Attached files
| file | filename |
|---|---|
| EX-32 - EXHIBIT 32 - ANDAIN, INC. | exhibit_32.htm |
| EX-31.1 - EXHIBIT 31.1 - ANDAIN, INC. | exhibit_31-1.htm |
| EX-31.2 - EXHIBIT 31.2 - ANDAIN, INC. | exhibit_31-2.htm |
| EX-10.25 - EXHIBIT 10.25 - ANDAIN, INC. | exhibit_10-25.htm |
| EX-10.24 - EXHIBIT 10.24 - ANDAIN, INC. | exhibit_10-24.htm |
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012
OR
o 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: 0-51216
ANDAIN, INC.
(Exact Name of Company as Specified in its Charter)
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Nevada
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20-2066406
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(State or Other Jurisdiction of Incorporation
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(I.R.S. Employer
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or Organization)
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Identification No.)
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400 South Beverly Drive, Suite 312, Beverly Hills, California
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90212
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(Address of Principal Executive Offices)
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(Zip Code)
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Company’s telephone number: (310) 286-1777
_____________________________________________________
(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o.
Indicate by check mark whether the Company 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o.
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:
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes o No x.
As of September 30, 2012, the Company had 65,334,242 shares of common stock issued and outstanding.
2
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION
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PAGE
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4
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6
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8
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9
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12
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19
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28
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28
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PART II – OTHER INFORMATION
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29
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29
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29
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30
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30
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30
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31
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31
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3
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
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September 30, 2012
(Unaudited)
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December 31, 2011
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|||||||
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ASSETS
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||||||||
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Current assets:
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||||||||
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Cash and cash equivalents
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$ | 2,207 | $ | 872 | ||||
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Accounts receivable
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799,942 | 930,177 | ||||||
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Total current assets
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802,149 | 931,049 | ||||||
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Property, plant and equipment
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24,007 | 35,098 | ||||||
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Intangible assets
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20,168 | 20,649 | ||||||
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Other assets
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173,970 | 360,178 | ||||||
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Total assets
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$ | 1,020,294 | $ | 1,346,974 | ||||
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
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||||||||
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Current liabilities:
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||||||||
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Bank overdrafts
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$ | 788 | 1 | |||||
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Accounts payable and accrued expenses
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994,136 | $ | 1,180,879 | |||||
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Total current liabilities
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994,924 | 1,180,880 | ||||||
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Long-term liabilities:
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||||||||
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Long-term debt
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247,147 | 550,312 | ||||||
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Total liabilities
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1,242,071 | 1,731,192 | ||||||
4
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(continued)
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September 30, 2012
(Unaudited)
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December 31, 2011
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|||||||
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Capital deficiency:
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||||||||
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Preferred stock, $0.001 par value, 10,000,000 authorized
shares; no shares issued and outstanding
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-- | -- | ||||||
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Common stock, $0.001 par value, 500,000,000 shares
authorized; 65,334,242 shares issued and outstanding at
September 30, 2012 and 22,034,242 at December 31, 2011
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65,334 | 22,034 | ||||||
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Additional paid-in capital
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3,990,155 | 3,890,219 | ||||||
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Capital reserves
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46,000 | 383,989 | * | |||||
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Accumulated deficit during development stage
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(4,129,619 | ) | (4,214,401 | ) * | ||||
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Accumulated other comprehensive income (loss)
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(78,145 | ) | 923 | |||||
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Total Andain, Inc. stockholders’ equity (deficiency)
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(106,275 | ) | 82,764 | |||||
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Non-controlling interest
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(115,502 | ) | (466,982 | ) | ||||
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Total stockholders’ capital deficiency
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(221,777 | ) | (384,218 | ) | ||||
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Total liabilities and capital deficiency
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$ | 1,020,294 | $ | 1,346,974 |
* Restated – see Note 5.
See accompanying notes to consolidated financial statements
5
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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For the Period of Inception
(July 23, 2004) to September 30,
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||||||||||||||||||
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2012
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2011
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2012
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2011
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2012
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Revenue:
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||||||||||||||||||||
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Government grants
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$ | -- | $ | 279,298 | $ | -- | $ | 421,291 | $ | 682,690 | ||||||||||
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Consulting income
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12,158 | (7,439 | ) | 88,404 | -- | 472,738 | ||||||||||||||
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Other income
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-- | -- | -- | -- | 15,000 | |||||||||||||||
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Total revenue
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12,158 | 271,859 | 88,404 | 421,291 | 1,170,428 | |||||||||||||||
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Operating expenses:
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||||||||||||||||||||
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Research and development
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(107,270 | ) | (220,388 | ) | (452,043 | ) | (220,388 | ) | (822,681 | ) | ||||||||||
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Depreciation
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(1,728 | ) | (1,920 | ) | (9,532 | ) | (5,828 | ) | (50,157 | ) | ||||||||||
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General and administrative
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(32,179 | ) | (309,127 | ) | (146,128 | ) | (763,130 | ) | (4,300,835 | ) | ||||||||||
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Impairment of goodwill
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-- | -- | -- | -- | (412,699 | ) | ||||||||||||||
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Other income
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610,396 | * | -- | 610,396 | * | -- | 610,396 | |||||||||||||
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Loss on disposal of associate
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-- | -- | -- | -- | (135,424 | ) | ||||||||||||||
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Impairment loss
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-- | -- | -- | -- | (177,729 | ) | ||||||||||||||
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Total operating income (expenses)
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469,219 | (531,435 | ) | 2,693 | (989,346 | ) | (5,289,129 | ) | ||||||||||||
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Profit (loss) from operations
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481,377 | (259,576 | ) | 91,097 | (568,055 | ) | (4,118,701 | ) | ||||||||||||
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Financial income
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22,379 | 19,952 | -- | 19,952 | 84,424 | |||||||||||||||
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Financial expense
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-- | (18,675 | ) | (3,506 | ) | (22,549 | ) | (46,989 | ) | |||||||||||
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Share of loss of equity-accounted
Investee
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-- | (106,836 | ) | -- | (115,996 | ) | -- | |||||||||||||
* See Note 11
6
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(continued)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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Period of Inception
(July 23, 2004)
Through
September 30,
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||||||||||||||||||
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2012
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2011
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2012
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2011
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2012
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||||||||||||||||
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Net profit (loss)
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503,756 | (365,135 | ) | 87,591 | (686,648 | ) | (4,081,266 | ) | ||||||||||||
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Add: Net profit (loss) attributable
to the non-controlling interest
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66,841 | 51,876 | 2,809 | 36,233 | (329,336 | ) |
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Net profit (loss) attributable to Andain, Inc.
stockholders
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$ | 436,914 | $ | (417,011 | ) | $ | 84,782 | $ | (722,881 | ) | $ | (3,751,930 | ) | |||||||
| Profit (loss) per share - basic | $ | 0.016 | $ |
(0.02
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) | $ | 0.004 | $ | (0.04 | ) | ||||||||||
| Profit (loss) per share - diluted | $ | 0.015 | $ | - | $ | 0.003 | $ | - | ||||||||||||
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Weighted average common shares
outstanding (basic and diluted)
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27,438,650 | 19,012,899 | 23,905,304 | 18,358,535 |
See accompanying notes to consolidated financial statements
7
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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Period of Inception
(July 23, 2004)
Through
September 30,
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||||||||||||||||||
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2012
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2011
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2012
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2011
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2012
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||||||||||||||||
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Net profit (loss) attributable to
Andain, Inc. stockholders
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$ | 436,914 | $ | (417,011 | ) | $ | 84,782 | $ | (722,881 | ) | $ | (3,751,930 | ) | |||||||
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Other comprehensive loss:
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||||||||||||||||||||
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Currency translation adjustment
of foreign operation
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(8,606 | ) | 48,415 | (93,754 | ) | (7,283 | ) | (75,619 | ) | |||||||||||
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Less: Amount attributed to
non-controlling interest
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(33 | ) | -- | (14,686 | ) | -- | (14,686 | ) | ||||||||||||
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Net comprehensive income (loss) for the
period
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$ | 428,341 | $ | (368,596 | ) | $ | 5,714 | $ | (730,164 | ) | $ | (3,812,863 | ) | |||||||
See accompanying notes to consolidated financial statements
8
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended
September 30,
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For the Period from Inception
(July 23, 2004) to
September 30,
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|||||||||||
| 2012 |
2011
|
2012 | ||||||||||
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Cash flow from operating activities:
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||||||||||||
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Net profit (loss) attributable to
Andain, Inc.
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$ | 84,782 | $ | (686,648 | ) | $ | (3,751,930 | ) | ||||
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Income charges/(credits) not effecting
cash:
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||||||||||||
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Depreciation
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9,532 | 5,828 | 50,157 | |||||||||
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Loss from acquisition of subsidiary
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-- | -- | 135,424 | |||||||||
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Amortization of goodwill
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-- | -- | 337,685 | |||||||||
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Impairment of loan
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-- | -- | 177,729 | |||||||||
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Minority interest
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2,809 | - | (209,672 | ) | ||||||||
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Shares issued for professional services
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-- | 447,500 | 11,910 | |||||||||
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Non-cash compensation expense
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-- | -- | 6,000 | |||||||||
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Equity-settled share-based payments
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143,236 | -- | 503,536 | |||||||||
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Loss from equity-accounted investee
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-- | 115,996 | -- | |||||||||
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Effect of movements in foreign
exchange rates on non-cash items
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-- | (2,181 | ) | (5,785 | ) | |||||||
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Changes in operating assets and liabilities:
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||||||||||||
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Accounts payable
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(672,494 | ) | (426,882 | ) | 503,408 | |||||||
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Accounts receivable
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108,597 | (174,564 | ) | (821,234 | ) | |||||||
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Change in other assets
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54,584 | -- | 54,584 | |||||||||
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Accrued compensation
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270,000 | 270,000 | 2,550,000 | |||||||||
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Accrued expenses – stockholder
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-- | -- | 37,508 | |||||||||
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Accrued consulting fees – stockholder
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-- | -- | 60,000 | |||||||||
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Net cash provided by (used in)
operating activities
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1,046 | (450,951 | ) | (478,049 | ) | |||||||
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Cash flow from investing activities:
|
||||||||||||
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Purchase of equipment
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(480 | ) | (952 | ) | (71,028 | ) | ||||||
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Acquisition of subsidiary
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-- | -- | (578,502 | ) | ||||||||
9
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
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Nine Months Ended
September 30,
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For the Period from Inception
(July 23, 2004) to
September 30,
|
|||||||||||
| 2012 | 2011 |
2012
|
||||||||||
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Disposal of interest in equity-accounted
investee
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-- | -- | -- | |||||||||
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Acquisition of patent
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-- | -- | (20,649 | ) | ||||||||
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Net cash used in investing activities
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(480 | ) | (952 | ) | (670,179 | ) | ||||||
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Cash flow from financing activities:
|
||||||||||||
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Proceeds from bank overdrafts
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-- | (38,376 | ) | -- | ||||||||
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Proceeds from stock issued for cash
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-- | 355,000 | 519,800 | |||||||||
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Proceeds from other loans
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-- | 104,494 | (59,520 | ) | ||||||||
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Loan from greater than 10% stockholder
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-- | 797 | (15,754 | ) | ||||||||
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Loans from key management personnel
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-- | 23,419 | 704,217 | |||||||||
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Net cash provided by financing activities
|
-- | 445,334 | 1,148,743 | |||||||||
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Increase (decrease) in cash
and cash equivalents
|
566 | (6,569 | ) | 216 | ||||||||
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Effects of exchange rate changes on the balance of cash held in foreign currencies
|
(19 | ) | (7,263 | ) | 903 | |||||||
|
Cash and cash equivalents,
beginning of period
|
872 | 23,672 | -- | |||||||||
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Cash and cash equivalents,
end of period
|
$ | 1,419 | $ | 9,840 | $ | 1,419 |
10
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
|
Nine Months Ended
September 30,
|
Period of Inception
(July 23, 2004)
Through
|
|||||||||||
| 2012 | 2011 |
June 30, 2012
|
||||||||||
|
Supplementary schedule of
cash flow activities:
|
||||||||||||
|
Non-cash investing and financing
activities:
|
||||||||||||
|
Issuance of common stock for payment
of legal fees and various other services
|
$ | 58,000 | $ | -- | $ | 566,514 | ||||||
|
Issuance of common stock for payment
of services of transfer agent
|
$ | 24,638 | $ | -- | $ | 79,235 | ||||||
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Issuance of common stock for payment
of rental expense
|
$ | -- | $ | -- | $ | 60,000 | ||||||
|
Issuance of common stock for payment
of management and consulting fees
|
$ | -- | $ | 1,920,000 | $ | 1,921,900 | ||||||
|
Issuance of common stock for
purchase of intellectual property
|
$ | -- | $ | -- | $ | 4,500 | ||||||
|
Issuance of common stock for
purchase of subsidiary
|
$ | -- | $ | -- | $ | 2,500 | ||||||
|
Issuance of common stock for payment
of management and consulting fees
|
$ | -- | $ | -- | $ | 300 | ||||||
|
Non-cash compensation expense
|
$ | -- | $ | -- | $ | 6,000 | ||||||
See accompanying notes to consolidated financial statements
11
ANDAIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – GENERAL
Andain Inc. (“Company”) was established in 2004 in the State of Nevada, U.S.A. Since commencing operations in 2006, the Company has been engaged, both independently and through its consolidated entities (collectively, the “Group”), in the development of medical technology, from early stage development to advanced clinical trials, for a wide range of medical needs.
The Group incurred profits from operations in the amount of $87,591 during the nine months ended September 30, 2012, and losses from operations of $686,648 during the nine months ended September 30, 2011 and $1,434,472 during the year ended December 31, 2011.
The above raise substantial doubt about the ability of the Company to continue as a going concern.
The future success of the Company is dependent upon its ability to invest the required resources in research and development, the quality of its technologies, future market and the continued financial support of its shareholders in order to secure the continuity of its research and development operations.
The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim consolidated financial statements as of September 30, 2012 and for the nine months then ended were prepared in a condensed form in accordance with the instructions for Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of financial position, results of operations, changes in equity, cash flows and all the data and notes which are required when preparing annual financial statements, in conformity with generally accepted accounting principles accepted in the United States of America.
The financial statements have been prepared under the historical cost basis.
The accounting principles used in the presentation of the interim financial statements are consistent with those principles used in the presentation of the latest annual financial statements. All significant accounting policies have been applied consistently with the year ended December 31, 2011, except for the correction of the accounting treatment of certain transactions, as described in Note 5.
The preparation of the interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. In the opinion of management, all adjustments considered necessary for fair presentation of the interim financial statements have been included. The results of operations for the nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The interim financial statements should be read in conjunction with the Company’s annual financial statements as of December 31, 2011 and for the year then ended and the accompanying notes thereto.
12
NOTE 3 – FUNCTIONAL AND REPORTING CURRENCY
The consolidated financial statements are presented in U.S. Dollars, which is the Company’s functional currency and presentation currency. The financial statements of entities that use a functional currency other than the U.S. Dollar are translated into U.S. Dollars. Assets and liabilities are translated using the exchange rate on the respective balance sheet dates. Items in the income statement and cash flow statement are translated into U.S. Dollars using the average rates of exchange for the periods involved. The resulting translation adjustments are recorded as a separate component of other comprehensive income/ (loss) within stockholders’ equity.
New Israeli Shekel (“NIS”) amounts as of September 30, 2012 have been translated into U.S. Dollars at the representative rate of exchange on September 30, 2012 (USD 1 = NIS 3.912).
NOTE 4 – RESENT ACCOUNTING PRONOUNCEMENTS ISSUED AND ADOPTED IN THE REPORTED PERIODS
In April 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-17, “Revenue Recognition - Milestone Method,” which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a drug study or achieving a specific result from the research or development efforts. An entity often recognizes these milestone payments as revenue in their entirety upon achieving the related milestone, commonly referred to as the milestone method. In future research and development transactions, we will analyze the impact and, when the milestones are substantive, we will recognize them according to ASU 2010-17. Accordingly, the adoption of the provisions of ASU 2010-17 did not have any effect on our financial position, results of operations or cash flows.
In May 2011, the FASB issued amended guidance on fair value measurements. This amended accounting standard clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This accounting standard is effective on a prospective basis for interim and annual reporting periods beginning on or after December 15, 2011. As this accounting standard only requires enhanced disclosure, the adoption of this standard did not impact the Company’s financial position or results of operations.
13
In June 2011, the authoritative guidance for presentation of comprehensive income was amended to eliminate the option to present other comprehensive income and its components in the statement of changes in shareholders’ deficit. Companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate but consecutive statements. The Company adopted this new guidance on January 1, 2012, as required and it did not have an impact on the Company’s financial position or results of operations.
In June 2011, Accounting Standards Codification (“ASC”) Topic 220, “Comprehensive Income,” was amended to increase the prominence of items reported in other comprehensive income. Accordingly, a company can present all non-owner changes in stockholders’ equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company adopted this guidance during the first quarter of 2012 and elected to disclose other comprehensive income in a single continuous statement during interim reporting periods.
In December 2011, the FASB issued new guidance impacting the presentation of certain items on the balance sheet. The new guidance requires an entity to disclose both gross and net information about both instruments and transactions that are eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The adoption of this guidance is not expected to impact the Company’s consolidated financial position, results of operations or cash flows, but may result in certain additional disclosures.
In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-12.” The amendments in ASU 2011-12 defer the changes in ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The amendments in this ASU are effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2011. See above for the provisions of ASU 2011-05.
NOTE 5 – NEW ACCOUNTING PRONOUNCEMENTS
In July 2012, the FASB issued new accounting guidance intended to simplify the testing of indefinite-lived intangible assets for impairment. Entities will be allowed the option to first perform a qualitative assessment on impairment for indefinite-lived intangible assets to determine whether a quantitative assessment is necessary. This guidance is effective for impairment tests performed in the interim and annual periods for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our Consolidated Financial Statements.
14
NOTE 6 – PRIOR PERIOD ADJUSTMENTS
During the period, the Company restated its financial statements for the year ended December 31, 2011 and the three months ended March 31, 2012, to give retrospective effect to the amendments described below:
|
Consolidated Balance Sheet
as of December 31, 2011
(Audited)
|
||||||||||||
|
As Previously
Reported
|
Prior Period Adjustments (1)
|
As Restated
|
||||||||||
|
Accumulated Deficit During the Development Stage
|
$ | (3,836,712 | ) | $ | (377,689 | ) | $ | (4,214,401 | ) | |||
|
Capital Reserves
|
$ | 6,300 | $ | 377,689 | $ | 383,989 | ||||||
(1) On January 14, 2011, the Company resolved to extend the period for exercise of granted options, dated July 19, 2006, to purchase 1,000,000 restricted shares of the Company's common stock from June 30, 2011 to June 30, 2013. This extension was not given effect in the consolidated financial statements as of December 31, 2011. The fair value attributed to the amendment of the option terms of $377,689 was determined on the basis of Black-Scholes option pricing model.
|
Consolidated Balance Sheet
as of March 31, 2012
(Unaudited)
|
||||||||||||
|
As Previously
Reported
|
Prior Period Adjustments (2)
|
As Restated
|
||||||||||
|
Accumulated Deficit During the Development Stage
|
$ | (3,924,428 | ) | $ | (171,411 | ) | $ | (4,095,839 | ) | |||
|
Non-controlling Interest
|
$ | (189,145 | ) | $ | (13,989 | ) | $ | (203,134 | ) | |||
15
|
Consolidated Statements of Operations
For the Three Months Ended March 31, 2012
(Unaudited)
|
||||||||||||
|
As Previously
Reported
|
Prior Period Adjustments (2)
|
As Restated
|
||||||||||
|
Extraordinary gain on
forgiveness of debt
|
$ | (230,126 | ) | $ | 230,126 | -- | ||||||
|
Net loss
|
$ | 118,778 | $ | 185,400 | $ | 304,178 | ||||||
|
Net loss attributable to
non-controlling interest
|
$ | 31,062 | $ | 13,989 | $ | 45,051 | ||||||
|
Net loss attributable to
Andain, Inc. stockholders
|
$ | 87,716 | $ | 171,411 | $ | 259,127 | ||||||
|
Net loss per share (basic)
attributable to Andain, Inc.
|
$ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) | ||||
(2) Represents the elimination of the extraordinary gain on forgiveness of debt that was recognized in the unaudited consolidated statements as of March 31 2012. As of the date of this report settlement of $185,400 of the debt to the company's service provider (legal counsel) has not yet been closed, and the remaining $44,726 was reclassified to research and development expenses.
NOTE 7 – STOCKHOLDERS’ EQUITY
Changes in during the nine months ended September 30, 2012 are as follows:
(a) On February 5, 2012, the Company issued a total of 300,000 restricted shares of common stock (150,000 each) to Otzarot Tarshsih Nechasim Vehashkaott Ltd., for consulting work, and Uziel Economic Consultant Ltd., for marketing services. Accordingly, the company charged to profit and loss account compensation of $18,000 for the nine months ended September 30, 2012.
(b) On June 14, 2012, the Company issued 200,000 restricted shares of common stock to the Company’s transfer agent, Globex Transfer, LLC, for professional services. Accordingly, the company charged to profit and loss account compensation of $14,235 for the six months ended September 30, 2012.
(c) On September 20, 2012, the Company issued a total of 3,000,000 restricted shares of common stock (1,500,000 each) to Otzarot Tarshsih Nechasim Vehashkaott Ltd., for additional consulting work, and Uziel Economic Consultant Ltd., for additional marketing services. The Company did not charge any additional compensation to the profit and loss account for the nine months ended September 30, 2012 since these additional services have not been provided yet.
(d) On January 1, 2011, the Company began using offices provided by 1568934 Ontario Limited, a greater than 10% stockholder of the Company, located in Beverly Hills, California. This office space is approximately 1,000 square feet; the Company pays restricted shares of common stock each month for rent, electricity, telephones, and other expenses of the office. The Company is under a month-to-month lease of these offices. On September 20, 2012, the Company issued 600,000 restricted shares of common stock to 1568934 Ontario Limited as rent for the 2012 calendar year under a Corporate Office Services Agreement, dated January 5, 2012. Accordingly, the Company charged to the profit and loss account compensation of $45,000 for the nine months ended September 30, 2012.
(e) On September 20, 2012, the Company issued 720,000 restricted shares of common stock to American Capital Ventures, and 480,000 restricted shares of common stock to Maplehurst Investment Group, both for investor relations services. Accordingly, the Company charged to the profit and loss account total compensation of $10,000 for the nine months ended September 30, 2012.
16
NOTE 8 – PROVISION FOR TAXES
At September 30, 2012, the Company had net operating loss carry forwards of $4,189,282 that may be offset against future federal taxable income through 2025. No tax benefit has been reported with respect to these net operating loss carry forwards in the accompanying financial statements because the Company believes that realization is not likely. Accordingly, the potential tax benefits of the net loss carry forwards are fully offset by a valuation allowance.
NOTE 9 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Foreign Exchange Risk.
The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the U.S. Dollar and the New Israeli Shekel. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.
Interest Rate Risk.
The Company is subject to cash flow interest rate risk due to fluctuations in the prevailing levels of market interest rates. The investment manager monitors the Company’s overall interest sensitivity on a monthly basis and the general director on a quarterly basis.
Credit Risk.
Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counter-parties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
Liquidity and Capital Risk Management.
The Company’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for stockholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to stockholders, return capital to stockholders, issue new shares or sell assets to reduce debt.
17
NOTE 10 – RELATED PARTY TRANSACTIONS
The following transactions were carried out with related parties:
|
|
Nine Months Ended
|
Nine Months Ended
|
||||||
|
|
September 30, 2012
|
September 30, 2011
|
||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||
|
$
|
$
|
|||||||
|
Income statements:
|
||||||||
|
Directors’ remuneration
|
270,000 | 270,000 | ||||||
|
Balance sheets:
|
||||||||
|
Loans receivable from related companies
|
175,689 | 69,456 | ||||||
|
Loans with related companies – other assets
|
173,970 | 292,181 | ||||||
|
Loans – key management personnel
|
(247,147 | ) | (74,652 | ) | ||||
|
Loans owing to related companies
|
-- | (158,844 | ) | |||||
NOTE 11 – OTHER INCOME
|
|
Nine Months Ended
|
Nine Months Ended
|
||||||
|
|
September 30, 2012
|
September 30, 2011
|
||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||
|
$
|
$
|
|||||||
|
Forgiveness of debt-share holders
|
504,000 | -- | ||||||
|
Forgiveness of debt-trade payables
|
106,396 | -- | ||||||
|
Total
|
610,396 | -- | ||||||
NOTE 12 – SUBSEQUENT EVENTS
(a) On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Eran Elimelech, son of Sam Elimelech (the Company’s president) but not living in the same household. Under this agreement, Eran Elimelech purchased from the Company 2,000,000 restricted shares of common stock for a total consideration of $2,000 ($0.001 per share). Sam Elimelech disclaims any beneficial ownership of these shares. These shares were actually issued on November 6, 2012.
(b) On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Sam Elimelech, the Company’s President & CEO. Under this agreement, Sam Eliemelech purchased from the Company 18,000,000 restricted shares of common stock for a total consideration of $18,000 ($0.001 per share). These shares were actually issued on November 15, 2012.
(c) On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Gai Mar-Chaim, the Company’s secretary/treasurer. Under this agreement, Mr. Mar-Chaim purchased from the Company 18,000,000 restricted shares of common stock for a total consideration of $18,000 ($0.001 per share). These shares were actually issued on November 15, 2012.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following management’s discussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with, the Company’s unaudited financial statements and related notes included elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.
Overview.
(a) General Discussion.
Andain is involved in the biotech and medical fields, specializing in identifying technical innovations and providing a unique incubator/accelerator development and industrial platform. The company also offers technical know-how and business strategy expertise to commercialize new technologies into products. The Company’s main efforts are to optimize development, engineering for production, regulation, pre-clinical and clinical trials and market penetration, respectfully, to each of its products. The Company is constantly working to enhance its products by new synergetic novel technologies keeping each of its products advantageous in its market.
The Company’s industrial incubator specializes in utilization of the industrial infrastructure of companies that it works with, optimizing each product’s research and development and engineering development to the “best-in-the-market” product.
The Company’s team of experts manages all technological, medical, regulatory and other aspects needed to insure timely development, and market presence within the planed program and budget.
The Company operates five product lines:
|
·
|
Miniature insulin pump
|
|
·
|
Targeted drug delivery nano-particles
|
|
·
|
Stem cell therapy
|
|
·
|
Ultasonic catheter for brain cancer therapy
|
|
·
|
Peptide booster for anti-wrinkle cosmeceuticals
|
Miniature Disposable Insulin Pump.
Andain has developed a miniature insulin pump with ultra slim, small 'Band-Aid' patch size, fully disposable, water proof, fully programmable characteristics, designed to treat Type I and Type II diabetes for a full week. The pump's dimensions 49mm diameter, by less than 7 mm thick with 6CC (600 units) insulin, make it very comfortable and almost unnoticeable to wear. Its ultra-low cost makes it an affordable yet clinically superior replacement for pen injector products. Smart on-line monitoring provides a real-time alert for occlusions and leakages. The Company’s main challenge was to achieve production price capable to compete with the low price of the insulin pen syringe injection for diabetic type II. The Company’s detailed market survey showed a significant advantage of such a product in the market, providing the size and price comfort, yet accurate as the expensive top of the line insulin pumps and preventing any hyper or hypo life threatening situations to the patient (stable blood glucose level superior to the syringe use).
19
The Company’s team successfully developed the technology of the MinIn (miniature insulin) fully disposable pump, and lab tested all regulatory aspects of the MinIn pup, ready for the clinical trials initial production batch. During the first quarter of 2012, the Company’s team focused on the technology transfer for GMP/GLP production, and Helsinky approval for clinical trials. During the second quarter, the Company has produced parts and subassemblies for 2,000 units, adapting production and assembly lines.
The Company estimates that the MinIn development, regulatory, and manufacturing in order to complete all needed clinical trials, will require an additional $530,000.
Nano-particles Targeted Drug Delivery Technology.
Andain is also committed to develop its nano-particle technology with the capacity to accommodate hydrophobic (repelling water based molecules), as well hydrophilic (attracting water based molecules) properties. These developments will enable the Company’s product to carry ultra strong antibiotics to treat VAP (ventilated associated pneumonia) at respiratory intensive care units (ICU) with an average mortality rate over 50%. The Company is using the VAP application to clinically test the technology, and start market test with its application for compassionate use before full Food and Drug Administration (“FDA”) regulation will end. The Company is also developing its product to carry the GSK RELENZA (zanamivir) drug for swine flu (H1N1) therapy. The Company’s lab results show very stable nano-particle with over a six months shelf life capable to carry hydrophobic and hydrophilic molecules with a high drug load, providing exceptional drug delivery efficiency. During the first quarter of 2012, the Company’s team mapped all intellectual properties used to develop the multi-task nano-particles and to secure it in a separate its intellectual properties apart from those used by TPDS. During the second quarter of 2012, the Company’s team prepared the all pre-clinical studies ready for animal tests. This work dramatically reduced the need for extended pre-clinical trials, saving time and money.
The Company estimates that the additional development, regulatory, and manufacturing in order to complete all needed clinical trials will require an additional $850,000 in order to conclude successful human trial.
Stem Cell Therapy for Muscular Injuries.
The Company has completed successful animal studies with positive results on limb therapy. The initial animal studies showed very promising rehabilitating results. Because of those results, the Company has modified and accelerated its development program with two pillar technologies with strong intellectual properties: (i) Direct a stem cell to a myogenic (muscle) cell without any spontaneous direction into unhealthy cells such as cancer; and (ii) mass produce the directed myogenic cells for patient treatment. As part of the of the development phase, the Company has developed a “harvesting” procedure of human fat tissue from the patient as a row material for extracting the stem cells, diverting and directing the stem cells to muscle cells and reproducing these cells for an effective treatment. Currently, the Company is developing the upscale production process for commercial use.
20
The Company estimates that the additional development, regulatory, and manufacturing in order to complete all needed pre-clinical trials, will require an additional $620,000.
(b) Operations.
Insulin Pumps.
The Company has postponed the registration and filing of the patent application from second quarter of 2012 to the end of 2012 due to the multiple miniaturizing, and sensory innovations emanated from the accelerated development program, which added to the Company’s IP.
The Company’s new pump is not based or relates in any aspect on Gaia-Med’s technology that precludes the Company and the incubator from any royalty payments on this product line. Currently, the Company and the incubator discontinued the development of the semi-disposable Gaia-Med pump within its original program. The Company will revisit the Gaia-Med development program in the third quarter of 2012, according to a MOITL request.
Nano-Particles.
Andain separates the additional development in any aspect from the development done in TPDS.
The Company has successfully managed to develop new technology and intellectual properties to be secured by new patents, for the multi-tasking nano-particles. The Company the registration and filing of the patent application from second quarter of 2012 to the end of 2012 due to additional technological patentable developments emanated from the accelerated program. The Company’s development success of new and separate technology that is not based or relates in any aspect on TPDS’s technology that precludes the Company and the incubator from any royalty payments on this product line. Currently, the Company and the incubator-halted development of TPDS based technology, and now develop only its new technology. The Company will revisit the original TPDS development program in the third quarter of 2012, according to a MOITL request.
The Company plans to initiate the planed pre-clinical animal trials to enable it to begin human clinical trials in Rambam Medical Centre, ICU, for VAP patients.
21
Stem Cell Therapy.
Andain has developed the stem-cell technology and product line, conducted animal tests and successfully built massive intellectual properties without the need to separate and transfer the activity into owned subsidiary. Therefore the Company decided to postpone its intention as planed to establish in the second quarter of 2012 a new company to accommodate all assets and operations of the new technology and development of the project. The Company will revisit the need to transfer this activity to a separate subsidiary during the next two quarters.
Results of Operations.
(a) Total Revenue.
The Company had total revenue of $12,158 for the three months ended September 30, 2012 compared to $271,859 for the three months ended September 30, 2011, a decrease of $259,701 or approximately 96%.
The Company had total revenue of $88,404 for the nine months ended September 30, 2012 compared to $421,291 for the Nine months ended September 30, 2011, a decrease of $332,883 or approximately 79%.
These decreases in revenue were the result of a decrease in government grants.
The Company had total revenue of $1,170,428 for the period of inception (June 23, 2004) through September 30, 2012.
(b) General and Administrative Expenses.
The Company had general and administrative expenses of $32,179 for the three months ended September 30, 2012 compared to $309,127 for the three months ended September 30, 2011, a decrease of $276,948 or approximately 90%.
The Company had general and administrative expenses of $146,128 for the nine months ended September 30, 2012 compared to $763,130 for the nine months ended September 30, 2011, a decrease of $617,002 or approximately 81%.
These decreases in general and administrative expenses were due to reclassification to research and development expenses and reduction of general and administrative expenses to operations needs.
The Company had general and administrative expenses of $4,300,835 for the period of inception (June 23, 2004) through September 30, 2012.
22
(c) Research and Development Expenses.
The Company had research and development expenses of $107,270 for the three months ended September 30, 2012 compared to $220,388 for the three months ended September 30, 2011, a decrease of $113,118 or approximately 51%.
The Company had research and development expenses of $452,043 for the nine months ended September 30, 2012 compared to $220,388 for the nine months ended September 30, 2011, an increase of $231,655 or approximately 105%.
This increase in research and development expenses was due to reclassification of general and administrative expenses to research and development.
The Company had research and development expenses of $822,681 for the period of inception (June 23, 2004) through September 30, 2012.
(d) Net Profit (Loss).
The Company had a net profit of $436,914 for the three months ended September 30, 2012 compared to a net loss of $417,011 for the three months ended September 30, 2011.
The Company had a net profit of $84,782 for the nine months ended September 30, 2012 compared to a net loss of $722,881 for the nine months ended September 30, 2011.
These changes from period to period are the result of other income generated from forgiveness of debts.
The Company had a net loss of $3,751,930 for the period of inception (June 23, 2004) through September 30, 2012.
Operating Activities.
Net cash provided by operating activities was $1,046 for the nine months ended September 30, 2012 compared to net cash used in operating activities of $450,951 for the nine months ended September 30, 2011, a change of $452,744. This change is attributed mainly to decrease of payment for professional services.
The net cash used in operating activities was $478,049 for the period of inception (June 23, 2004) through September 30, 2012.
Investing Activities.
Net cash used in investing activities was $480 for the nine months ended September 30, 2012 compared to $952 for the nine months ended September 30, 2011.
Net cash used in investing activities was $670,179 for the period of inception (June 23, 2004) through September 30, 2012.
23
Liquidity and Capital Resources.
As of September 30, 2012, the Company had total current assets of $802,149 and total current liabilities of $994,924 resulting in a working capital deficit of $192,775. The cash and cash equivalents was $2,207 as of September 30, 2012 compared to $872 as of December 31, 2011, an increase of $1,335. This increase was due to share issuance for cash received in January 2012.
The net cash provided by financing activities was $0 for the nine months ended September 30, 2012 compared to $445,334 for the nine months ended September 30, 2011. This change is attributed to decrease in share issuance for cash and for share-based payments. Overall, cash and cash equivalents for the nine months ended September 30, 2012 increased by $547. The net cash provided by financing activities was $1,148,743 for the period of inception (June 23, 2004) through September 30, 2012.
The Company’s current cash and cash equivalents balance will be not be sufficient to fund its operations for the next 12 months. The Company’s ability to continue as a going concern on a longer-term basis will be dependent upon its ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, and to obtain additional financing, and ultimately attain profitability. The Company’s continued operations, as well as the implementation of the Company’s business plan will depend upon its ability to raise additional funds through bank borrowings and equity or debt financing.
On January 14, 2011, the Company entered into a Regulation S Stock Purchase Agreement with 1568934 Ontario Limited, an Ontario limited partnership (“Purchaser”). Under this agreement, the Purchaser purchased from the Company 266,667 restricted shares of common stock at $0.75 per share for a total consideration of $200,000. The Purchaser is an affiliate of the Company.
On May 24, 2011, the Company entered into a Regulation S Stock Purchase Agreement with the Purchaser. Under this agreement, the Purchaser purchased from the Company 140,000 restricted shares of common stock at $0.75 per share for a total consideration of $105,000.
On July 29, 2011, the Company entered into a Regulation S Stock Purchase Agreement with the Purchaser. Under this agreement, the purchaser purchased from the Company 66,667 restricted shares of common stock at $0.75 per share for a total consideration of $50,000.
On December 26, 2011, the Company entered into a Regulation S Stock Purchase Agreement with the Purchaser. Under this agreement, the Purchaser purchased from the Company 2,590,909 restricted shares of common stock at $0.11 per share for a total consideration of $285,000.
On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Sam Elimelech, the Company’s President & CEO. Under this agreement, Sam Eliemelech purchased from the Company 18,000,000 restricted shares of common stock for a total consideration of $18,000 ($0.001 per share).
24
On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Gai Mar-Chaim, the Company’s secretary/treasurer. Under this agreement, Mr. Mar-Chaim purchased from the Company 18,000,000 restricted shares of common stock for a total consideration of $18,000 ($0.001 per share).
On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Eran Elimelech, son of Sam Elimelech (the Company’s president) but not living in the same household. Under this agreement, Eran Elimelech purchased from the Company 2,000,000 restricted shares of common stock for a total consideration of $2,000 ($0.001 per share). Sam Elimelech disclaims any beneficial ownership of these shares.
Whereas the Company has been successful in the past in raising capital, no assurance can be given that these sources of financing will continue to be available to it and/or that demand for the Company’s common stock will be sufficient to meet its capital needs, or that financing will be available on terms favorable to the Company. If funding is insufficient at any time in the future, the Company may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of the Company’s planned product development and marketing efforts, any of which could have a negative impact on its business and operating results. In addition, insufficient funding may have a material adverse effect on the Company’s financial condition, which could require it to:
|
·
|
curtail operations significantly;
|
|
·
|
sell significant assets;
|
|
·
|
seek arrangements with strategic partners or other parties that may require the Company to relinquish significant rights to products, technologies or markets; or
|
|
·
|
explore other strategic alternatives including a merger or sale of the Company.
|
To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to the Company’s existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Company’s operations. Regardless of whether the Company’s cash assets prove to be inadequate to meet its operational needs, the Company may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to the Company’s existing stockholders.
Inflation.
The impact of inflation on the Company’s costs and the ability to pass on cost increases to its customers over time is dependent upon market conditions. The Company is not aware of any inflationary pressures that have had any significant impact on its operations over the past quarter and the Company does not anticipate that inflationary factors will have a significant impact on future operations.
25
Off-Balance Sheet Arrangements.
The Company does not maintain off-balance sheet arrangements nor does it participate in non-exchange traded contracts requiring fair value accounting treatment.
Critical Accounting Policies.
The SEC has issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company’s most critical accounting policies include: (a) use of estimates; (b) impairment of long-lived assets; (c) revenue recognition; and (d) share-based compensation. The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results the Company reports in its financial statements.
(a) Use of Estimates.
The preparation of financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Company bases its estimates on historical experience and on various other assumptions that is believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
(b) Impairment of Long-Lived Assets.
For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company assesses the impairment of long-lived assets (including identifiable intangible assets) annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
When management determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we test for any impairment based on a projected undiscounted cash flow method. Projected future operating results and cash flows of the asset or asset group are used to establish the fair value used in evaluating the carrying value of long-lived and intangible assets. The Company estimates the future cash flows of the long-lived assets using current and long-term financial forecasts. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If this were the case, an impairment loss would be recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value.
26
(c) Revenue Recognition.
The Company recognizes revenue when all four recognition criteria have been met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, seller’s price to buyer is fixed or determinable, and collectability is reasonably assured.
(d) Share-Based Compensation.
The Company follows Accounting Standards Codification Topic 718-10, “Stock Compensation,” which addresses accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. Topic 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Upon the adoption of Topic 718-10, the Company maintained its method of valuation for stock option awards using the Black-Scholes valuation model, which has historically been used for the purpose of providing pro-forma financial disclosures in accordance with Topic 718-10.
The use of the Black-Scholes valuation model to estimate the fair value of stock option awards requires the Company to make judgments and assumptions regarding the risk-free interest rate, expected dividend yield, expected term and expected volatility over the expected term of the award. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the actual amount of expense could be materially different in the future.
Compensation expense is only recognized on awards that ultimately vest.
Forward Looking Statements.
Information in this Form 10-Q contains “forward looking statements” within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended (“Securities Act”). When used in this Form 10-Q, the words “expects,” “anticipates,” “believes,” “plans,” “will” and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements regarding the adequacy of cash, expectations regarding net losses and cash flow, statements regarding growth, the need for future financing, dependence on personnel, and operating expenses.
Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer/principal financial officer, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, the Company’s management carried out an evaluation, under the supervision and with the participation of the principal executive officer/principal financial officer, of disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon the evaluation, the principal executive officer/principal financial officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed by it in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. In addition, the principal executive officer/principal financial officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer/principal financial officer, to allow timely decisions regarding required disclosure.
Inherent Limitations of Control Systems.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be or have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, and/or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, and/or the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective internal control system, misstatements due to error or fraud may occur and not be detected.
28
Changes in Internal Control Over Financial Reporting.
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company may become party to litigation or other legal proceedings that the Company considers to be a part of the ordinary course of the business. There are no material legal proceedings to report, except as outlined in the last Form 10-K. There are no changes to those legal proceedings as reported in that Form 10-K.
ITEM 1A. RISK FACTORS.
There have been no material changes in the risk factors as previously disclosed in response to Item 1A.of Part I of the Company’s latest Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Other than as set forth below, there were no unregistered sales of the Company’s equity securities during the three months ended September 30, 2012 that were not reported in a filing:
(a) On September 20, 2012, the Company issued a total of 3,000,000 restricted shares of common stock (1,500,000 each) to Otzarot Tarshsih Nechasim Vehashkaott Ltd., for additional consulting work, and Uziel Economic Consultant Ltd., for additional marketing services. The Company did not charge any additional compensation to the profit and loss account for the nine months ended September 30, 2012 since these additional services have not been provided yet.
(b) On September 20, 2012, the Company issued 720,000 restricted shares of common stock to American Capital Ventures, and 480,000 restricted shares of common stock to Maplehurst Investment Group, both for investor relations services. Accordingly, the Company charged to the profit and loss account total compensation of $10,000 for the nine months ended September 30, 2012.
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The Company relied on the exemptive provisions of Regulation D under the Securities Act for the issuances in (a) and (b) above. At all times relevant the securities were offered subject to the terms and conditions of this Regulation. No commissions were paid in connection with any of these sales. All funds received from the sale of the common stock are to be used for working capital purposes.
There were no purchases of the Company’s common stock by the Company or its affiliates during the three months ended September 30, 2012
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Correction.
It was reported in the Company’s last Form 10-Q that 600,000 restricted shares of common stock were issued to 1568934 Ontario Limited, a greater than 10% stockholder of the Company, located in Beverly Hills, California, on August 14, 2012 in connection with office space leased to the Company. These shares were actually issued on September 20, 2012.
Subsequent Events.
(a) On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Sam Elimelech, the Company’s President & CEO. Under this agreement, Sam Eliemelech purchased from the Company 18,000,000 restricted shares of common stock for a total consideration of $18,000 ($0.001 per share). These shares were actually issued on November 15, 2012.
(b) On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Gai Mar-Chaim, the Company’s secretary/treasurer. Under this agreement, Mr. Mar-Chaim purchased from the Company 18,000,000 restricted shares of common stock for a total consideration of $18,000 ($0.001 per share). These shares were actually issued on November 15, 2012.
(c) On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Eran Elimelech, son of Sam Elimelech (the Company’s president) but not living in the same household. Under this agreement, Eran Elimelech purchased from the Company 2,000,000 restricted shares of common stock for a total consideration of $2,000 ($0.001 per share). Sam Elimelech disclaims any beneficial ownership of these shares. These shares were actually issued on November 6, 2012.
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The Company relied on the exemptive provisions of Regulation S under the Securities Act for the issuances in (a), (b), and (c) above. At all times relevant the securities were offered subject to the terms and conditions of this Regulation. No commissions were paid in connection with any of these sales. All funds received from the sale of the common stock are to be used for working capital purposes.
ITEM 6. EXHIBITS.
Exhibits included or incorporated by reference herein are set forth in the Exhibit Index.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Andain, Inc.
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Dated: November 19, 2012
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By: /s/ Sam Shlomo Elimelech
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Sam Shlomo Elimelech, President
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(principal executive officer)
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31
EXHIBIT INDEX
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Number
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Description
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3.1
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Articles of Incorporation, dated July 14, 2004 (incorporated by reference to Exhibit 3.1 of the Form 10-SB filed on March 24, 2005).
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3.2
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Bylaws, dated August 1, 2004 (incorporated by reference to Exhibit 3.2 of the Form 10-SB filed on March 24, 2005).
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4.1
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Option issued to 1568934 Ontario Limited by the Company, dated January 14, 2011 (incorporated by reference to Exhibit 10.6 of the Form 8-K filed on March 29, 2011).
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4.2
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Employee Stock Option Plan, dated January 15, 2011 (incorporated by reference to Exhibit 4.2 of the Form 10-Q filed on November 21, 2011).
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4.3
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Stock Option Grant to Sam Elimelech, dated January 20, 2011 (incorporated by reference to Exhibit 4.3 of the Form 10-Q filed on November 21, 2011).
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4.4
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Stock Option Grant to Gai Mar-Chaim, dated January 20, 2011 (incorporated by reference to Exhibit 4.4 of the Form 10-Q filed on November 21, 2011).
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4.5
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2011 Stock and Option Plan, dated July 26, 2011 (incorporated by reference to Exhibit 4 of the Form S-8 filed on July 26, 2011).
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4.6
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2012 Stock and Option Plan, dated August 5, 2011 (incorporated by reference to Exhibit 4 of the Form S-8 filed on August 14, 2012).
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10.1
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Affiliation Agreement between the Impact Active Team Ltd. and P.O.C. High-Tech (1992) Ltd. Corporation, dated June 23, 2004 (incorporated by reference to Exhibit 10.8 of the Form SB-2 filed on February 13, 2007).
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10.2
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Consulting Agreement between the Company and Dr. Leonid Lurya, dated May 16, 2006 (incorporated by reference to Exhibit 10.2 of the Form 10-K filed on December 30, 2010).
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10.3
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Share Purchase Agreement between the Company and Pangea Investments GmbH, dated June 11, 2006 (not including Schedule 1, Disclosure Schedule) (incorporated by reference to Exhibit 10.1 of the Form 8-K filed on July 5, 2006).
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10.4
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Technology Purchase Agreement between the Company and Pangea Investments GmbH, dated June 11, 2006 (incorporated by reference to Exhibit 10.2 of the Form 8-K filed on July 5, 2006).
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10.5
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Finder’s Fee Agreement between the Company and Pangea Investments GmbH, dated June 11, 2006 (incorporated by reference to Exhibit 10.5 of the Form 8-K filed on July 5, 2006).
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32
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10.6
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Consulting Agreement between the Company and Pangea Investments GmbH, dated July 3, 2006 (incorporated by reference to Exhibit 10.3 of the Form 8-K filed on July 5, 2006).
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10.7
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Business Development Services Agreement between the Company and Pangea Investments GmbH, dated July 3, 2006 (incorporated by reference to Exhibit 10.4 of the Form 8-K filed on July 5, 2006).
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10.8
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Employment Agreement between the Company and Sam Elimelech, dated July 3, 2006 (incorporated by reference to Exhibit 10.6 of the Form 8-K filed on July 5, 2006).
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10.9
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Employment Agreement between the Company and Gai Mar-Chaim, dated July 3, 2006 (incorporated by reference to Exhibit 10.7 of the Form 8-K filed on July 5, 2006).
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10.10
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Regulation S Stock Purchase Agreement between the Company and 1568934 Ontario Limited, dated July 19, 2006 (incorporated by reference to Exhibit 10.11 of the Form 10-K/A filed on February 7, 2011).
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10.11
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Consulting Agreement between the Company and Meizam - Advanced Enterprise Center Arad Ltd., dated October 25, 2006 (incorporated by reference to Exhibit 10.10 of the Form 10-K filed on December 30, 2010).
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10.12
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Employment Agreement between the Company and Sam Elimelech, dated January 1, 2011 (incorporated by reference to Exhibit 10.1 of the Form 8-K filed on March 29, 2011).
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10.13
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Employment Agreement between the Company and Gai Mar-Chaim, dated January 1, 2011 (incorporated by reference to Exhibit 10.2 of the Form 8-K filed on March 29, 2011).
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10.14
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Regulation S Stock Purchase Agreement between the Company and Sam Elimelech, dated January 5, 2011 (incorporated by reference to Exhibit 10.3 of the Form 8-K filed on March 29, 2011).
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10.15
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Regulation S Stock Purchase Agreement between the Company and Gai Mar-Chaim, dated January 5, 2011 (incorporated by reference to Exhibit 10.4 of the Form 8-K filed on March 29, 2011).
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10.16
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Regulation S Stock Purchase Agreement between the Company and 1568934 Ontario Limited, dated January 14, 2011 (incorporated by reference to Exhibit 10.5 of the Form 8-K filed on March 29, 2011).
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33
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10.17
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Stock Purchase Agreement between the Company and Meizam Arad Investments Ltd., dated January 31, 2011 (incorporated by reference to Exhibit 10.7 of the Form 8-K filed on March 29, 2011).
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10.18
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Stock Purchase Agreement between Meizam – Advanced Enterprise Center Arad Ltd and Meizam Arad Investments Ltd., dated January 31, 2011 (incorporated by reference to Exhibit 10.8 of the Form 8-K filed on March 29, 2011).
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10.19
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Regulation S Stock Purchase Agreement between the Company and 1568934 Ontario Limited, dated May 24, 2011 (incorporated by reference to Exhibit 10 of the Form 8-K filed on July 19, 2011) (excluding Schedules 2.4, 2.7, and 2.10).
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10.20
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Regulation S Stock Purchase Agreement between the Company and 1568934 Ontario Limited, dated July 29, 2011 (incorporated by reference to Exhibit 10 of the Form 8-K filed on August 16, 2011) (excluding Schedules 2.4, 2.7, and 2.10).
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10.21
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Regulation S Stock Purchase Agreement between the Company and 1568934 Ontario Limited, dated December 26, 2011 (incorporated by reference to Exhibit 10 of the Form 8-K filed on February 6, 2012) (including Schedule 1.4 (Option to Purchase Shares of Common Stock) and Schedule 2.4 (Litigation); excluding Schedule 2.7).
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10.22
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Corporate Office Services Agreement between the Company and 1568934 Ontario Limited, dated January 5, 2012 (incorporated by reference to Exhibit 10.22 of the Form 10-Q filed on August 29, 2012).
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10.23
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Regulation S Stock Purchase Agreement between the Company and Eran Elimelech, dated July 29, 2012 (incorporated by reference to Exhibit 10.23 of the Form 10-Q filed on August 29, 2012).
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10.24
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Regulation S Stock Purchase Agreement between the Company and Sam Elimelech, dated July 29, 2012 (filed herewith).
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10.25
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Regulation S Stock Purchase Agreement between the Company and Gai Mar-Chaim, dated July 29, 2012 (filed herewith).
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16.1
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Letter on Change in Certifying Accountant (incorporated by reference to Exhibit 16 of the Form 8-K filed on January 5, 2006).
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16.2
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Letter on Change in Certifying Accountant (incorporated by reference to Exhibit 16 of the Form 8-K filed on November 5, 2010).
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16.3
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Letter on Change in Certifying Accountant (incorporated by reference to Exhibit 16 of the Form 8-K filed on July 24, 2012).
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34
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21
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Subsidiaries of the Company (incorporated by reference to Exhibit 21 of the Form 10-K filed on April 16, 2012).
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23
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Consent of Dov Weinstein & Co. C.P.A. (Isr) (incorporated by reference to Exhibit 23 of the Form 10-Q filed on August 29, 2012).
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31.1
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Rule 13a-14(a)/15d-14(a) Certification of Sam Shlomo Elimelech (filed herewith).
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31.2
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Rule 13a-14(a)/15d-14(a) Certification of Gai Mar-Chaim (filed herewith).
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32
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Section 1350 Certification of Sam Shlomo Elimelech and Gai Mar-Chaim (filed herewith).
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35