SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.  20549





FORM 10-Q





ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF 1934





For Quarterly Period Ended March 31, 2011





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 000-54239





DigiPath, Inc.


(Exact name of registrant issuer as specified in its charter)





Nevada

27-3601979(State or other jurisdiction of incorporation or

organization)

(I.R.S. Employer Identification No.)1328 West Balboa Boulevard Suite C, Newport Beach, CA 92661(Address of principal executive offices, including zip code)Registrant’s phone number, including area code    (702) 527-2060





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 file 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 twelve months (or shorter period that the registrant was required to submit and post such files).


YES      NO x





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):





Large Accelerated Filer  Accelerated Filer  Non-accelerated Filer  Smaller reporting company x





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No x





Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.





Class

Outstanding at May 11, 2011Common Stock, $.001 par value

5,296,750

















INDEX





Page No.PART I
FINANCIAL INFORMATIONITEM 1.
FINANCIAL STATEMENTS:Condensed Balance Sheets as of March 31, 2011 (unaudited)
3Condensed Statements of Operations for the Three and period October 5, 2010 to Months Ended March 31, 2011 (unaudited)
4Condensed Statement of Stockholders’ Equity for the Period Ended March 31, 2011 (unaudited)
5Condensed Statements of Cash Flows for the period October 5, 2010 to March 31, 2011 (unaudited)
6Notes to Condensed Financial Statements (unaudited)
7ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
10ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
17ITEM 4T.
CONTROLS AND PROCEDURES
17PART II
OTHER INFORMATION
18ITEM 1
LEGAL PROCEEDINGS
18ITEM 1A
RISK FACTORS
18ITEM 2
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
18ITEM 3
DEFAULTS UPON SENIOR SECURITIES
18ITEM 4
(REMOVED AND RESERVED)
18ITEM 5
OTHER INFORMATION
18ITEM 6
EXHIBITS
18








- 2 -








PART I - FINANCIAL INFORMATION





ITEM I — FINANCIAL STATEMENTS


DIGIPATH, INC.




CONDENSED BALANCE SHEETS




(UNAUDITED)









March 31,2010ASSETSCURRENT ASSETSCash

$
237,129TOTAL ASSETS

$
237,129LIABILITIES AND STOCKHOLDERS’ EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses

$
5,405Revolving note payable, related party


202,411TOTAL CURRENT LIABILITIES


207,816STOCKHOLDERS’ EQUITY:Preferred stock, $.001 par value, 10,000,000 shares authorized, no shares issued and outstanding


-Common stock, $.001 par value, 50,000,000 shares authorized, 5,296,750 shares issued and outstanding at March 31, 2011


5,297Additional paid in capital


29,378Accumulated deficit


(5,362)TOTAL STOCKHOLDERS’ EQUITY


29,313TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$
237,129






















The accompanying notes are an integral part of these condensed financial statements.









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DIGIPATH, INC.




CONDENSED STATEMENTS OF OPERATIONS




(UNAUDITED)














Three Months Ended

For the Period

October 5, 2010 toMarch 31, 2011REVENUES
$
30,000

$
30,000COST OF SALES

-


-GROSS PROFIT

30,000


30,000OPERATING EXPENSES:General and administrative expenses

19,112


32,951INCOME/(LOSS) FROM OPERATIONS

10,888


(2,951
)Interest expense

(2,411
)

(2,411
)INCOME/(LOSS) BEFORE PROVISION FOR INCOME TAXES

8,477


(5,362
)Provision for income taxes

-NET INCOME/(LOSS)
$
8,477

$
(5,362
)NET LOSS PER SHARE OF COMMON STOCK — Basic and diluted
$
0.00

$
(0.00
)WEIGHTED AVERAGE SHARES OUTSTANDING — Basic and diluted

5,026,378


5,013,723






















The accompanying notes are an integral part of these condensed financial statements.









- 4 -


DIGIPATH, INC.




CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY




FOR THE PERIOD OCTOBER 5, 2010 (INCEPTION)




THROUGH MARCH 31, 2011




(UNAUDITED)









Preferred Stock


Common Stock


APIC


Accumulated Deficit


TotalShares


Amount


Shares


AmountBalance at October 5, 2010


-


$
-



-


$
-


$
-


$
-


$
-Common stock issued for services on October 8, 2010


-



-



5,000,000



5,000



-



-



5,000Common stock issued for services on January 31, 2011


-



-



10,000



10



990



-



1,000Common stock issued for cash on March 23, 2011


-



-



286,750



287



28,388



-



28,675Net loss


-



-



-



-



-



(5,362)



(5,362)Balance at March 31, 2011


-


$
-



5,296,750


$
5,297


$
29,378


$
(5,362)


$
29,313







The accompanying notes are an integral part of these condensed financial statements









- 5 -







DIGIPATH, INC.




CONDENSED STATEMENTS OF CASH FLOWS




(UNAUDITED)














For the Period October 5, 2010 to March 31,2011CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(5,362)Adjustments to reconcile net loss to cash flows from operating activities:Common stock issued for services


6,000Changes in operating assets and liabilities:Accounts payable and accrued expenses


5,405Interest Payable


2,411Net cash provided by operating activities


8,454CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from Revolving Note


200,000Issuance of Common Stock for Cash


28,675Net cash provided by financing activities


228,675NET INCREASE IN CASH


237,129CASH, Beginning of period


-CASH, End of period

$
237,129







The accompanying notes are an integral part of these condensed financial statements.




- 6 -







DIGIPATH, INC.




NOTES TO CONDENSED FINANCIAL STATEMENTS







NOTE 1 – BASIS OF PRESENTATION AND ORGANIZATION




Organization and Business — DigiPath, Inc. (“DigiPath, Inc.,” the “Company,” “we,” “our” or “us”) was incorporated in Nevada on October 5, 2010.  During January, 2011, the Company no longer was considered a development stage company as it began recognizing revenue for its advisory services to a handful of healthcare clients.




DigiPath focuses on the business of providing advisory services for clients involved within healthcare.  Services range the full breadth of management operations for marketing, product development, sales, outreach, operations, customer service, regulatory, and financial.  Clients include Manufacturer (hardware and software), Distribution & Service Firms, Laboratories (reference, hospital owned, independent), Private Pathology Practices (associated with hospitals), and Centers of Excellence.




Basis of Presentation- The accompanying financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated in the United States of America.





Going Concern — The accompanying condensed financial statements have been prepared assuming the Company will continue as a going concern. For the period October 5, 2010 to March 31, 2011, the Company had a net loss of $5,362. At March 31, 2011, the Company had working capital of 29,313 and stockholders’ equity of $29,313. Since inception, the Company has also been dependent upon the receipt of capital investment or other financing to fund its operations. The amount of capital required to sustain operations until the successful completion of a business combination is subject to future events and uncertainties. It may be necessary for the Company to secure additional working capital through loans or sales of common stock, and there can be no assurance that such funding will be available in the future or have terms agreeable to the Company. These conditions raise substantial doubt about the Company's ability to continue as a going concern.




The accompanying condensed financial statements have been presented on the basis of the continuation of the Company as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.




NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Those estimates and assumptions include estimates for accruals for potential liabilities.




Income Taxes - The Company accounts for income taxes in accordance with ASC 740, Income Taxes ("ASC 740"), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.




ASC 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company's financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.




- 7 -







The Company performed a review of its material tax positions. During the fiscal quarter ended March 31, 2011, there were no increases or decreases in unrecognized tax benefits as a result of tax positions taken during the fiscal quarter, there were no decreases in unrecognized tax benefits relating to settlements with taxing authorities, and there were no reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations. As of March 31, 2011, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate. As of March 31, 2011, the Company has no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date.




The Company has elected to classify any interest or penalties recognized with respect to any unrecognized tax benefits as income taxes. During the fiscal quarter ended March 31, 2011, the Company did not recognize any amounts for interest or penalties with respect to any unrecognized tax benefits. As of March 31, 2011, no amounts for interest or penalties with respect to any unrecognized tax benefits have been accrued.




Cash - Cash includes all highly liquid instruments with an original maturity of three months or less as of March 31, 2011.




Fair Value of Financial Instruments - On July 1, 2008, the Company adopted ASC 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:




-
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.-
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.-
Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.


The Company had no such assets or liabilities recorded to be valued on the basis above at March 31, 2011.




Revenue Recognition – The Company is in the development stage and has yet to realize revenues from operations. The Company will recognize revenue in accordance with ASC  605, Revenue Recognition, Overall, SEC Materials (ASC 605). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. The Company had no operations and no revenue for the fiscal quarters ended March 31, 2011.




Net Loss Per Share - Basic earnings (loss) per share (EPS) is computed by dividing the net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS is computed by dividing the income (loss) applicable to common shareholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. The Company currently has no dilutive securities and as such, basic and diluted loss per share are the same for all periods presented.




Comprehensive Loss - Comprehensive loss is defined as all changes in stockholders' equity, exclusive of transactions with owners, such as capital investments. Comprehensive loss includes net loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. For the quarter ended March 31, 2011, the Company's comprehensive loss was the same as its net loss.




Stock Compensation for Services Rendered - The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and ASC 505-50, Equity, Equity-Based Payments to Non-employees (ASC 505-50). All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty's performance is complete or the date on which it is probable that performance will occur.




Recently Issued Accounting Pronouncements - In January, 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, “Improving Disclosure about Fair Value Measurements.” This ASU will add new requirements for disclosures into and out of Levels 1 and 2 fair value measurements and information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. It also clarifies existing fair value disclosures about the level of disaggregation, inputs and valuation techniques. The guidance in the ASU is effective for annual and interim reporting periods in fiscal years beginning after November 15, 2010 (the Company’s fiscal year 2012). We do not anticipate the adoption of the new guidance to have any effect on our financial statements or results of operations.




- 8 -










Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future financial statements.




NOTE 3 – REVOLVING NOTE PAYABLE




On February 14, 2011, DigiPath, Inc., a Nevada corporation (“Company”), entered into a Revolving Promissory Note (the “Revolving Note”) with NYX Capital Advisors, Inc. (“NYX”).   Under the terms of the Revolving Note, NYX agreed to advance to the Company, from time to time and at the request of the Company, amounts up to an aggregate of $500,000 until September 30, 2012.  All advances shall be paid on or before September 30, 2012 and interest shall accrue from the date of any advances on any principal amount withdrawn, and on accrued and unpaid interest thereon, at the rate of eight percent (8%) per annum, compounded annually.  The Company’s obligations under the Revolving Note will accelerate upon a bankruptcy event of the Company, any default by the Company of its payment obligations under the Revolving Note or the breach by the Company of any provision of any material agreement between the Company and the noteholder.  As of March 31, 2011, the outstanding principal on the Revolving Note was $200,000.  As of March 31, 2011, the accrued interest on the Revolving Notes was $2,411.




NOTE 4 – STOCKHOLDERS’ EQUITY




Common Stock - Common stock consists of $0.001 par value, 50,000,000 shares authorized, 5,296,750 shares issued and outstanding as of March 31, 2011. In October 2010, the Company issued 5,000,000 shares of its common stock to the Company’s President, for services performed. In January, 2011, the Company issued 10,000 shares of its common stock for services. On March 23, 2011, the Company completed a private placement offering to certain investors (“Investors”) pursuant to which the Company sold an aggregate of 286,750 shares of the Company’s common stock resulting in gross proceeds of $28,675 to the Company.




Preferred Stock - The articles of incorporation of the Company authorize 10,000,000 shares of preferred stock with a par value of $0.001 per share. The Board of Directors is authorized to determine any number of series into which shares of preferred stock may be divided and to determine the rights, preferences, privileges and restrictions granted to any series of the preferred stock.




NOTE 5 – SUBSEQUENT EVENTS




The Company has evaluated subsequent events for the period from March 31, 2011, the date of these financial statements, through May 11, 2011, which represents the date the Company intends to file these financial statements with the Securities and Exchange Commission. Pursuant to the requirements of ASC 855, Subsequent Events there were no events or transactions occurring during this subsequent event reporting period that require recognition or disclosure in these financial statements.




- 9 -







ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended September 30, 2010 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K.  The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.





The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control.  Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements.  We strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended September 30, 2010 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.




Business History and Background





DigiPath, a Nevada corporation, was incorporated on October 5, 2010 in Nevada.




During January, 2011, the Company no longer was considered a development stage company as it began recognizing revenue for its advisory services to a handful of healthcare clients.




On February 14, 2011, we entered into a Revolving Promissory Note (the “Revolving Note”) with NYX Capital Advisors, Inc. (“NYX”).  Eric Stoppenhagen, our CEO, has voting and investment control over the securities owned by NYX Capital Advisors, Inc. as he is the sole owner.   Under the terms of the Revolving Note, NYX agreed to advance to the Company, from time to time and at the request of the Company, amounts up to an aggregate of $500,000 until September 30, 2012.  All advances shall be paid on or before September 30, 2012 and interest shall accrue from the date of any advances on any principal amount withdrawn, and on accrued and unpaid interest thereon, at the rate of eight percent (8%) per annum, compounded annually.  The Company’s obligations under the Revolving Note will accelerate upon a bankruptcy event of the Company, any default by the Company of its payment obligations under the Revolving Note or the breach by the Company of any provision of any material agreement between the Company and the noteholder.  As of the date of the Revolving Note, $200,000 was deemed outstanding under the Revolving Note.


On March 23, 2011, the Company completed a private placement offering to certain investors (“Investors”) pursuant to which the Company sold an aggregate of 286,750 shares of the Company’s common stock resulting in gross proceeds of $28,675 to the Company. The Company intends to use proceeds of the offering for working capital. The Company has no material relationship with any of the investors participating in the private placement offering other than in respect of the investment. The Company paid no commissions in connection with the closing of the private placement offering.




The Company has a long term desire to become a publicly reporting company in order to have greater access to capital, increase the Company’s valuation, and to provide future liquidity to its current and future shareholders.




(b) Business of Issuer




DigiPath currently focuses on the business of providing advisory services for clients involved within healthcare industry.  Currently, our focus is on digital pathology.  Digital pathology image-based information environment enabled by computer technology that allows for the management of information generated from a digital slide. Digital pathology is enabled in part by virtual microscopy, which is the practice of converting glass slides into digital slides that can be viewed, managed, and analyzed. Pathology is the study and diagnosis of disease.




Our current services range the full breadth of management operations for marketing, product development, sales, outreach, operations, customer service, regulatory, and financial.  Our target clients include manufacturer (hardware and software), distribution and service firms, laboratories (reference, hospital owned, independent), private pathology practices (associated with hospitals), and centers of excellence.




DigiPathTM is healthcare technology advisors focused on improving the care of its clients’ patients.




- 10 -





DigiPath advisory services uses a proprietary methodology services platform called 6D Focus Methodology.  DigiPath provides services for all steps, or teaches the stakeholders team on how to implement each step.  DigiPath tailors advisory services to individual firms’ expertise.




DigiPath advisors use industry standards, best practices, and reputable products to provide a platform that supports specified stakeholder needs.  The 6D Focus Methodology ensures that our client’s needs are met for currently and in the future.




DigiPath provides the expertise in accelerating the adoption of digital pathology within a group, organization, or system.  DigiPath provides advisory services to the many digital pathology stakeholders.




DigiPath provides advisory service to a variety of people, groups, organizations, or systems who affect or can be affected by the implementation of digital pathology.  We provide advisory services to the manufacturer of both hardware and software products related to digital pathology. We assist laboratories, private pathology practices and centers of excellence (reference, hospital owned, independent) with increasing efficiency and quality of services.





DigiPath’s advisory services focus on collaboration with our stakeholders.  Consulting is about collaboration. Bringing together the client’s functional expertise and our process expertise is the secret of assuring a return on investment from DigiPath advisory services.  We offers advisory services throughout the workflow for the difference stakeholders, including marketing, product development, outreach & sales, operations, customer service, regulatory, and financial services.




Our marketing services include a thorough domestic and international market review, competitive analysis, pricing and packaging analysis, and strategic partner’s evaluations.




Our product development services include market research documentation, product research documentation, technical research documentation, quality assurance process & policy, and quality and International Organization for Standardization (“ISO”) compliance.




We provide outreach and sales services which include customer relationship management planning, prospect identification, distribution partner evaluation, staffing and commission assistance, sales process training, and sales operational planning.




Our operation services include workflow review, analysis and recommendations, change management coaching, information technology integration, standard operating procedure documentation and training support.




Our customer service advisory services include institution of strategy for managing our clients’ interaction with customers, clients and sales prospects through organization, automation and synchronization of business processes.




Plan of Operations




DigiPath uses a proprietary methodology services platform, 6D Focus Methodology in all our advisory services.  We provide services for all steps, or teach the stakeholders team on how to implement each step.  We tailor advisory services to our clients’ needs and expertise.




We use industry standards, best practices, and reputable products to provide a platform that supports your specified stakeholder needs.  The 6D Focus Methodology ensures that our client’s needs are met for today and tomorrow.




Step 1 Discover




The DigiPath in-depth data-gathering process gives us a “behind the scenes” look at the digital pathology market, the individual stakeholder’s business, and combined impacts for patients, market, and the stakeholder’s business.




Step 2 Diagnose




Based on step 1, the DigiPath team provides a diagnoses how specific stakeholder problems, processes, shortfalls, quality, and/or competitive concerns.  Step 2 includes the recommendations on DigiPath advisory service areas which can deliver the stakeholder’s benefits.




- 11 -





Step 3 Design




DigiPath team designs solutions to overcome issues identified in step 1 and 2.  Solutions can be based on the specific advisory service areas; marketing, product development, outreach & sales, operations, customer service, regulatory, or financial.




Step 4 Deliver




If the stakeholder chooses, DigiPath can assist with delivering solutions for the Step 3 design.  The advisory services delivery may include strategic planning, design, procurement, consulting, project management, implementation, testing, training, and documentation.




Step 5 Defect




Once a recommendation is delivered, a defect review and improvement plan is critical for the recommendation’s success.  DigiPath can provide a platform for defect review and continued quality assurance.




Step 6 Distribute




As a solution distributes within your organization, a proactive approach to maintenance and support ensures the return on investment is provided to your firm’s goals.  DigiPath can provide continued evaluation and advisory services to ensure the return on investment goals are met.




Results of Operation





Three Months Ended March 31, 2011





For the three months ended March 31, 2011, the Company had $30,000 of revenues from consulting services. These revenues consisted of advisory service fees from clients.  The advisory services relate to marketing, product development, sales, outreach, and operations.  We have not noted any significant trends that would have a material impact on revenues.





For the three months ended March 31, 2011, the Company had a net income of $8,477. For the three months ended March 31, 2011, the Company incurred $19,112 of operating expenses which comprised of mainly of travel expenses.





For the period October 5, 2010 to March 31, 2011





For the period October 5, 2010 to March 31, 2011, the Company had $30,000 of revenues from consulting services.





For the period October 5, 2010 to March 31, 2011, the Company had a net loss of $5,362. For the period October 5, 2010 to March 31, 2011, the Company incurred $32,951 of operating expenses, comprised which comprised of mainly of travel expenses.





Liquidity and Capital Resources





As of March 31, 2011, the Company had assets equal to $237,129, comprising exclusively of cash. The Company's current liabilities as of March 31, 2011 were $207,816 comprising of accounts payable, accrued expenses, and notes payable.





The following is a summary of the Company's cash flows provided by (used in) operating, investing, and financing activities for the period October 5, 2010 to March 31, 2011:





For the period October 5, 2010 to March 31,





2011Operating Activities

$
8,454Investing Activities


-Financing Activities


228,675Net Effect on Cash

$
237,129





The Company currently has nominal assets and revenues. To the extent the Company does not earn revenues, the Company is dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of. In addition, the Company would be dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations. Our financial statements indicate that without additional capital, there is substantial doubt as to our ability to continue as a going concern.





- 12 -





Going Concern





We currently have no source of operating revenue, and have only limited working capital with which to pursue our business plan, which contemplates the completion of a business combination with an operating company. The amount of capital required to sustain operations until the successful completion of a business combination is subject to future events and uncertainties. It may be necessary for us to secure additional working capital through loans or sales of common stock, and there can be no assurance that such funding will be available in the future. These conditions raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed financial statements for the quarter ended March 31, 2011 include a "going concern" footnote.





Critical Accounting Policies





The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We believe that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions. We have identified in Note 2 - "Summary of Accounting Policies" to the Condensed Financial Statements contained in this Quarterly Report certain critical accounting policies that affect the more significant judgments and estimates used in the preparation of the financial statements.





Recently Issued Accounting Pronouncements - In January, 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, “Improving Disclosure about Fair Value Measurements.” This ASU will add new requirements for disclosures into and out of Levels 1 and 2 fair value measurements and information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. It also clarifies existing fair value disclosures about the level of disaggregation, inputs and valuation techniques. The guidance in the ASU is effective for annual and interim reporting periods in fiscal years beginning after November 15, 2010 (the Company’s fiscal year 2012). We do not anticipate the adoption of the new guidance to have any effect on our financial statements or results of operations.





Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future financial statements.





Off-Balance Sheet Arrangements





We have not entered into any 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 and would be considered material to investors.





Contractual Obligations





As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.





- 13 -





Risk Factors







The following important factors, and the important factors described elsewhere in this report or in our other filings with the SEC, could affect (and in some cases have affected) our results and could cause our results to be materially different from estimates or expectations.  Other risks and uncertainties may also affect our results or operations adversely.  The following and these other risks could materially and adversely affect our business, operations, results or financial condition.




An investment in the Company is highly speculative in nature and involves an extremely high degree of risk.





Investors may lose all of their investment in us.





Investment in us involves a high degree of risk.  Investors may never recoup all or part of or realized any return on their investment.  Accordingly, investors may lose all of their investment and must be prepared to do so.





We will continue to incur the expenses of complying with public company reporting requirements.





We have an obligation to continue to comply with the applicable reporting requirements of the Exchange Act even though compliance with such reporting requirements is economically burdensome.





We may need additional financing the failure of to raise such financing will have a material adverse effect on our business.





Our cash requirements may vary materially from those now planned depending on numerous factors, including our ability to obtain the Digital Pathology consulting, finding customers to use such technology and competition. If are not able to attract and retain customers, we may not have sufficient funds to institute our business plan.  We therefore would need to raise additional funds to finance our capital requirements through new financings to achieve the level of operations we anticipate.  Such financings could include equity financing, which may be dilutive to stockholders, or debt financing, which would likely restrict our ability to borrow from other sources.  In addition, such securities may contain rights, preferences or privileges senior to those of the rights of our current stockholders.  We do not have any commitments for additional financing.  There can be no assurance that additional funds will be available on terms attractive to us, or at all.  If adequate funds are not available, we may be required to curtail our development of the Digital Pathology consulting and/or otherwise materially reduce our operations.  Any inability to raise adequate funds could have a material adverse effect on our business, results of operation and financial condition.





Our success will, to a large extent, depend on and experience of our officers and directors.





Our officers and directors will be responsible for the management and control of the Company.  Our success will, to a large extent, depend on the quality of the management provided by Eric Stoppenhagen, our CEO.  Although our officers and directors believe that they have the ability to manage the Company, they can give no assurance that their efforts will result in success.  Stockholders have no right or power to take part in the management of the Company.  Accordingly, no person should purchase any of the Shares offered hereby unless he is willing to entrust all aspects of the management of the Company to the officers and directors.





If we borrow money to expand our business, we will face the risks of leverage.





We anticipate that we may in the future incur debt for financing our growth.  Our ability to borrow funds will depend upon a number of factors, including the condition of the financial markets.  The risk of loss in such circumstances is increased because we would be obligated to meet fixed payment obligations on specified dates regardless of our revenue.  If we do not meet our debt service payments when due, we may sustain the loss of our equity investment in any of our assets securing such debt upon the foreclosure on such debt by a secured lender.


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Our common stock is considered a “penny stock,” any investment in our shares is considered to be a high-risk investment and is subject to restrictions on marketability.





We currently are not on an exchange.  We plan to list on the OTC Bulletin Board. To the extent we are successful, our common stock is considered a “penny stock” because it is quoted and traded on the OTC Bulletin Board (“OTCBB”) and it trades for less than $5.00 per share.  The OTCBB is generally regarded as a less efficient trading market than the NASDAQ Capital or Global Markets or the New York Stock Exchange.





The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.”  Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market.  The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and any salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer’s account.  In addition, the penny stock rules require that, prior to effecting a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.  These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock.





Since our common stock will be subject to the regulations applicable to penny stocks, the market liquidity for our common stock could be adversely affected because the regulations on penny stocks could limit the ability of broker-dealers to sell our common stock and thus your ability to sell our common stock in the secondary market in the future.





We have additional securities available for issuance, including preferred stock, which if issued could adversely affect the rights of the holders of our common stock.





Our articles of incorporation authorize the issuance of 50,000,000 shares of common stock and 10,000,000 shares of preferred stock. The common stock and preferred stock can be issued by our board of directors without stockholder approval. Accordingly, our stockholders will be dependent upon the judgment of our management in connection with the future issuance and sale of shares of our common and preferred stock, in the event that buyers can be found therefor. Any future issuances of common stock would further dilute the percentage ownership of our Company held by the public stockholders.





Authorization of 10,000,000 shares of preferred stock can adversely affect the voting power and other rights of common stock owners.





Our Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although we have no present intention to issue any shares of its authorized preferred stock, there can be no assurance that the Company will not do so in the future.





Indemnification of officers and directors.





The Articles of Incorporation and Bylaws of the Company contain broad indemnification and liability limiting provisions regarding our officers, directors and employees, including the limitation of liability for certain violations of fiduciary duties.  Stockholders of the Company therefore will have only limited recourse against the individuals.





Risks Related to the Industry and Our Operations





Our business venture into the digital pathology business is subject to a high risk of failure.





Our business venture into the Digital Pathology consulting is at a very early stage and is subject to a high risk of failure. In order to establish commercial viability, we will have to acquire a large customer base.  There can be no assurances that we will be able to do so.





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We are uncertain of our ability to protect our trade secrets the loss of which would negatively impact our competitive advantage.





We rely on trade secrets, know-how and continuing knowledge to achieve and thereafter maintain a competitive advantage with respect to the Digital Pathology consulting.  Although we have entered into and we intend to enter into confidentiality and invention agreements with employees, consultants, certain potential customers and advisors, no assurance can be given that such agreements will be honored or that we will be able to effectively protect our rights to our unpatented trade secrets and know-how.  Moreover, no assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.





Our failure to develop our limited marketing capabilities would have a material adverse effect on our business.





We have limited marketing capabilities and resources to expend on marketing the Digital Pathology consulting.  In order to achieve market penetration we will have to undertake significant efforts and expenditures to create awareness of, and demand for, our Digital Pathology consulting and products.  Our ability to penetrate the market and build our customer base will be substantially dependent on our marketing efforts, including our ability to encourage customers to adopt Digital Pathology.  No assurance can be given that we will succeed. Our failure to successfully develop our marketing capabilities, both internally and through third-party joint ventures, would have a material adverse effect on our business, operating results and financial condition.





We are dependent on key personnel, the loss of whose services could materially adversely impact our business and prospects.





Our success in the Digital Pathology consulting business will be largely dependent upon the efforts of the principals who are developing the Digital Pathology consulting business and the employees hired by us to assist such principals in developing such customer base.  The loss of the services of any of these individuals could have a material adverse effect on our digital pathology consulting business and prospects.  There can be no assurance that we will be able to retain the services of such individuals in the future.  Our success will be dependent upon our ability to hire and retain qualified technical, research, management, marketing and financial personnel. We will compete with other companies with greater financial and other resources for such personnel.  Although we have not to date experienced difficulty in attracting qualified personnel, there can be no assurance that it will be able to retain the personnel it hires or acquire additional qualified personnel as and when needed.





Control by key stockholders limits investors’ ability to participate in our management.





Our largest stockholder, Eric Stoppenhagen, represents approximately 94% of the voting power of our outstanding capital stock.  If the Company sells additional shares will still have only limited rights to participate in our management.





Our business plan will take a significant amount of time to implement.





The research and development related to the Digital Pathology consulting and our business plan will take a significant amount of time to implement.  Investors must be prepared to hold the Shares as a long term investment as the value of the Shares will not increase in value in the short term, if ever.





Absence of cash dividends may affect the investment value of our common stock.





The Board of Directors has not and does not anticipate paying cash dividends on the common stock of the Company for the foreseeable future and intends to retain any future earnings to finance the growth of the Company’s business.  Payment of dividends, if any, will depend, among other factors, on earnings, capital requirements and the general operating and financial conditions of the Company, as well as legal limitations on the payment of dividends out of paid-in capital.





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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 4T                      Controls and Procedures.





Evaluation of Disclosure Controls and Procedures





We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.





As of March 31, 2011, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.





Changes in Internal Controls





There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2011 that have materially affected or are reasonably likely to materially affect our internal controls.





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PART II -- OTHER INFORMATION








Item 1. Legal Proceedings.





To the best knowledge of our sole officer and director, the Company is not a party to any legal proceeding or litigation.





Item 1A. Risk Factors.





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. See the ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS which identifies and discloses certain risks and uncertainties including, without limitation, those "Risk Factors".





Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.





On March 23, 2011, the Company completed a private placement offering to certain investors (“Investors”) pursuant to which the Company sold an aggregate of 286,750 shares of the Company’s common stock resulting in gross proceeds of $28,675 to the Company. The Company intends to use proceeds of the offering for working capital. The Company has no material relationship with any of the investors participating in the private placement offering other than in respect to the investment. The Company paid no commissions in connection with the closing of the private placement offering.





Item 3. Defaults Upon Senior Securities.





None.





Item 5. Other Information.





None.







ITEM 6.

Exhibits31
Certification of President pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.32
Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





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SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





DIGIPATH, INC.Date: May 11, 2011
/s/  ERIC STOPPENHAGENName: Eric StoppenhagenTitle: President, Secretary and Director





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EXHIBIT INDEX








Exhibit

Description31

Certification of President pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.32

Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

















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