  Exercise priceNumberExpiration Date$2.502,00002/10/2017$2.504,00002/17/2017$2.501,25004/18/2017$2.5080008/15/2017$2.5020008/20/2017$2.501,00009/14/2017$2.501,00010/02/201710,250  The weighted average grant date fair value of the warrants granted during the three months ended December 31, 2013 was $0.0095 per share. The warrants were valued using the Black-Scholes option pricing model. The following assumptions were used for warrants issued during the three months ended December 31, 2013; risk free interest rates of 0.60% - 0.72%; expected dividend yield of 0%; expected term of 5 years and expected volatility of 244.07% - 248.52%. The weighted average remaining life of the warrants at December 31, 2014 was 3.86 years. At December 31, 2014, all warrants are exercisable and there is no aggregate intrinsic value for the warrants outstanding.  Stock Award Plan  Under the 2006 Stock Award Plan the Company may award shares of common stock to employees, officers, directors, consultants and advisors and may make grants subject to such terms and conditions as determined by the Board of Directors. As of December 31, 2013, the Company has 111,845 shares available for future grant under the Plan.  19    8. NET LOSS PER SHARE  Securities that could potentially dilute basic earnings (loss) per share ("EPS") as of December 31, 2014 and 2013, and that were not included in the computation of diluted EPS because to do so would have been anti-dilutive consist of the following:  December 31, 2014December 31, 2013Series E 5% convertible preferred stock−−Series F Convertible Preferred stock180,000180,000Series G Convertible Preferred stock−−Series H Convertible Preferred stock11Series I Convertible Preferred stock−1,194,412Series J Convertible stock68,501,938−Convertible Notes Payable*342,646,78014,261,876Stock options186,760186,760Restricted stcok award10,00010,000Warrants10,25010,250411,535,72915,843,299  * Conversions are subject to 9.99% conversion limitations at one time.  9. COMMITMENTS AND CONTINGENCIES  Operating Lease  Currently, the Company rents space at 137 National Plaza, Suite 300, National Harbor, MD 20745on a month-to-month basis. Monthly rent approximates $275. There are no future minimum lease rental payments.  Consulting Agreements  The Company signed a consulting agreement which calls for a $30,000 monthly payment in the form of a convertible promissory note. For the three months ended December 31, 2014, the Company has incurred $90,000 respectively. See Footnote 3 for details on the Notes issued for these services.  10. EMPLOYEE BENEFIT PLAN  The Company has a 401(k) plan for the benefit of certain employees. The Company had contributed to the plan under a safe harbor plan requiring a 3% contribution for all eligible participants. In addition, the Company may contribute a 3% elective match. Effective January 1, 2013, the Company amended the plan to remove the 3% safe harbor contribution. No contributions have been made in the current fiscal year. Contributions and other costs of the plan for the six months ended December 31, 2014 were $-0-. Contributions and other costs of the plan for the six months ended December 31, 2013 were $-0-.  11. OPERATING SEGMENTS  The Company had operated in three segments which are consistent with its internal organization. The major segments were medical diagnostic services, government contracting, and Tea sales.  Revenues, expenses and assets not explicitly attributed to a segment are deemed to be unallocated.  20    Data for the three and six months ended December 31, 2014 and December 31, 2013 follow below:  Three Months Ended December 31, 2014MedicalGovernmentTeaDiagnosticsContractingSalesUnallocatedTotalRevenues$13,500$−$4,581$−$18,081Cost of Goods Sold−−5,779−5,779Total Operating Expenses33,583−102,108102,344238,034Operating Income (Loss)(20,083)−(103,306)(102,344)(123,389)Other Income (Expense)−−−(369,431)(369,431)Net Income(20,083)−(103,306)(471,775)(492,820)Total Assets$45,034$5,004$196,063$2,185,507$2,431,608  Three Months Ended December 31, 2013MedicalGovernmentTeaDiagnosticsContractingSalesUnallocatedTotalRevenues$54,000$−$−$−$54,000Cost of Goods Sold−−−−−Total Operating Expenses63,853478−302,676367,007Operating Income (Loss)(9,853)(478)−(302,676)(313,007)Other Income (Expense)−−−(412,545)(412,545)Net Income(9,853)(478)−(715,221)(725,552)Total Assets$67,282$5,916$−$1,039,074$1,112,272   21    Six Months Ended December 31, 2014MedicalGovernmentTeaDiagnosticsContractingSalesUnallocatedTotalRevenues$54,000$−$4,581$−$58,581Cost of Goods Sold−−5,779−5,779Total Operating Expenses83,917−102,108257,338443,363Operating Income (Loss)(29,917)−(103,306)(257,338)(390,561)Other Income (Expense)−−−(750,289)(750,289)Net Income(29,917)−(103,306)(1,007,627)(1,140,850)Total Assets$45,034$5,004$196,063$2,185,507$2,431,608  Six Months Ended December 31, 2013MedicalGovernmentTeaDiagnosticsContractingSalesUnallocatedTotalRevenues$108,000$−$−$−$108,000Cost of Goods Sold−−−−−Total Operating Expenses142,827956−568,741712,524Operating Income (Loss)(34,827)(956)−(568,741)(604,524)Other Income (Expense)−−−(472,267)(472,267)Net Income(34,827)(956)−(1,041,008)(1,076,791)Total Assets$67,282$5,916$−$1,039,074$1,112,272  12. SUBSEQUENT EVENTS  Material Definitive Agreement  On February 5, 2015, AccelPath, INc. (the Company) entered into a Securities Purchase Agreement (the Agreement) with STI Signature Spirits Group, LLC, a New York limited liability company (STI), and the members of STI (collectively referred to as the Sellers). Under the terms of the Agreement, the Sellers will sell 52.78 membership interests in STI, representing 52% of the outstanding membership units of STI (the Majority Interest), to the Company. In exchange for the Majority Interest, the Company shall issue shares of a newly created Series K preferred stock (the Preferred Stock) with a stated value of $750,000 and $55,000 of restricted common stock of the Company and will assume $485,516.53 worth of STIs debt. Further, the Sellers shall be entitled to additional shares of Preferred Stock with a stated value of $2,250,000 pursuant to a three year earn out based on the number of units sold and booked by STI for each calendar year beginning the 2015. Please see our 8-K of February 10, 2015 for more detail.  22    Issuance of Debt  On January 1, 2015, the Company issued a note for $30,000 for consulting services. The convertible promissory note bears no interest and matures on December 1, 2015. The third party has the option to convert all or a portion of the note plus accrued interest into common stock at a conversion price equal to 50% of the lowest closing bid price for the twenty days prior to the conversion. As of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.  On February 1, 2015, the Company issued a note for $30,000 for consulting services. The convertible promissory note bears no interest and matures on December 1, 2015. The third party has the option to convert all or a portion of the note plus accrued interest into common stock at a conversion price equal to 50% of the lowest closing bid price for the twenty days prior to the conversion. As of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.  On January 8, 2014, the Company borrowed $2,000 from a third party in a convertible promissory note. The convertible promissory note bears interest at 10% per annum and matures on December 31, 2015. The third party has the option to convert all or a portion of the note plus accrued interest into common stock at a conversion price equal to 50% of the lowest closing bid price for the thirty days prior to the conversion. As of the date of this filing, there have been no conversions of this Note and the entire amount is outstanding.   23    Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  The following discussion and analysis of our financial condition and results of operations for the three months ended December 31, 2014 should be read together with our condensed consolidated financial statements and related notes included elsewhere in this report.  FORWARD LOOKING STATEMENTS IMPORTANT INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS  This Quarterly Report on Form 10-Q of Accelpath, Inc. (the "Company") contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as "may," "will," "could," "should," "expects," "anticipates," "intends," "projects," "predicts," "plans," "believes," "seeks," "estimates," "scheduled" and variations of these words and similar expressions. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Forward-looking statements appear in a number of places in this Form 10-Q and include statements regarding, among other matters:  · expectations regarding the Company's growth; · the Company's beliefs regarding its acquisition, redevelopment, development, leasing and operational activities and opportunities, including the performance of its retailers; · the Company's acquisition, disposition and other strategies; · regulatory matters pertaining to compliance with governmental regulations; · the Company's capital expenditure plans and expectations for obtaining capital for expenditures; · the Company's expectations regarding income tax benefits; · the Company's expectations regarding its financial condition or results of operations; and · the Company's expectations for refinancing its indebtedness, entering into and servicing debt obligations and entering into joint venture arrangements.  Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company or the industry to differ materially from the Company's future results, performance or achievements, or those of the industry, expressed or implied in such forward-looking statements. Such factors include, among others, general industry, as well as national, regional and local economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of current and prospective tenants, anchor or tenant bankruptcies, closures, mergers or consolidations, lease rates, terms and payments, interest rate fluctuations, availability, terms and cost of financing and operating expenses; adverse changes in the real estate markets including, among other things, competition from other companies, retail formats and technology, risks of real estate development and redevelopment, acquisitions and dispositions; the liquidity of real estate investments, governmental actions and initiatives (including legislative and regulatory changes); environmental and safety requirements; and terrorist activities or other acts of violence which could adversely affect all of the above factors. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results, under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, 2014, as well as our other reports filed with the Securities and Exchange Commission (the "SEC"), which disclosures are incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.  24    The information in this discussion contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including but not limited, to statements regarding the Companys capital needs, business strategy, and all other statements regarding future performance. All such information and statements are subject to certain risks and uncertainties, the effects of which are difficult to predict and generally beyond the control of the Company, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements contained herein. These risks and uncertainties include, but are not limited to, whether the Company will realize the improvements in its operations that it expects; general economic conditions; and those risks identified and discussed by the Company in its filings with the U.S. Securities and Exchange Commission. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may, should, expect, plan, intend, anticipate, believe, estimate, predict, potential or continue, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined in the Risk Factors section below, and, from time to time, in other reports we file with the Securities and Exchange Commission (the SEC). These factors may cause our actual results to differ materially from any forward-looking statement. Readers are cautioned not to place undue reliance on any forward looking statements contained in this report. We will not update these forward looking statements unless the securities laws and regulations require us to do so.  OVERVIEW  The Company is in the business of enabling pathology diagnostics through its Accelpath subsidiary. The Technest subsidiary was in the business of the design, research and development, integration, sales and support of three-dimensional imaging devices and systems but is no longer active. See below for a description of our Accelpath business.  Subsequent to December 31, 2014, the Company terminated its investment in Energy Innovative Products and undertook an investment in Village Tea Distributors, Inc. Please see Note 1 to Condensed Consolidated Financial Statements included in this form 10-Q for an Overview of these businesses.  AccelPath Business  We are a technology solutions company that delivers services that play a key role in the delivery of information for diagnosis of diseases and other pathologic conditions with and through our associated pathologists and strategic alliances. The experienced pathologists and medical institutions with which we partner to manage slide and information delivery prepare comprehensive diagnostic reports of a patients condition and consult with referring physicians to help determine the appropriate treatment. Such diagnostic reports often enable the early detection of disease, allowing referring physicians to make informed and timely treatment decisions that improve their patients health in a cost-effective manner. We seek out referring physicians and histology laboratories in need of pathology interpretations for our associated pathologists and manage slide delivery and develop services for managing the information.  We are focused on providing technology solutions for the anatomic pathology market. Our business model builds upon the expertise of experienced pathologists to provide seamless, reliable and comprehensive pathology and special test offerings to referring physicians using conventional and digital technologies. The pathologists with whom we contract seek to establish long-standing relationships with the referring physicians as a result of focused delivery of our diagnostic services, personalized responses and frequent consultations, and flexible information technology, or IT, solutions that are customizable to the referring physicians or laboratories as well as the pathologists needs. Our IT and communications platform enables us to deliver diagnostic reports to referring physicians generally within 24 hours of slide receipt, helping to improve patient care. In addition, our IT platform enables us to closely track and monitor medical trends from referring physicians.  Technest Business  Technest focuses on the design, research and development, integration, sales and support of three-dimensional imaging devices and systems primarily in the healthcare industries and intelligent surveillance devices and systems, and three-dimensional facial recognition in the security industries. Historically, the Companys largest customers have been the National Institutes of Health and the Department of Defense. During the three months ended December 31, 2013, the Technest business became inactive.  The Company is considering strategic alternatives to maximize the value of Technest and its intellectual property. The Company is actively pursuing licensing opportunities for the further commercialization of these products and the related intellectual property.  25    Energy Innovative Products (EIP)  AccelPath and EIP entered into an Agreement and Plan of Reorganization dated October 24, 2013, which would have resulted in EIP becoming a wholly-owned subsidiary of AccelPath. On October 9, 2014 EIP gave notice to Accelpath of its intention to terminate the Agreement. As a result, the parties shall take all action required to unwind the transaction, including the return and surrender by Accelpath of the common stock its holds in EIP, and the return and surrender by EIP of its 3,500 shares of Series I Preferred Stock of AccelPath. Accelpath shall retire all shares of Series I Preferred Stock to treasury.  The Company accounts for its investment in EIP under the Cost method and includes it under the caption, Investment in Unconsolidated subsidiary. The Company evaluates its investment in EIP for impairment quarterly. While the termination of the transaction occurred subsequent to the balance sheet date, at the date of this report, we determined that the value of our Investment in EIP had no value. Thusly, we have written off our investment and subsequently reduced our Additional Paid-In Capital.  Village Tea Company Distribution, Inc.  On October 16, 2014, AccelPath entered into an Securities Purchase Agreement with the common stock and preferred stock shareholders (the Sellers) of Village Tea Company Distribution, Inc. (Village Tea) holding seventy percent (70%) of common stock and all the Series A Preferred Stock of Village Tea. Village Tea, is a provider of environmentally-friendly exotic teas sourced directly from growers throughout Asia and Africa. Combining exquisite taste with extraordinary health benefits, the Company plans to create a niche presence in the tea market and provide its products through leading health food retail chains, major retailers, specialty shops and its own outlets. Upon the closing of the transaction on October 24, 2014, Village Tea became a majority-owned subsidiary of AccelPath. Accelpath issued 1,525 shares of a newly designated series of convertible preferred stock to the Sellers, Series J. The Series J Preferred Stock has a stated value per share equal to $1,000, shall pay an annual dividend of 10% in cash or common stock, and shall be convertible at the holders option, subject to beneficial ownership limitations, into shares of the common stock of Accelpath at a conversion price equal to eighty percent (80%) of the lowest closing bid price for the Common Stock during the thirty (30) trading days immediately preceding a Conversion Date. Accelpath agreed to assume the debt obligations of Village Tea in connection with the Agreement.  RESULTS OF OPERATIONS  On March 4, 2011, the Company acquired AccelPath, LLC and it became a wholly-owned subsidiary of the Company. Accounting principles generally accepted in the United States generally require that a company whose security holders retain the majority voting interest in the combined business be treated as the acquirer for financial statement reporting purposes. The acquisition was accounted for as a reverse acquisition whereby AccelPath, LLC was deemed to be the accounting acquirer. Accordingly, the results of operations of the Company have been included in the consolidated financial statements since the date of the reverse acquisition.  Three months ended December 31, 2014 compared with the three months ended December 31, 2013  Revenues  The Company had $18,081 in revenues during the three months ended December 31, 2014 compared with $54,000 in revenues during the three months ended December 31, 2013. Revenues for the three months ended December 31, 2014 were comprised of medical diagnostic revenue of $13,500 and sales of tea products of $4,581. Revenues for December 31, 2013 were solely from medical diagnostic services. The $40,500 decrease in medical diagnostic revenue resulted from the loss of the one remaining service contract in October 2014. The increase in tea sales of $4,581 were due solely to the purchase of our Village Tea subsidiary  26    Gross profit  The gross profit for the three months ended December 31, 2014 was $12,302 or 68% of revenues compared to a gross profit of $54,000 or 100% of revenues for the three months ended December 31, 2013. $40,500 decrease in gross profit was due to the decrease in the medical diagnostic services revenue in the current period. Under AccelPaths business model there are minimal, if any, costs of revenues. The remaining decrease of $1,198 in gross profit was due to insufficient revenues at our Village Tea subsidiary to cover marginal cost.  Selling, general and administrative expenses  Selling, general and administrative expenses for the three months ended December 31, 2014 were $238,034 compared to $367,007 for the three months ended December 31, 2013, a decrease of $128,973. The decrease was predominately due to the lack of stock-based compensation during the current quarter, partially offset by operating costs at Village Tea. All previously incurred stock-based compensation expense was amortized during the fiscal year ended June 30, 2014.  During the three months ended December 31, 2014 and 2013, these expenses consisted primarily of compensation expenses, professional fees, consulting fees, occupancy expenses and travel expenses. During the three months ended December 31, 2013, the Company recognized stock-based compensation expense of $133,703.  Operating loss  The operating loss for the three months ended December 31, 2014 was $225,733 compared with $313,007 for the three months ended December 31, 2013. The $87,274 improvement in operating loss was primarily due to the lack of stock-based compensation in the current period partially offset by reduced medical diagnostic contract revenues.  Other income (expense)  Other income (expense) was $(369,431) for the three months ended December 31, 2014 compared to $(412,545) for the three months ended December 31, 2013. During the three months ended December 31, 2014, the Company had $129,201 in interest expense on notes payable, including amortization of the discount on debt. Additionally, there was $202,563 on loss due to the conversion of debt and a net $37,667 loss associated with the derivative liability. For the three months ended December 31, 2013, the Company had $101,709 in interest expense on notes payable, including amortization of the discount on debt and accrual of the Original Issue Discount and there was $310,836 on loss due to the conversion of debt  Net loss applicable to common shareholders  The net income applicable to common shareholders for the three months ended December 31, 2014 was $595,164 in comparison with a net loss of $726,691 applicable to common shareholders for the three months ended December 31, 2013. The net loss per share was $0.00 per share for the three months ended December 31, 2014 and $0.28 per share for the three months ended December 31, 2013. Included in the net loss applicable to common shareholders for the three months ended December 31, 2013 are accrued cash dividends of $1,139 on the Series E 5% convertible preferred stock.  Six months ended December 31, 2014 compared with the six months ended December 31, 2013  Revenues  The Company had $58,581 in revenues during the six months ended December 31, 2014 compared with $108,000 in revenues during the three months ended December 31, 2013. Revenues for the six months ended December 31, 2014 were comprised of medical diagnostic revenue of $54,000 and sales of tea products of $4,581. Revenues for December 31, 2013 were solely from medical diagnostic services. The $54,000 decrease in medical diagnostic revenue resulted from the reduction in and ultimate loss of the one remaining service contract in October 2014. The increase in tea sales of $4,581 were due solely to the purchase of our Village Tea subsidiary  27    Gross profit  The gross profit for the three months ended December 31, 2014 was $52,802 or 90% of revenues compared to a gross profit of $108,000 or 100% of revenues for the three months ended December 31, 2013. $54,000 decrease in gross profit was due to the decrease in the medical diagnostic services revenue in the current period. Under AccelPaths business model there are minimal, if any, costs of revenues. The remaining decrease of $1,198 in gross profit was due to insufficient revenues at our Village Tea subsidiary to cover marginal cost.  Selling, general and administrative expenses  Selling, general and administrative expenses for the six months ended December 31, 2014 were $443,363 compared to $691,033 for the six months ended December 31, 2013, a decrease of $269,161. The decrease was predominately due to the lack of stock-based compensation during the current quarter, partially offset by operating costs at Village Tea. All previously incurred stock-based compensation expense was amortized during the fiscal year ended June 30, 2014.  During the three months ended December 31, 2014 and 2013, these expenses consisted primarily of compensation expenses, professional fees, consulting fees, occupancy expenses and travel expenses. During the three months ended December 31, 2013, the Company recognized stock-based compensation expense of $267,406.  Operating loss  The operating loss for the three months ended December 31, 2014 was $390,561 compared with $604,524 for the six months ended December 31, 2013. The $213,963 improvement in operating loss was primarily due to the lack of stock-based compensation in the current period partially offset by reduced medical diagnostic contract revenues.  Other income (expense)  Other income (expense) was $(750,289) for the six months ended December 31, 2014 compared to $(472,267) for the three months ended December 31, 2013. During the three months ended December 31, 2014, the Company had $292,464 in interest expense on notes payable, including amortization of the discount on debt. Additionally, there was $367,575 on loss due to the conversion of debt and a net $90,249 loss associated with the derivative liability. For the three months ended December 31, 2013, the Company had $167,932 in interest expense on notes payable, including amortization of the discount on debt and accrual of the Original Issue Discount and there was $310,836 on loss due to the conversion of debt. This was partially offset by technology licensing income of $6,501.  Net loss applicable to common shareholders  The net income applicable to common shareholders for the three months ended December 31, 2014 was $1,140,850 in comparison with a net loss of $1,076,791 applicable to common shareholders for the six months ended December 31, 2013. The net loss per share was $0.01 per share for the three months ended December 31, 2014 and $0.52 per share for the three months ended December 31, 2013. Included in the net loss applicable to common shareholders for the three months ended December 31, 2013 are accrued cash dividends of $1,139 on the Series E 5% convertible preferred stock.  LIQUIDITY AND CAPITAL RESOURCES  Cash and Working Capital  On December 31, 2014, the Company had a working capital deficit of $3,914,143 compared to a working capital deficit of $2,726,028 at June 30, 2014. The $305,189 decrease in working capital is due primarily to the operating loss incurred by the Company during the three months ended December 31, 2014. AccelPath exited the development stage in October 2010. Our primary source of operating cash flows to date has been from financing activities. During the six months ended December 31, 2014, we received $112,500 from the issuance of notes payable.  Sources of Liquidity  During the three months ended December 31, 2014 and the year ended June 30, 2014, we satisfied our operating cash requirements primarily from the issuance of notes payable and the collection of revenues from our medical diagnostics subsidiary.  28    COMMITMENTS AND CONTINGENCIES  Facilities  The Company currently leases office space at 137 National Plaza, Suite #300, National Harbor, MD 20745. Rent is $275 per month. Our telephone number is 240-273-3295.  Off Balance Sheet Arrangements  We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. As of December 31, 2014, the Company had warrants outstanding for the purchase of 10,500 shares of common stock. The Company does not expect any material cash proceeds from exercise of these warrants. As of December 31, 2013, the Company had stock options outstanding for the purchase of 186,720 shares of common stock. In addition, on March 7, 2011, the Company entered into an Equity Purchase Agreement with a third party. Pursuant to the Equity Purchase Agreement, a third party shall commit to purchase up to $5,000,000 of our common stock over the course of 24 months commencing on the effective date of the registration statement pursuant to the registration rights agreement. The registration statement was declared effective on February 9, 2012; a post-effective amendment was filed on June 1, 2012 and was declared effective on June 13, 2012. No post-effective amendments have been filed since June 2012 and the registration statement is no longer effective. Our ability to draw down funds under the Equity Purchase Agreement is subject to a number of conditions set forth in the Equity Purchase Agreement, as are more fully discussed in the Risk Factors Section entitled Risks Related to Market Conditions.  Effect of inflation and changes in prices  Management does not believe that inflation and changes in prices has had or will have a material effect on operations.  Critical Accounting Policies and Estimates  The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the amounts of revenues and expenses recorded during the reporting periods. We base our estimates on historical experience, where applicable and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.  Our critical accounting policies and use of estimates are discussed in, and should be read in conjunction with, the annual consolidated financial statements and notes included in the Companys Annual Report on Form 10-K for the year ended June 30, 2014 as filed with the SEC.  Item 3. Quantitative And Qualitative Disclosures About Market Risk.  As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.   Item 4. Controls and Procedures  Evaluation of Disclosure Controls and Procedures.  We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.  29    Our management, with the participation of our Chief Executive Officer (CEO) and our Principal Financial Officer (PFO), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of December 31, 2014. In designing and evaluating disclosure controls and procedures, we and our management recognize that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective. As of December 30, 2013, based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls, the CEO and PFO concluded that our disclosure controls and procedures were not effective.  In light of the conclusion that our internal controls over financial reporting were ineffective as of December 31, 2014, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regards to this quarterly report on Form 10-Q. Accordingly, management believes, based on its knowledge, that: (i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the periods covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as at, and for, the periods presented in this quarterly report.  Managements Report on Internal Control over Financial Reporting  Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Under the supervision of our CEO and PFO, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2014 using the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of June 30, 2014, we determined that control deficiencies existed that constituted material weaknesses, as described below:  1. lack of documented policies and procedures; 2. inadequate resources dedicated to the financial reporting function; and 3. ineffective separation of duties due to limited staff.  Subject to the Companys ability to obtain financing and hire additional employees, the Company expects to be able to design and implement effective internal controls in the future that address these material weaknesses.  Accordingly, we concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company's internal controls.  As a result of the material weaknesses described above, our CEO and PFO have concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2014 and June 30, 2014 based on criteria established in Internal ControlIntegrated Framework issued by COSO.  Changes in Internal Control Over Financial Reporting.  There were no changes in our internal control over financial reporting during the quarter ended December 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  30    PART II. OTHER INFORMATION   Item 1. Legal Proceedings  None   Item 2. Unregistered Sales of Equity Securities And Use Of Proceeds  None except those previously mentioned in this report under Footnotes 4, 6 and 7 of the Financial Statements   Item 3. Defaults upon Senior Securities  None   Item 4. Mine Safety Disclosures  None   Item 5. Other Information   License Agreement  In December 2014, current management of the Company was made aware of a license agreement (the Agreement) entered into as of August 19, 2011 among the Company (through previous management), (then known as Technest Holdings, Inc.), Genex Technologies, Inc., a wholly owned subsidiary of the Company (Genex) and 3D-ID, LLC, a Florida limited liability company (3D-ID).  Under the terms of the Agreement, the Company and Genex provided 3D-ID a perpetual sub-licensable, exclusive, worldwide license to make, have made, use, sell, offer for sale and import products and to practice any method under all trademarks, trade secrets, know-how, proprietary information and other intellectual property of the Company and Genex currently developed by the Company and/or Genex, including, without limitation, in each instance, all specifications, engineering drawings, schematics, bills of materials, software source and object code and algorithms, wiring diagrams, test procedures, assembly drawings, artwork, and other documents or files related to the Technology (the Intellectual Property) and other technology owned by the Company and/or Genex (the Technology).  In consideration of the license, 3D-ID is to pay the Company a royalty equal to five percent (5%) of any revenues received by 3D-ID from any products sold or licensed to third parties that used the Intellectual Property in the manufacture, use, offer for sale, sale or importation of which requires and/or involves the Intellectual Property or the Technology and the provision of services by 3D-ID involving the Intellectual Property and/or the Technology.  The Company has received no royalties from 3D-ID under the Agreement.  Under the terms of the Agreement, 3D-ID is to make quarterly written reports to the Company within thirty (30) days after the end of each calendar quarter, detailing the basis for the royalty payments as a result of the sales during the previous quarter.  The Company has received no reports from 3D-ID as required under the Agreement.  Further, 3D-ID was to make royalty payments of at least $15,000 during the first two years of the Agreement and at least $20,000.  Under the terms of the Agreement, if 3D-ID does not make these minimum royalty payments, the license shall become non-exclusive.  The Company has received no minimum royalty payments from 3D-ID as required under the Agreement.  The Company is continuing to investigate this matter to determine whether any additional obligations are owed to it by 3D-ID.  The Company believes 3D-ID is in default under the Agreement.  31    Item 6. Exhibits


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|Exhibit No. |  | Description                                                                                                                  |  | Filed with this Quarterly Report |  | Form                      |  | Filing Date     |  | Exhibit No.
|4.1         |  | AccelPath Inc. Common Stock Warrant issued to Mr. Albert Friesen dated October 2, 2012                                       |  |                                  |  | 8-K                       |  | October 4, 2012 |  | 4.1        
|10.1        |  | Loan Agreement dated as of October 1, 2012, by and among AccelPath, Inc. and Mr. Khal Aljerian                               |  |                                  |  | 8-K                       |  | October 4, 2012 |  | 10.1       
|10.2        |  | Promissory Note dated as of October 1, 2012 payable to Mr. Khal Aljerian                                                     |  |                                  |  | 8-K                       |  | October 4, 2012 |  | 10.2       
|10.3        |  | Amendment dated October 2, 2012 to Loan Agreement dated February 10, 2012 between Technest Holdings, Inc. and Albert Friesen |  |                                  |  | 8-K                       |  | October 4, 2012 |  | 10.3       
|10.4        |  | First Allonge to Promissory Note dated February 10, 2012 payable to Mr. Friesen                                              |  |                                  |  | 8-K                       |  | October 4, 2012 |  | 10.4       
|10.5        |  | First Amendment to Lease Agreement dated November 16, 2012 between PS Business Parks, LP, Technest, Inc. and AccelPath, Inc. |  | X                                |  |                           |  |                 |  |            
|31.1        |  | Certification by CEO of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a).                                        |  | X                                |  |                           |  |                 |  |            
|31.2        |  | Certification by PFO of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a).                                        |  | X                                |  |                           |  |                 |  |            
|32.1        |  | Certification by CEO and PFO of Periodic Report Pursuant to 18 U.S.C. Section 1350.                                          |  | X                                |  |                           |  |                 |  |            

32    SIGNATURES  In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  ACCELPATH, INC.  Date: February 23, 2015 By: /s/ Gilbert Steedley Gilbert Steedley Chief Executive Officer and President  33