Attached files
| file | filename |
|---|---|
| EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF GAI MAR-CHAIM - ANDAIN, INC. | exhibit_31-2.htm |
| EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF SAM SHLOMO ELIMELECH - ANDAIN, INC. | exhibit_31-1.htm |
| EXCEL - IDEA: XBRL DOCUMENT - ANDAIN, INC. | Financial_Report.xls |
| EX-32 - SECTION 1350 CERTIFICATION OF SAM SHLOMO ELIMELECH AND GAI MAR-CHAIM - ANDAIN, INC. | exhibit_32.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 MARCH 31, 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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|
|
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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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_____________________________________________________
(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 March 31, 2012, the Company had 22,334,242 shares of common stock issued and outstanding.
2
TABLE OF CONTENTS
3
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ANDAIN, INC.
(A Development Stage Company)
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March 31, 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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Cash and cash equivalents
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$ | 135,292 | $ | 872 | ||||
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Accounts receivable
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574,488 | 930,177 | ||||||
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Total current assets
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709,780 | 931,049 | ||||||
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Property, plant and equipment
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34,059 | 35,098 | ||||||
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Intangible assets
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21,238 | 20,649 | ||||||
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Other assets
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661,191 | 360,178 | ||||||
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Total assets
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$ | 1,426,268 | $ | 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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Accounts payable and accrued expenses
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$ | 957,486 | $ | 1,180,879 | ||||
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Total current liabilities
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957,486 | 1,180,879 | ||||||
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Long-term liabilities:
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||||||||
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Long-term debt
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625,795 | 550,312 | ||||||
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Bank overdrafts
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-- | 1 | ||||||
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Total liabilities
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1,583,281 | 1,731,192 | ||||||
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Non-controlling interest
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(189,145 | ) | (466,982 | ) | ||||
4
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(continued)
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March 31, 2012
(Unaudited)
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December 31,
2011
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||||||
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Stockholders’ deficit:
|
||||||||
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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, $0.001 par value, 500,000,000 shares
authorized; 22,334,242 shares issued and outstanding at
March 31, 2012 and 22,034,242 at December 31, 2011
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22,334 | 22.034 | ||||||
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Additional paid-in capital
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3,925,919 | 3,890,219 | ||||||
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Share-based reserves
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6,300 | 6,300 | ||||||
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Accumulated deficit during development stage
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(3,924,428 | ) | (3,836,712 | ) | ||||
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Accumulated other comprehensive income
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2,007 | 923 | ||||||
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Total Andain, Inc. stockholders’ equity
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32,132 | 82,764 | ||||||
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Total stockholders’ deficit
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(157,013 | ) | (384,218 | ) | ||||
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Total liabilities and stockholders’ deficit
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$ | 1,426,268 | $ | 1,346,974 | ||||
See accompanying notes to consolidated financial statements
5
ANDAIN, INC.
(A Development Stage Company)
(Unaudited)
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Three Months Ended
March 31,
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Period of Inception
(July 23, 2004) through
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|||||||||||
| 2012 | 2011 |
March 31, 2012
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||||||||||
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Revenue:
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||||||||||||
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Government grants
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$ | -- | $ | 104,132 | $ | 682,690 | ||||||
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Consulting income
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44,831 | 7,439 | 429,165 | |||||||||
| Other income |
--
|
-- |
15,000
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|||||||||
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Total revenue
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44,831 | 111,571 | 1,126,855 | |||||||||
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Operating expenses:
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||||||||||||
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Depreciation
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(4,944 | ) | (2,745 | ) | (45,569 | ) | ||||||
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General and administrative
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(337,540 | ) | (266,810 | ) | (4,492,247 | ) | ||||||
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Research and development
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-- | -- | (370,638 | ) | ||||||||
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Impairment of goodwill
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-- | -- | (412,699 | ) | ||||||||
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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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(67,738 | ) | -- | (245,467 | ) | |||||||
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Total operating expenses
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(410,222 | ) | (269,555 | ) | (5,702,044 | ) | ||||||
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Loss from operations
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(365,391 | ) | (157,984 | ) | (4,575,189 | ) | ||||||
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Interest income
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16,487 | -- | 62,162 | |||||||||
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Interest expense
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-- | -- | (4,734 | ) | ||||||||
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Loss before extraordinary gain
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(348,904 | ) | (157,984 | ) | (4,517,761 | ) | ||||||
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Extraordinary gain on forgiveness of debt
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230,126 | -- | 230,126 | |||||||||
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Net loss
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(118,778 | ) | (157,984 | ) | (4,287,635 | ) | ||||||
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Add: Net loss attributable to non-controlling interests
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31,062 | 28,659 | 363,207 | |||||||||
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Net loss attributable to
Andain, Inc.
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(87,716 | ) | (129,325 | ) | (3,924,428 | ) | ||||||
| Loss per share – basic:
Net loss attributable to Andain
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$ | (0.00 | ) | $ | (0.01 | ) | ||||||
| Weighted average common shares outstanding | 22,215,562 | 18,246,667 | ||||||||||
| Loss per share – diluted:
Net loss attributable to Andain
|
$ | (0.00 | ) | $ | (0.01 | ) | ||||||
| Weighted average common shares outstanding | 28,215,562 | 24,246,667 |
See accompanying notes to consolidated financial statements
6
ANDAIN, INC.
(A Development Stage Company)
(Unaudited)
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Three Months Ended
March 31,
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Period of Inception
(July 23, 2004) through
|
|||||||||||
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2012
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2011
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March 31, 2012
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||||||||||
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Operating activities:
|
||||||||||||
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Net loss attributable to Andain, Inc.
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$ | (87,716 | ) | $ |
(129,325
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) | $ | (3,924,428 | ) | |||
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Adjustments to reconcile net loss to net
cash provided by operating activities:
|
||||||||||||
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Depreciation
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4,944 | 2,745 | 45,569 | |||||||||
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Loss from acquisition of subsidiary
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-- | -- | 135,424 | |||||||||
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Shares issued in subsidiary
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-- | 642,170 | -- | |||||||||
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Amortization of goodwill
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-- | -- | 337,685 | |||||||||
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Impairment of loan
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67,738 | -- | 245,467 | |||||||||
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Minority interest
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277,837 |
(16,385
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) | (52,013 | ) | |||||||
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Shares issued for professional services
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-- | 1,920,000 | 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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36,000 | -- | 396,300 | |||||||||
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Effect of movements in foreign
exchange rates on non-cash items
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(4,494 | ) | (927 | ) | (10,279 | ) | ||||||
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Changes in operating assets and liabilities:
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||||||||||||
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Accounts payable
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(223,393 | ) | (224,588 | ) | 952,509 | |||||||
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Accounts receivable
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355,689 | (121,368 | ) | (574,142 | ) | |||||||
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Accrued compensation
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90,000 | 90,000 | 2,370,000 | |||||||||
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Accrued consulting fees
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-- | -- | 60,000 | |||||||||
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Accrued expenses – stockholder
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-- | -- | 37,508 | |||||||||
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Net cash provided by operating activities
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516,605 | 2,162,322 | 37,510 | |||||||||
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Investing activities:
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||||||||||||
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Purchase of equipment
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-- | (290 | ) | (70,548 | ) | |||||||
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Acquisition of patent
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-- | -- | (20,649 | ) | ||||||||
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Acquisition of subsidiary
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-- | (200,723 | ) | (578,502 | ) | |||||||
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Acquisition of interest in equity-accounted investee
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-- | (646,366 | ) | -- | ||||||||
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Net cash used in investing activities
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-- | (847,379 | ) | (669,699 | ) | |||||||
7
ANDAIN, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
| Three Months Ended
March 31
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Period of Inception
July 23, (2004) through
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|||||||||||
| 2012 | 2011 | March 31, 2012 | ||||||||||
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Financing activities:
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||||||||||||
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Proceeds from increase in bank overdrafts
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-- | 751 | -- | |||||||||
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Proceeds from stock issued for cash
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285,000 | 200,723 | 804,800 | |||||||||
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Proceeds from other loans
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(838,531 | ) | (182,439 | ) | (913,805 | ) | ||||||
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Loan from equity-accounted investee
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-- | 646,366 | -- | |||||||||
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Loans from key management personnel
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170,262 | (1,942,076 | ) | 874,479 | ||||||||
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Net cash provided by (used in)
financing activities
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(383,269 | ) | (1,276,675 | ) | 765,474 | |||||||
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Increase in cash and cash equivalents
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133,336 | 38,268 | 133,285 | |||||||||
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Effects of exchange rate changes on the balance of cash held in foreign currencies
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1,084 | (13,894 | ) | 2,007 | ||||||||
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Cash and cash equivalents,
beginning of period
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872 | 23,672 | -- | |||||||||
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Cash and cash equivalents,
end of period
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$ | 135,292 | $ | 48,046 | $ | 135,292 |
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Supplementary schedule of
cash flow activities:
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||||||||||||
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Non-cash investing and financing
activities:
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||||||||||||
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Issuance of common stock for payment
of legal fees and various other services
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$ | 36,000 | $ | -- | $ | 566,514 | ||||||
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Issuance of common stock for payment
of services of transfer agent
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$ | -- | $ | -- | $ | 10,000 | ||||||
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Issuance of common stock for payment
of rental expense
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$ | -- | $ | -- | $ | 60,000 | ||||||
| Issuance of common stock for payment of management and consulting fees | $ | -- | $ | 1,920,000 | $ | 1,921,900 | ||||||
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Issuance of common stock for
purchase of intellectual property
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$ | -- | $ | -- | $ | 4,500 | ||||||
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Issuance of common stock for
purchase of subsidiary
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$ | -- | $ | -- | $ | 2,500 | ||||||
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Issuance of common stock for payment
of management and consulting fees
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$ | -- | $ | -- | $ | 300 | ||||||
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Non-cash compensation expense
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$ | -- | $ | -- | $ | 6,000 |
See accompanying notes to consolidated financial statements
8
ANDAIN, INC.
(Unaudited)
NOTE 1 – GENERAL INFORMATION
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.
After discussions with management, an Israeli law firm which provided legal services to the Company’s industrial incubator project; Meizam Arad Ltd discharged the Company from certain claims and debts, which resulted in an extraordinary gain on forgiveness of debt of $230,126.
NOTE 2 – BASIS OF PRESENTATION
Statement of Compliance.
The financial information included herein for the three-month periods ended March 31, 2012 and 2011 is unaudited; however, such information reflects all adjustments consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of December 31, 2011 is derived from Andain Inc.’s 2011 Annual Report on Form 10-K for the year ended December 31, 2011. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Andain’s 2011 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
The financial statements have been prepared under the historical cost basis.
The principal accounting policies are set out below, these policies have been consistently applied to all the years presented, unless otherwise stated.
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.
9
The functional currency of foreign entities is generally the local currency unless the primary economic environment requires the use of another currency. Gains or losses arising from the translation or settlement of foreign-currency-denominated monetary assets and liabilities into the functional currency are recognized in the income in the period in which they arise. However, currency differences on intercompany loans that have the nature of a permanent investment are accounted for as translation differences as a separate component of other comprehensive income/(loss) within stockholders’ equity.
New Israeli Shekel (“NIS”) amounts as of March 31, 2012 have been translated into U.S. Dollars at the representative rate of exchange on March 31, 2012 (USD 1 = NIS 3.715).
Consolidation Principles.
The consolidated financial statements of the Company include the accounts of the Company, and all entities in which a direct or indirect controlling interest exists through voting rights or qualifying variable interests. All intercompany balances and transactions have been eliminated in the consolidated financial statements.
Going Concern.
The Company’s consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. Except for government grants received by the Group’s industrial incubator, the Company has not established any source of revenue to cover its operating costs. The Company will engage in very limited activities without incurring any liabilities that must be satisfied in cash until a source of funding is secured. The Company will offer non-cash consideration as a means of financing its operations. If the Company is unable to obtain revenue producing contracts or financing or if the revenue or financing it does obtain is insufficient to cover any operating losses it may incur, it may substantially curtail or terminate its operations or seek other business opportunities, through business alliances, acquisitions or other arrangements that may dilute the interests of existing stockholders.
Use of Estimates.
The preparation of the 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.
10
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents.
Cash and cash equivalents comprise cash balances, cash on current accounts with banks, bank deposits and other highly liquid short-term investments with original maturities of less than three months
Accounts Receivable.
Accounts receivables are stated at the amount that management of the Company expects to collect from outstanding balances. Management provides for probable uncollectible amounts through an allowance for doubtful accounts. Additions to the allowance for doubtful accounts are based on management’s judgment, considering historical write-offs, collections and current credit conditions. Balances which remain outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to the applicable accounts receivable. Payments received subsequent to the time that an account is written off are considered bad debt recoveries. As of March 31, 2012, the Company has experienced no bad debt write offs from operations.
Property, Plant and Equipment.
Property and equipment are stated at cost. Expenditures for repairs and maintenance are expensed as incurred. Expenditures that increase the useful life or value are capitalized. For financial statement purposes, depreciation expense on property and equipment is computed on the straight-line method using the following lives:
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Motor vehicles
|
5 years
|
|
Furniture
|
15 years
|
|
Computer equipment
|
3 years
|
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 is the case, an impairment loss would be recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value.
11
Goodwill and Intangible Assets.
Goodwill represents the excess of the cost over the fair value of net tangible and identifiable intangible assets of acquired businesses. Goodwill is assessed for impairment by applying fair value based tests annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The goodwill impairment test consists of a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit to its carrying value, including goodwill. The Company uses un-discounted cash flow models to determine the fair value of a reporting unit. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test is not required. The second step, if required, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. The fair value of a reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess.
Patents are stated at cost and are considered to have an indefinite useful life, they are not amortized but tested for impairment on an annual basis.
Accounts Payable and Accrued Expenses.
Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.
Non-Controlling Interests.
A non-controlling interest in a subsidiary is an ownership interest in a consolidated entity that is reported as equity in the consolidated financial statements and separate from the Company’s equity. In addition, net income/(loss) attributable to non-controlling interests is reported separately from net income attributable to the Company in the consolidated financial statements.
The Company’s consolidated statements present the full amount of assets, liabilities, income and expenses of all of its consolidated subsidiaries, with a partially offsetting amount shown in non-controlling interests for the portion of these assets and liabilities that are not controlled by the Company.
12
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.
Research and Development.
Internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed.
Income Taxes.
Income taxes are accounted for in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes.” Under the asset and liability method, deferred tax assets and liabilities are recognized for the future consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases (temporary differences). Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are recovered or settled. Valuation allowances for deferred tax assets are established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Earnings Per Share.
The Company presents basic and diluted earnings per share (EPS) data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all potential dilutive common shares, which comprise options granted to employees.
Cash Flow Statement.
Cash flow statements have been prepared using the indirect method. Cash flows in foreign currencies have been translated into US dollars using the average exchange rate for the periods.
Share-Based Compensation.
The Company follows ASC 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.
13
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.
NOTE 4 – ACCOUNTS RECEIVABLE
| March 31, 2012 | December 31, 2011 | |||||||
| (Unaudited) | ||||||||
|
Trade accounts receivable
|
$ | 8,721 | $ | 573 | ||||
|
Suppliers paid in advance
|
40,504 | 417,722 | ||||||
|
Institutions
|
17,013 | 17,731 | ||||||
|
Grants receivable from the
|
||||||||
|
Office of the Chief Scientist (Israel)
|
508,250 | 494,151 | ||||||
| $ | 574,488 | $ | 930,177 | |||||
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
| Computers | Furniture | Vehicles | Total | |||||||||||||
|
Balance as of December 31, 2011
|
$ | 9,105 | $ | 20,288 | $ | 5,705 | $ | 35,098 | ||||||||
|
Depreciation
|
(331 | ) | (138 | ) | (4,475 | ) | (4,944 | ) | ||||||||
|
Effect of foreign currency
|
||||||||||||||||
|
exchange differences
|
251 | 2,501 | 1,153 | 3,905 | ||||||||||||
|
Balance as of March 31, 2012 (unaudited)
|
$ | 9,025 | $ | 22,651 | $ | 2,383 | $ | 34,059 | ||||||||
14
NOTE 6 – INTANGIBLE ASSETS
Intangible assets comprise a patent owned by the Company’s subsidiary Gaia Med. The patent cost consists mainly of legal fees and relates to a miniature insulin pump.
| March 31, 2012 | ||||||||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||
|
Average Remaining Life (years)
|
Purchase Price | Additions |
Accumulated
Amortization
|
Net Carrying Value | ||||||||||||||||
|
Patents
|
-- | $ | 20,649 | $ | 589 | -- | $ | 21,238 | ||||||||||||
| -- | $ | 20,649 | $ | 589 | -- | $ | 21,238 | |||||||||||||
NOTE 7 – OTHER ASSETS
Other assets consist of the following:
|
March 31, 2012
|
December 31, 2011
|
|||||||
| (Unaudited) | ||||||||
|
Other loans
|
$ | 22,530 | $ | -- | ||||
|
Loans with related parties:
|
||||||||
|
Related companies
|
638,661 | 360,178 | ||||||
| $ | 661,191 | $ | 360,178 | |||||
The above loans are unsecured, bear interest at 4% per annum, and have no set terms of repayment.
NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| March 31, 2012 | December 31, 2011 | |||||||
| (Unaudited) | ||||||||
|
Trade payables
|
$ | 175,241 | $ | 130,239 | ||||
|
Institutions
|
61,897 | 69,490 | ||||||
|
Accrued liabilities
|
597,848 | 834,883 | ||||||
|
Deferred revenue:
|
||||||||
|
Arising from government grants
|
122,500 | 119,006 | ||||||
|
Refundable deposits
|
-- | 27,261 | ||||||
| $ | 957,486 | $ | 1,180,879 | |||||
NOTE 9 – LONG-TERM DEBT
|
March 31, 2012
|
December 31, 2011
|
|||||||
| (Unaudited) | ||||||||
|
Key management personnel
|
$ | 617,705 | $ | 357,443 | ||||
|
Related companies
|
8,090 | 192,869 | ||||||
| $ | 625,795 | $ | 550,312 | |||||
The above debt is unsecured, interest free and has no set terms of repayment.
15
NOTE 10 – STOCKHOLDERS’ EQUITY
Common Stock.
(a) On June 11, 2006, the Company entered into a share-based technology purchase agreement by issuing 4,500,000 restricted shares of common stock at $0.001 per share for the purchase of intellectual property, patent rights and related technical information for a pulmonary drug delivery system owned by Pangea Investments GmbH, the majority stockholder of the Company.
(b) On June 11, 2006, the Company entered into a share-based purchase agreement by issuing 2,500,000 restricted shares of common stock at $0.001 per share for the purchase of all the common stock of Impact Active Team Ltd, a Company owned by Pangea Investments GmbH.
(c) On July 19, 2006, the Company issued 200,000 restricted shares of common stock at $0.75 per share to 1568934 Ontario Limited for consideration of $150,000. Each share was accompanied by a 12 month warrant to acquire five shares of common stock at the price of the Company’s initial public offering as determined on the first day trading; however, no warrants were realized.
(d) On July 29, 2006, the Company issued 770,000 restricted shares of common stock at $0.01 per share to a total of 56 investors for consideration of $7,700.
(e) On January 5, 2011, the Company entered into a Regulation S Stock Purchase Agreements with the two directors of the Company. Under these agreements, the directors purchased from the Company a total of 8,000,000 restricted shares of common stock at $0.001) per share for a total consideration of $8,000. These shares were actually issued on or about March 1, 2011.
(f) On January 14, 2011, the Company entered into a Regulation S Stock Purchase Agreement with 1568934 Ontario Limited. 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. These shares were issued on or about January 14, 2011.
In connection with this agreement, the Company granted to the purchaser an option, dated January 14, 2011, to purchase 1,000,000 restricted shares of the Company’s common stock. This option is exercisable for a period of 24 months from the date of filing by the Company of a Form 211 with the Financial Industry Regulatory Authority (“FINRA”) at an exercise price that is equal to the public offering price of the common stock in a future Form S-1 registration statement of the Company.
16
(g) On January 20, 2011, the Company granted options to the two directors of the Company to each purchase 990,000 restricted shares of Company common stock. This option is exercisable at fair market value, as defined in the Employee Stock Option Plan. This option vests at the rate of 330,000 per year over a period of three years. The options granted are not exercisable until January 1 of the following year. Therefore, only 330,000 shares of this option are currently exercisable. Each vested portion of the option expires two years after vesting. These options were granted in exchange for services provided to the Company.
(h) On May 24, 2011, the Company entered into a Regulation S Stock Purchase Agreement with 1568934 Ontario Limited. 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. These shares were issued on or about June 14, 2011.
(i) On July 29, 2011, the Company entered into a Regulation S Stock Purchase Agreement with 1568934 Ontario Limited. 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. These shares were issued on or about August 8, 2011.
(j) On August 1, 2011, the Company issued 830,000 free trading shares of common stock registered under a Form S-8 registration statement for various professional services to the Company.
(k) On January 1, 2011, the Company began using offices provided by 1568934 Ontario Limited located in Beverly Hills, California. This office space is approximately 2,000 square feet; the Company pays 5,000 shares of restricted 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 August 8, 2011, the Company issued 60,000 restricted shares of common stock to 1568934 Ontario Limited under this arrangement as rent for the 2011 calendar year.
(l) On August 8, 2011, the Company issued 100,000 restricted shares of common stock to the Company’s transfer agent, Globex Transfer, LLC, for professional services.
(m) On December 26, 2011, the Company entered into a Regulation S Stock Purchase Agreement with 1568934 Ontario Limited. 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. These shares were issued on or about December 31, 2011.
(n) 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.
Preferred Stock.
The Company has authorized, but not issued, 10,000,000 shares of preferred stock, par value $0.001 per share. The board of directors has the authority to establish and fix the designation, powers, or preferences of preferred shares without further vote by the stockholders.
17
NOTE 11 – PROVISION FOR TAXES
At March 31, 2012, the Company had net operating loss carry forwards of $3,924,428 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.
The income tax benefit for the three months ended March 31, 2012 differs from the amount computed at the federal statutory rates of approximately 35% as follows:
|
Income tax benefit at statutory rate
|
$ | (41,572 | ) | |
|
Valuation allowance
|
41,572 | |||
|
Total
|
$ | -- |
If substantial changes in the Company’s ownership should occur, there would be an annual limitation of the amount of net operating loss carry forwards that may be utilized by the Company.
NOTE 12 – 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.
18
NOTE 13 – RELATED PARTY TRANSATIONS
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the group and other related parties are disclosed below.
The following entities have been identified as related parties:
|
1568934 Ontario Limited
|
Greater than 10% stockholder
|
|
Sam Elimelech
|
Director and greater than 10% stockholder
|
|
Gai Mar-Chaim
|
Director and greater than 10% stockholder
|
|
Impact Active Team Ltd.
|
Israeli, wholly-owned subsidiary
|
|
TPDS Ltd.
|
Israeli, majority-owned subsidiary
|
|
Meizam - Advanced Enterprise Center Arad Ltd.
|
Israeli, majority-owned subsidiary
|
|
Meizam Arad Investments Ltd.
|
Israeli, majority-owned subsidiary
|
|
Gaia Med Ltd.
|
Israeli, majority-owned subsidiary
|
|
P.O.C. Hi Tech Ltd.
|
Israeli company with common director
|
The following transactions were carried out with related parties:
|
March 31, 2012
|
December 31, 2011 | |||||||
| (Unaudited) | ||||||||
| $ | $ | |||||||
|
Income statements:
|
||||||||
|
Directors’ remuneration
|
90,000 | 360,000 | ||||||
|
Balance sheets:
|
||||||||
|
Loans receivable from related companies
|
638,661 | 360,178 | ||||||
|
Loans – key management personnel
|
(617,705 | ) | (357,443 | ) | ||||
|
Loans owing to related companies
|
(8,090 | ) | (192,896 | ) | ||||
NOTE 14 – RECENT ACCOUNTING STANDARDS
In April 2010, the FASB issued 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.
19
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.
The Company invests in commercialization of its technologies and 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.
The Company is committed to develop a fully disposable miniature insulin pump, suitable for diabetics type I and type II as well, without any MOITAL grant, saving the need to pay future royalties. 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 comfort of a “band aid” patch size product, accurate as the expensive insulin pumps and preventing any hyper or hypo life threatening situations to the patient (stable blood glucose level superior to the syringe use).
20
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.
The Company estimates that the MinIn development, regulatory, and manufacturing in order to complete all needed clinical trials, will require an additional $750,000.
Nano-particles Targeted Drug Delivery Technology.
The Company 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 enable the Company to carry out 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.
The Company estimates that the additional development, regulatory, and manufacturing in order to complete all needed clinical trials, will require an additional $1,200,000.
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.
The Company estimates that the additional development, regulatory, and manufacturing in order to complete all needed pre-clinical trials, will require an additional $650,000.
21
(b) Operations.
Insulin Pumps.
The Company separates the development in any aspect from the development of the Gaia Med Diamond semi-disposable pump. The Company has successfully managed to develop Gaia-Med’s technology and intellectual properties secured by patents, and develop new, separate intellectual properties for the MinIn pump capable and eligible for its own patents to be registered and filed in second quarter of 2012. The Company’s development success of new and separate technology that is not based or relates in any aspect on Gaia-Med’s technology precludes the Company and the incubator from any royalty payments on this product line. The Company and the incubator also continue to develop the semi-disposable Gaia-Med pump within its original program. Therefore, the Company intends to establish a new company to accommodate all assets and operations of the MinIn pump as soon as this pump is ready for clinical trials batch production.
Nano-Particles.
The Company 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, to be filed in second quarter of 2012. The Company’s development success of new and separate technology that is not based or relates in any aspect on TPDS’s technology 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 the pre-clinical results of the new technology and product.
The Company intends to establish in the second quarter of 2012 a new company to accommodate all assets and operations of the new technology and development
Stem Cell Therapy.
The Company intends 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.
Results of Operations.
(a) Total Revenue.
The Company had total revenue of $44,831 for the three months ended March 31, 2012 compared to $111,571 for the three months ended March 31, 2011, a decrease of $66,740 or approximately 60%. This decrease in total revenue was the result of the ending of government assistance received by the industrial incubator, Meizam Arad, and TPDS and Gaia Med.
The Company had total revenue of $1,126,855 for the period of inception (June 23, 2004) through March 31, 2012.
22
(b) General and Administrative Expenses.
The Company had general and administrative expenses of $337,540 for the three months ended March 31, 2012, compared to $266,810 for the three months ended March 31, 2011, an increase of $70,730 or approximately 26%. The increase in general and administrative expensed was due to general increase in activity in Meizam Arad.
The Company had general and administrative expenses of $4,492,247 for the period of inception (June 23, 2004) through March 31, 2012.
(c) Research and Development Expenses.
The Company had research and development expenses of $0 for the three months ended March 31, 2012 compared to $0 for the three months ended March 31, 2011. The Company had research and development expenses of $370,638 for the period of inception (June 23, 2004) through March 31, 2012.
(d) Net Loss.
The Company had a net loss of $87,716 for the three months ended March 31, 2012 compared to $129,325 for the three months ended March 31, 2011, a decrease of $41,609 or approximately 32%. The decrease in net loss is the result of the factors noted above, as well as an extraordinary gain on forgiveness of debt by Meizam Arad.
The Company had a net loss of $3,924,428 for the period of inception (June 23, 2004) through March 31, 2012.
Operating Activities.
The net cash provided by operating activities was $516,605 for the three months ended March 31, 2012 compared to $2,162,322 for the three months ended March 31, 2011, a decrease of $1,645,717 or approximately 76%. This decrease increase is attributed to many changes from period to period, but mainly due to shares issued for the payment of professional services during the three months period ended March 31, 2011
Investing Activities.
Net cash used in investing activities was $0 for the three months ended March 31, 2012 compared to $847,379 for the three months ended March 31, 2011.
Liquidity and Capital Resources.
As of March 31, 2012, the Company had total current assets of $709,780 and total current liabilities of $957,486 resulting in a working capital deficit of $247,706. The cash and cash equivalents was $135,292 as of March 31, 2012 compared to $872 as of December 31, 2011, an increase of decrease of $134,420. This increase was due to the receipt of proceeds from the issuance of common stock.
23
The net cash used in financing activities was $383,269 for the three months ended March 31, 2012 compared to $1,276,675 for the three months ended March 31, 2011, a decrease of $893,406 or approximately 70%. This decrease was attributed to the payment of professional services during the three months ended March 31, 2011. Overall, cash and cash equivalents for the three months ended March 31, 2012 increased by $133,336.
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.
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;
|
24
|
·
|
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.
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.
25
(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.
(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.
26
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. 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.
Not applicable.
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.
27
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.
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 March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
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.
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.
28
There were no unregistered sales of the Company’s equity securities during the three months ended March 31, 2011 that were not reported in a previously filed Form 8-K, except as follows:
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.
There were no purchases of the Company’s common stock by the Company or its affiliates during the three months ended March 31, 2012, except as follows:
(a) Effective on February 27, 2012, Pangea Investments GmbH, a former affiliate of the Company, sold all of the restricted shares of common stock held in its name (5,543,756 as shown on its last filed Form 4) to the following: Sam Elimelech, a Company director and president (2,471,878 shares); Gai Mar-Chaim, a Company director and secretary/treasurer (2,471,878 shares); and Ralph Marthaler, the control person of Pangea (600,000 shares).
(b) Mr. Elimelech purchased shares of its common stock on the open market, as follows:
January 19, 2012: 1,000 shares at $0.12 per share ($120 total).
January 26, 2012: 1,000 shares at $0.95 per share ($95 total).
January 26, 2012: 1,000 shares at $0.10 per share ($100 total).
February 1, 2012: 1,000 shares at $0.15 per share ($150 total).
February 16, 2012: 5,000 shares at $0.12 per share ($600 total).
March 8, 2012: 5,000 shares at $0.10 per share ($500 total).
Not applicable.
Not applicable.
Corrections to 2011 Form 10-K:
After the Company’s Form 10-K for the year ended December 31, 2011 was filed, management noted the following items that need correction:
(a) Item 1A Risk Factors: Under Risk Factors Related to the Common Stock, it was noted that the Company was not yet trading on the Over the Counter Bulletin Board. In fact, the Company filed an application and commenced quotation on this market on June 29, 2011.
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(b) Item 2 Properties: The first paragraph of this section was not worded correctly and should have read:
“The Company does not own any fixed property and has no agreements in place or planned to acquire any properties. On January 1, 2011, the Company began using offices provided by 1568934 Ontario Limited, an affiliate of the Company, located in Beverly Hills, California. This office space is approximately 2,000 square feet; the Company pays 5,000 shares of restricted 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.”
(c) Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities:
Mr. Elimelech purchased shares of Company common stock on the open market on the following dates and in the following amount:
November 23, 2011: 5,000 shares at $0.08 per shares ($400 total).
November 24, 2011: 5,000 shares at $0.10 per shares ($500 total).
December 6, 2011: 1,500 shares at $0.12 per share ($180 total).
December 7, 2011: 3,000 shares at $0.10 per share ($300 total).
December 8, 2011: 1,500 shares at $0.13 per share ($195 total).
December 24, 2011: 10,000 shares at $0.12 per share ($1,200 total).
(d) Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations, Results of Operations – Net Loss, should have read:
“The Company had a net loss of $1,153,931 for the year ended December 31, 2011 compared to $950,430 for the year ended December 31, 2010, an increase of $203,201 or approximately 21%. The increase in net loss is the result primarily from the Company’s accelerated development and engineering for production of our disposable insulin pump.”
(e) Item 10 Directors, Executive Officers, and Corporate Governance:
Compliance with Section 16(a) of the Securities Exchange Act: Additional Form 4’s to report purchases of Company common stock by Mr. Elimelech, as set forth in (c) above. A Form 4 to cover these purchases is being prepared now for filing with the SEC.
(f) Item 11 Executive Compensation: In footnote No. 2 to the compensation chart, the grant date for the options granted to the two officers of the Company should have read “January 20, 2011.”
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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: May 21, 2012
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By:
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/s/ Sam Shlomo Elimelech | |
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Sam Shlomo Elimelech, President
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(principal executive officer)
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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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31
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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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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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32
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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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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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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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33
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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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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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34