UNITED STATES SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

þ	QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

or

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission file number 001-35138

 

PIMI AGRO CLEANTECH, INC.

(Exact name of registrant as specified in its charter)

 

Delaware	26-4684680
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

 

269 South Beverly Drive suite 1091

Beverly Hills California 90212 USA

(Address of principal executive offices)

 

(310) 203-8278

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months). Yes þ No ¨

 

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

 

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ

 

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

 

The number of shares of common stock outstanding as of July 31, 2012 was 8,553,987.

 

 

 PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

Condensed Consolidated Interim Financial Statements

as of June 30, 2012 (Unaudited)

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

 

Condensed Consolidated Financial Statements

as of June 30, 2012 (Unaudited)

 

 

Table of Contents

 

 

	Page
Condensed Consolidated Financial Statements
Balance Sheets	2
Statements of Operations and Comprehensive Loss	3
Statements of Changes in Stockholders’ Deficit	4 – 10
Statements of Cash Flows	11
Notes to Condensed Consolidated Financial Statements	12 – 16

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

CONSOLIDATED BALANCE SHEETS

 

		US dollars (except share data)
		June 30,				December 31,
		2012				2011
		(unaudited)
ASSETS
Current Assets
Cash and cash equivalents			283,402				22,446
Accounts receivable			37,888				186,842
Other current assets			53,837				22,487
Total current assets			375,127				231,775
Property and Equipment, Net			26,816				27,559
Funds in Respect of Employee Rights Upon Retirement			71,725				68,015
Total assets			473,668				327,349
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable:
Trade			113,339				145,189
Other			156,896				167,357
Convertible Bonds			180,756				174,356
Series A Convertible preferred stock (Notes 2B and 3)			571,225				-
Total current liabilities			1,022,216				486,902
Liability for employee rights upon retirement			77,024				73,454
Total liabilities			1,099,240				560,356
Stockholders’ Deficit
Common stocks of US$ 0.01 par value ("Common stocks"):
30,000,000 shares authorized as of June 30, 2012 and December 31, 2011; issued and outstanding 8,553,587 shares and 8,541,087 shares as of June 30, 2012 and December 31, 2011, respectively			85,535				85,410
Additional paid in capital			4,065,371				4,055,026
Accumulated other comprehensive loss			(61,926	)			(61,768	)
Deficit accumulated during the development stage			(4,714,552	)			(4,311,675	)
Total stockholders' deficit			(625,572	)			(233,007	)
Total liabilities and stockholders’ deficit			473,668				327,349

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

 

		US dollars (except share data)
		Six month period ended June 30,								Three month period ended June 30,								Cumulative period from January 14, 2004 (date of inception) through June 30,
		2012				2011				2012				2011				2012(*)
		(unaudited)								(unaudited)								(unaudited)
Revenues from sales of products			128,295				160,500				27,352				67,089				1,132,177
Research and development expenses			(330,633	)			(352,788	)			(170,346	)			(175,479	)			(3,881,449	)
General and administrative expenses			(168,934	)			(171,847	)			(98,961	)			(91,716	)			(1,699,736	)
Operating loss			(371,272	)			(364,135	)			(241,955	)			(200,106	)			(4,449,008	)
Financing expenses, net			(31,605	)			(49,372	)			(16,501	)			(25,261	)			(185,210	)
Loss from continuing operations			(402,877	)			(413,507	)			(258,456	)			(225,367	)			(4,634,218	)
Loss from discontinued operations, net			-				-				-				-				(80,334	)
Loss for the period			(402,877	)			(413,507	)			(258,456	)			(225,367	)			(4,714,552	)
Other comprehensive income (loss):
Foreign currency translation adjustments			(158	)			(4,231	)			2,356				(4,333	)			(61,926	)
Comprehensive loss			(403,035	)			(417,738	)			(256,100	)			(229,700	)			(4,776,478	)
Loss per share (basic and diluted) (Note 4)			(0.05	)			(0.06	)			(0.03	)			(0.03	)

 

 

(*)

As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 

 

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*)

 

		US Dollars (except share data)
		Common stock																				Deficit
		Number of shares				Amount				Additional paid in capital				Accumulated other comprehensive income (loss)				Receipts on account of shares				accumulated during the development stage				Total stockholders equity (deficit)
January 14, 2004 (date of inception)			-				-				-				-				-				-				-
120,000 common stock issued for cash of US$ 0.002 per share			120,000				1,200				(932	)			-				-				-				268
Balance as of December 31, 2004			120,000				1,200				(932	)			-				-				-				268
Loss for the year			-				-				-				-				-				(223,285	)			(223,285	)
Other comprehensive income			-				-				-				5,989				-				-				5,989
Receipts on account of shares			-				-				-				-				100,000				-				100,000
Balance as of December 31, 2005			120,000				1,200				(932	)			5,989				100,000				(223,285	)			(117,028	)
Loss for the year			-				-				-				-				-				(831,415	)			(831,415	)
Other comprehensive loss			-				-				-				(12,748	)			-				-				(12,748	)
Issuance of 25,200 common stock for cash of  US$ 7.50 per share on January 2, 2006			25,200				252				188,748				-				(100,000	)			-				89,000
Issuance of 24,000 common stock for cash of US$ 7.56 per share on July 19, 2006			24,000				240				181,293				-				-				-				181,533
Issuance of 72,000 common stock for cash of US$ 7.53 per share on December 28, 2006			72,000				720				541,600				-				-				-				542,320
Issuance of 1,688 common stock for cash of US$ 8.33 per share on December 28, 2006			1,688				17				14,043				-				-				-				14,060
Receipts on account of shares			-				-				-				-				33,644				-				33,644
Balance as of December 31, 2006			242,888				2,429				924,752				(6,759	)			33,644				(1,054,700	)			(100,634	)

 

(*)

As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

  

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*) (cont.)

 

		US Dollars (except share data)
		Common stock																				Deficit
		Number of shares				Amount				Additional paid in capital				Accumulated other comprehensive income (loss)				Receipts on account of shares				accumulated during the development stage				Total stockholders equity (deficit)
Loss for the year			-				-				-				-				-				(341,453	)			(341,453	)
Other comprehensive loss			-				-				-				(23,206	)			-				-				(23,206	)
Issuance of 8,708 common stock for cash of US$ 2.37 per share, 30,006 common stock for cash of US$ 3.28 per share, 7,754 common stock for cash of US$ 0.0025 per share and 591 common stock for cash of US$ 3.45 per share in April 2007			47,059				471				119,375				-				(33,644	)			-				86,202
Issuance of  6,937 common stock for cash of US$ 4.10 per share in June 2007			6,937				69				28,339				-				-				-				28,408
Issuance of 747,390 common stock for cash of US$ 0.078 per share in July 2007			747,390				7,474				51,061				-				-				-				58,535
Issuance of 996,520 common stock for cash of US$ 0.024 per share in August 2007			996,520				9,965				14,007				-				-				-				23,972
Issuance of 996,520 common stock for cash of US$ 0.024 per share in November 2007			996,520				9,965				15,212				-				-				-				25,177
Issuance of 996,520 common stock for cash of US$ 0.0026 per share in December 2007			996,520				9,965				(7,405	)			-				-				-				2,560
Receipts on account of shares			-				-				-				-				100,000				-				100,000
Balance as of December 31, 2007			4,033,834				40,338				1,145,341				(29,965	)			100,000				(1,396,153	)			(140,439	)

 

(*)

As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*) (cont.)

 

		US Dollars (except share data)
		Common stock																				Deficit
		Number of shares				Amount				Additional paid in capital				Accumulated other comprehensive income (loss)				Receipts on account of shares				accumulated during the development stage				Total stockholders equity (deficit)
Loss for the year			-				-				-				-				-				(602,994	)			(602,994	)
Other comprehensive income			-				-				-				109				-				-				109
Issuance of 716,589 common stock for cash of US$ 0.041 per share in February 2008			716,589				7,166				22,370				-				-				-				29,536
Issuance of 235,334 common stock for cash of US$ 0.72 per share in February 2008			235,334				2,353				166,600				-				(100,000	)			-				68,953
Issuance of 291,515 common stock for cash of US$ 0.69 per share in June 2008			291,515				2,915				197,085				-				-				-				200,000
Issuance of 310,382 common stock for cash of US$ 0.71 per share in September 2008			310,382				3,104				216,161				-				-				-				219,265
Issuance of 444,004 common stock for cash of US$ 0.74 per share in November 2008			444,004				4,440				323,548				-				-				-				327,988
Stock based compensation			-				-				43,767				-				-				-				43,767
Balance as of December 31, 2008			6,031,658				60,316				2,114,872				(29,856	)			-				(1,999,147	)			146,185

 

(*)

As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*) (cont.)

 

		US Dollars (except share data)
		Common stock																				Deficit
		Number of shares				Amount				Additional paid in capital				Accumulated other comprehensive income (loss)				Receipts on account of shares				accumulated during the development stage				Total stockholders equity (deficit)
Loss for the year			-				-				-				-				-				(1,076,624	)			(1,076,624	)
Other comprehensive loss			-				-				-				(11,810	)			-				-				(11,810	)
Issuance of 26,399 common stock for cash of US$ 1.33 per share in January 2009			26,399				264				34,721				-				-				-				34,985
Issuance of 3,373 common stock for cash of US$ 1.33 per share in March 2009			3,373				34				24,966				-				-				-				25,000
Issuance of 201,972 common stock for cash of US$ 0.73 per share in March 2009			201,972				2,020				122,980				-				-				-				125,000
Issuance of 45,328 common stock for cash of US$ 1.32 per share in March 2009			45,328				453				59,547				-				-				-				60,000
Issuance of 4,459 common stock for cash of US$ 1.32 per share in April 2009			4,459				45				5,516				-				-				-				5,561
Issuance of 45,328 common stock for cash of US$ 1.32 per share in June 2009			45,328				453				59,547				-				-				-				60,000
Issuance of 40,000 common stock for cash of US$ 1.35 per share in June 2009			40,000				400				53,600				-				-				-				54,000
Issuance of 20,000 common stock for cash of US$ 1.35 per share in August 2009			20,000				200				26,800				-				-				-				27,000
Issuance of 20,000 common stock for cash of US$ 1.35 per share in September 2009			20,000				200				26,800				-				-				-				27,000
Issuance of 35,000 common stock for cash of US$ 1.35 per share in October 2009			35,000				350				46,900				-				-				-				47,250
Issuance of 45,330 common stock for cash of US$ 1.32 per share in October 2009			45,330				453				59,547				-				-				-				60,000
Issuance of 54,263 common stock for cash of US$ 1.35 per share in November 2009			54,263				542				68,193				-				-				-				68,735
Stock based compensation			-				-				91,077				-				-				-				91,077
Balance as of December 31, 2009			6,573,110				65,730				2,795,066				(41,666	)			-				(3,075,771	)			(256,641	)

 

(*)

As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*) (cont.)

 

		US Dollars (except share data)
		Common stock																				Deficit
		Number of shares				Amount				Additional paid in capital				Accumulated other comprehensive income (loss)				Receipts on account of shares				accumulated during the development stage				Total stockholders equity (deficit)
Loss for the year			-				-				-				-				-				(629,038	)			(629,038	)
Other comprehensive loss			-				-				-				(28,216	)			-				-				(28,216	)
Issuance of 3,225 common stock for cash of US$ 1.55 per share in February 2010			3,225				32				4,968				-				-				-				5,000
Issuance of 35,000 common stock for cash of US$ 1.35 per share in February 2010			35,000				350				46,900				-				-				-				47,250
Issuance of common stock and warrants, net of issuance costs in August 2010			385,108				3,851				197,215				-				-				-				201,066
Issuance of 134,121 common stock for cash of US$ 0.6 per share in December 2010			134,121				1,341				76,118				-				-				-				77,459
Amounts attributed to detachable warrants issued in connection with convertible bonds			-				-				41,208				-				-				-				41,208
Beneficial conversion feature on convertible bonds			-				-				41,207				-				-				-				41,207
Stock based compensation (**)			30,000				300				82,046				-				-				-				82,346
Balance as of December 31, 2010			7,160,564				71,604				3,284,728				(69,882	)			-				(3,704,809	)			(418,359	)

 

(*)

As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

 

(**)

Including US$ 24,850 with respect to the issuance of 30,000 common stock to a service provider.

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*) (cont.)

 

		US Dollars (except share data)
		Common stock																				Deficit
		Number of shares				Amount				Additional paid in capital				Accumulated other comprehensive income (loss)				Receipts on account of shares				accumulated during the development stage				Total stockholders equity (deficit)
Loss for the year			-				-				-				-				-				(606,866	)			(606,866	)
Other comprehensive income			-				-				-				8,114				-				-				8,114
Issuance of 125,000 common stock and warrants for cash of US$ 0.8 per share in January 2011			125,000				1,250				98,750				-				-				-				100,000
Issuance of 125,000 common stock and warrants for cash of US$ 0.8 per share in February 2011			125,000				1,250				98,750				-				-				-				100,000
Issuance of 250,000 common stock and warrants for cash of US$ 0.8 per share in March 2011			250,000				2,500				197,500				-				-				-				200,000
Issuance of 368,750 common stock and warrants for cash of US$ 0.8 per share in April 2011			368,750				3,688				291,312				-				-				-				295,000
Issuance of 125,000 common stock and warrants for cash of US$ 0.8 per share in May 2011			125,000				1,250				98,750				-				-				-				100,000
Issuance of 12,500 common stock and warrants for cash of US$ 0.8 per share in September 2011			12,500				125				9,875				-				-				-				10,000
Issuance of 62,500 common stock and warrants, and payment of US$ 50,000 in cash as equity issuance costs			62,500				625				(50,625	)			-				-				-				(50,000	)
Exercise of options			311,773				3,118				-				-				-				-				3,118
Stock based compensation			-				-				25,986																25,986
Balance as of December 31, 2011			8,541,087				85,410				4,055,026				(61,768	)			-				(4,311,675	)			(233,007	)

 

(*)

As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*) (cont.)

 

		US Dollars (except share data)
		Common stock																				Deficit
		Number of shares				Amount				Additional paid in capital				Accumulated other comprehensive income (loss)				Receipts on account of shares				accumulated during the development stage				Total stockholders equity (deficit)
Loss for the period			-				-				-				-				-				(402,877	)			(402,877	)
Other comprehensive loss			-				-				-				(158	)			-				-				(158	)
Issuance of 12,500 common stock and warrants for cash of US$ 0.8 per share in March 2012			12,500				125				9,875				-				-				-				10,000
Stock based compensation			-				-				470				-				-				-				470
Balance as of June 30, 2012 (unaudited)			8,553,587				85,535				4,065,371				(61,926	)			-				(4,714,552	)			(625,572	)

 

(*)

As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		US dollars (except share data)
		Six month period ended June 30,								Cumulative period from January 14, 2004 (date of inception) through June 30,
		2012				2011				2012(*)
		(unaudited)								(unaudited)
Cash flows from operating activities:
Loss for the period			(402,877	)			(413,507	)			(4,714,552	)
Adjustments to reconcile net loss for the period to net cash used in operating activities:
Depreciation			3,828				4,451				43,513
Increase in liability for employee rights upon retirement			5,666				13,015				78,692
Stock based compensation			470				14,860				243,646
Interest on convertible bonds			6,400				33,872				96,826
Interest on stockholders loans			-				-				(2,409	)
Issuance costs of convertible preferred stock			62,600				-				62,600
Change in fair value of convertible preferred stock			(54,775	)			-				(54,775	)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable			144,697				63,247				(47,716	)
Increase in other current assets			(33,065	)			(8,431	)			(150,572	)
Decrease (increase) in accounts payable – trade			(29,024	)			(74,189	)			114,423
Decrease (increase) in accounts payable – other			(6,316	)			(32,398	)			197,466
Net cash used in operating activities generated from continuing operations			(302,396	)			(399,080	)			(4,132,858	)
Net cash provided from operating activities generated from discontinued operations			-				-				80,334
Net cash used in operating activities			(302,396	)			(399,080	)			(4,052,524	)
Cash flows from investment activities:
Increase in funds in respect of employee rights upon retirement			(5,663	)			(9,224	)			(72,327	)
Purchase of property and equipment			(3,801	)			-				(68,161	)
Net cash used in investment activities			(9,464	)			(9,224	)			(140,488	)
Cash flows from financing activities:
Credit from banking institution			-				(63,682	)			(2,615	)
Issuance of convertible preferred stock, net			563,400				-				563,400
Proceeds from issuance of common stock and warrants			10,000				748,118				3,319,267
Payment on account of shares			-				-				233,644
Proceeds from issuance of convertible bonds and warrants, net			-				-				159,808
Proceeds from loans received from stockholders			-				-				194,083
Net cash provided by financing activities			573,400				684,436				4,467,587
Effect of exchange rate changes on cash and cash equivalents			(584	)			9,865				8,827
Increase (decrease) in cash and cash equivalents			260,956				285,997				283,402
Cash and cash equivalents at beginning of the period			22,446				-				-
Cash and cash equivalents at end of the period			283,402				285,997				283,402

 

(*)

As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.  

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 - GENERAL

 

A.

Pimi Agro Cleantech, Inc. (the "Company") was incorporated on April 1, 2009, under the laws of the State of Delaware. On April 27, 2009, the Company acquired from its stockholders all of the issued and outstanding shares of Pimi Agro Cleantech Ltd. (hereinafter: "Pimi Israel"), including preferred and ordinary shares. As a consideration for the transaction, the Company issued its stockholders an equal number of its common stock (6,313,589 shares). As a result of the acquisition, Pimi Israel became a wholly-owned subsidiary of the Company. The transaction involved companies under common control, and accordingly, the acquisition has been accounted for at historical cost in a manner similar to a pooling of interests. On this basis, the stockholders’ equity has been retroactively restated to reflect the equivalent number of shares of common stock of the Company issued for the acquisition of Pimi Israel as if such shares were issued at the dates they were issued by Pimi Israel to its stockholders on the basis of 1 common stock for each 1 preferred share or 1 ordinary share of Pimi Israel. The historical financial statements prior to April 27, 2009 were retroactively restated to reflect the activities of Pimi Israel.

 

Pimi Israel was incorporated in 2004 and commenced its operations in 2005. Pimi Israel develops, produces and markets products for improving the quality and extending the shelf-life of fruits and vegetables. Since its inception, Pimi Israel has devoted substantially all of its efforts to business planning, research and development and raising capital, and has not yet generated significant revenues. Accordingly, Pimi Israel and the Company (collectively, the "Group") are considered to be in the development stage as defined in FASB Accounting Standards Codification (ASC) Topic 915, "Development Stage Entities".

 

In February 2010, the Company's common stock began quotation on the OTC Bulletin Board under the symbol "PIMZ.OB".

 

B.

Going concern uncertainty

 

Since its incorporation (April 1, 2009), the Company has not had any operations other than those carried out by Pimi Israel. The development and commercialization of Pimi Israel's product will require substantial expenditures. Pimi Israel and the Company have not yet generated sufficient revenues from their operations to fund the Group activities, and is therefore dependent upon external sources for financing their operations. The Company anticipates that it will need to raise additional capital in order to meet its ongoing operations in 2013. There can be no assurance that Pimi Israel and the Company will succeed in obtaining the necessary financing to continue their operations. If such additional required funds cannot be raised, then the Company may be forced to curtail its development activities or adopt other cost savings measures, any of which might negatively affect its operating results. Since inception, Pimi Israel (and therefore, the Company) has incurred accumulated losses of US$ 4,714,552 and cumulative negative operating cash flow of US$ 4,052,524.

 

Continuation of the Company's current operations after utilizing its current limit reserves is dependent upon the generation of additional financial resources either mainly through fund raising or by generating revenues from its products. The Company focuses its solutions towards vegetables and fruits which are considered the largest in terms of worldwide consumption. Among other things, the Company tries to cooperate with major fruit packing houses in Israel and abroad.

 

These factors raise substantial doubt about Pimi Israel and the Company's ability to continue as a going concern.

 

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)

 

 

NOTE 1 - GENERAL (cont.)

 

C.

Risk factors

 

The Company and Pimi Israel (collectively, the "Group") have a limited operating history and face a number of risks, including uncertainties regarding finalization of the development process, demand and market acceptance of the Group's products, the effects of technological changes, competition and the development of products by competitors. Additionally, other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Group's future results.

 

In addition, the Group expects to continue incurring significant operating costs and losses in connection with the development of its products and increased marketing efforts.

 

As mentioned above, the Group has not yet generated significant revenues from its operations to fund its activities, and therefore the continuance of its activities as a going concern depends on the receipt of additional funding from its current stockholders and investors or from third parties.

 

D.

Use of estimates in the preparation of financial statements

 

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to change in fair value of the series A convertible preferred stock and to the going concern assumption.

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A.

Basis of presentation

 

The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

 

In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary (consisting of normal recurring adjustments) for a fair presentation of the Company’s financial position at June 30, 2012 and the results of its operations and cash flow for the six and three month periods then ended.

 

The unaudited condensed interim financial statements were prepared on a basis consistent with the Company’s annual financial statements on Form 10-K for the year ended December 31, 2011. Results of operations for the six and three month periods ended June 30, 2012 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2012.

 

The consolidated balance sheet as of December 31, 2011 was derived from the audited financial statements at that date but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, including a discussion of the significant accounting policies and estimates, refer to the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2011.

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

B.

Convertible preferred stock

 

The Company has considered the provisions of ASC Topic 815, "Derivatives and Hedging", and ASC Topic 470, "Debt" and determined that due to the conversion terms of the convertible proffered stock, they cannot be classified as equity instrument. Accordingly, the convertible proffered stock were classified as a derivative liability and measured at fair value through earnings. Costs incurred to issue the convertible proffered stock were expensed as incurred. See also Note 3A.

 

	C.	Recently issued accounting pronouncements

1.

ASC Topic 220, "Comprehensive Income"

 

Effective January 1, 2012, the Company adopted retrospectively the provisions of Accounting Standard Update No. 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 eliminated the option to present the components of other comprehensive income as part of the statement of equity and requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income (as applied by the Company) or in two separate but consecutive statements.

 

The adoption of ASU 2011-05 did not have a material impact on the unaudited consolidated financial statements.

 

2.

ASC Topic 210, “Balance Sheet”

 

In December 2011, the FASB issued Accounting Standard Update (ASU) 2011-11, “Balance Sheet (Topic 210) - Disclosures about Offsetting Assets and Liabilities” (ASU 2011-11). ASU 2011-11, enhance disclosures about financial instruments and derivative instruments that are either offset in accordance with the Accounting Standards Codification or are subject to an enforceable master netting arrangement or similar agreement. 

 

The amended guidance will be effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods (fiscal year 2013 for the Company) and should be applied retrospectively to all comparative periods presented.

 

The Company is currently evaluating the impact that the adoption of ASU 2011-11 would have on its consolidated financial statements, if any.

 

 

NOTE 3 - EVENTS DURING THE REPORTING PERIOD

 

A.

On December 15, 2011, the Company filed a Certificate of Designation with the Secretary of State of Delaware in connection with the Series A Preferred Stock authorizing 60,000 shares which constitute such Series. The holders of shares of Series A Preferred Stock shall be entitled to receive dividend cash payments of 9% per annum, payable in quarterly installments, and subject to conversion. On March 7, 2012, the Company filed a Certificate of Amendment to the Certificate of Designation with the Secretary of State of Delaware in order to increase the number of designated Series A Preferred Stock from 60,000 to 62,600.

 

On March 9, 2012, the Company completed a closing (the “Closing”) of its private placement (the “Private Offering”) in the aggregate amount of $626,000 (the “Financing”). The Company issued 62,600 shares of convertible preferred stock (“Series A Preferred Stock”) par value $0.01 at a purchase price of $10.00 per share to 19 accredited investors and 19 non-accredited investors (the “Subscribers”). The issuance costs were US$ 62,600 and were paid in cash.

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

  

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

 

 

NOTE 3 - EVENTS DURING THE REPORTING PERIOD (cont.)

 

A.

(cont.)

 

Upon the closing of the Company's next round of financing, provided such closing occurs within twelve (12) months following the execution of the Closing in which Subscribers receive the Series A Preferred Stock, and further subject to minimum proceeds of $2,000,000 being raised in such investment (the "Next Round of Financing"), the Series A Preferred Stock shall automatically be converted into fully paid, nonasseable shares of Common Stock, $0.01 par value per share, of the Company (“Common Stock”). The number of such Conversion Shares shall be determined by dividing the investment amount of the holder of the Series A Preferred Stock (the "Investment") by either (a) 80% of the closing price per share of the Company's common stock in Next Round of Financing or (b) dividing each holder’s Investment amount by $0.80, whichever is lower. In the event that the closing of the Next Round of Financing has not occurred by November 30, 2012, each share of Series A Preferred Stock shall automatically be converted into fully paid, nonassesable shares of Common Stock. Notwithstanding, the holders of Series A Preferred Stock shall be entitled to convert each share of the Series A Preferred Stock into fully paid, nonassesable share of Common Stock, at a price of $0.80 per share.

 

All and any shares of Series A Preferred Stock shall be automatically converted to the Common Stock and canceled on November 30, 2012, and, if converted to the Common Stock on an earlier date, the shares so converted shall be canceled on the date of their respective conversion.

 

As of June 30, 2012 and December 31, 2011, 62,600 and 60,000 Series A Preferred Stock were authorized for issuance, respectively, and 62,600 and 0 were issued and outstanding, respectively.

 

B.

On March 8, 2012 the Company entered into subscription agreement with one individual residing in Israel for the total sum of US$10,000 at a purchase price of $0.80 per share. For each share of Common Stock purchased, the investor or a third party on his behalf received a warrant with an exercise price of $0.80, exercisable until March 2, 2014.

 

 

NOTE 4 - LOSS PER SHARE

 

Basic loss per share is computed by dividing net loss by the weighted average number of shares outstanding during the period.

 

The net loss and the weighted average number of shares used in computing basic and diluted loss per share for the six and three month periods ended June 30, 2012 and 2011, respectively, are as follows:

 

		US dollars								US dollars
		Six month period ended June 30,								Three month period ended June 30,
		2012				2011				2012				2011
		(unaudited)								(unaudited)
Net loss used for the computation of loss per share			402,877				413,507				258,456				225,367

 

 

 

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

 

 

NOTE 4 - LOSS PER SHARE (cont.)

 

		Number of shares								Number of shares
		Six month period ended June 30,								Three month period ended June 30,
		2012				2011				2012				2011
Weighted average number of shares used in the computation of basic and diluted earnings per share			8,548,379				7,844,818				8,553,587				8,237,405
Total weighted average number of ordinary shares related to outstanding options and warrants excluded from the calculations of diluted loss per share (*)			136,400				116,916				136,400				116,916

 

(*)

The effect of the inclusion of options, convertible bonds and convertible preferred stock for all reported periods was anti-dilutive.

 

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Statement of Forward-Looking Information

 

In this quarterly report, references to "Pimi Agro CleanTech, Inc.," "Pimi," "the Company," "we," "us," and "our" refer to Pimi Agro Cleantech, Inc. and its wholly owned subsidiary, Pimi Agro CleanTech, Ltd.

 

Except for the historical information contained herein, some of the statements in this Report contain forward-looking statements that involve risks and uncertainties. These statements are found in the sections entitled "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Risk Factors" in our Annual Report on Form 10-K for the period ended December 31, 2011. They include statements concerning: our business strategy; expectations of market and customer response; liquidity and capital expenditures; future sources of revenues; expansion of our proposed product line; and trends in industry activity generally. In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "expect," "plan," "could," "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal," or "continue" or similar terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the risks outlined under "Risk Factors" in 2011 10K, that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For example, assumptions that could cause actual results to vary materially from future results include, but are not limited to: our ability to successfully develop and market our products to customers; our ability to generate customer demand for our products in our target markets; the development of our target markets and market opportunities; our ability to manufacture suitable products at competitive cost; market pricing for our products and for competing products; the extent of increasing competition; technological developments in our target markets and the development of alternate, competing technologies in them; and sales of shares by existing shareholders. Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Unless we are required to do so under federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.

 

Overview

 

The Company focuses on developing environmentally friendly solutions for extending storability and shelf life of vegetables and fruits. As of the date of this report, the Company is developing seven (7) products (CitrusGuard™, FreshProtect™, SpuDefender™, SweetGuard™, StorGuard™, OnionGuard™ and Super Clean™) and has started the commercialization of five (5) of these products (CitrusGuard™, FreshProtect™, SpuDefender™, SweetGuard™ and Super Clean™).

 

Currently, the Company is focused on solutions related to fresh Citrus Fruits, table potatoes and Sweet Potatoes. Based on recent statistics, Citrus are the most consumed fruits worldwide. World fresh Citrus market is estimated at above 50 million tons per annum. Potatoes are the second largest crop (after grain) worldwide. According to the Food and Agriculture Organization of the United Nation, the total crop of the 20 major producers of Potatoes in the year 2010 was approximately 211 million metric tons (see: http://faostat.fao.org/site/339/default.aspx). We estimate that Table Potatoes which our solution is currently aimed for are 30%-40% of the total world produced potatoes.

 

All of our products are based on Stabilized Hydrogen Peroxide ("STHP"), which has the ability to increase shelf life, while reducing residue pesticides in consumed fruits and vegetables.

 

The Company anticipates generating revenue from the sale of its products to growers and packaging facilities in the United States in addition to current revenues from the sale of products in Israel.

 

The Company’s management believes that the current trend in the markets to use environmentally friendly products, which are residue free, or low residue, and to replace the subsisting chemicals, which are high residue, together with the trend of the regulators, to reduce the usage of high residue chemicals (such as CIPC), will cause farmers and packing houses to prefer Pimi’s solutions. The Company has already begun testing at several facilities in the United States and anticipates that additional facilities will test the company’s products in the future.

 

Company History

 

Pimi Israel was established in 2004 with a vision towards developing environmentally friendly alternative solutions to current chemical treatments of fruits, vegetables and grains, thereby improving the well-being of consumers, growers and the environment. Pimi Israel has devoted significant research in developing environmentally friendly solutions for pre and post harvest treatments of fruits and vegetables. The Company's technology is based on a unique, patented formulation of Stabilized Hydrogen Peroxide, combined with a controlled distribution system used to apply it.

 

 

On April 27, 2009 we purchased all the issued and outstanding shares of Pimi Israel from Pimi Israel’s shareholders in consideration for 6,313,189 shares of our Common Stock. As a result, Pimi Israel became a wholly owned subsidiary of the Company.

 

CRITICAL ACCOUNTING POLICIES

 

The Securities and Exchange Commission ("SEC") defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our accounting policies are described in Note 2 to the financial statements appearing elsewhere in our Annual Report on Form 10-K for the period ended December 31, 2011. Not all of the accounting policies require management to make difficult, subjective or complex judgments or estimates.

 

Our management believes that, as for the financial statements for the periods included in this report, the change in fair value of the series A convertible preferred stock and the going concern assessment are viewed as critical accounting policy. However, due to the early stage of operations of the Company there are no other accounting policies that are considered to be critical accounting policies by the management.

 

Recently issued accounting pronouncements

 

ASC Topic 220, “Comprehensive Income”

Effective January 1, 2012, the Company adopted retrospectively the provisions of Accounting Standard Update No. 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 eliminated the option to present the components of other comprehensive income as part of the statement of equity and requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income (as applied by the Company) or in two separate but consecutive statements.

 

The adoption of ASU 2011-05 did not have a material impact on the unaudited consolidated financial statements.

 

ASC Topic 210, “Balance Sheet”

In December 2011, the FASB issued Accounting Standard Update (ASU) 2011-11, “Balance Sheet (Topic 210) - Disclosures about Offsetting Assets and Liabilities” (ASU 2011-11). ASU 2011-11, enhance disclosures about financial instruments and derivative instruments that are either offset in accordance with the Accounting Standards Codification or are subject to an enforceable master netting arrangement or similar agreement.

 

The amended guidance will be effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods (fiscal year 2013 for the Company) and should be applied retrospectively to all comparative periods presented.

 

The Company is currently evaluating the impact that the adoption of ASU 2011-11 would have on its consolidated financial statements, if any.

 

 

RESULTS OF OPERATIONS

 

SIX MONTHS ENDED JUNE 30, 2012 COMPARED TO SIX MONTHS ENDED JUNE 30, 2011

 

Total Net Sales: Total Net Sales decreased $32,205 or 20% to $128,295 in the 6 months ended June 30, 2012 from $160,500 for the 6 months ended June 30, 2011. The decrease is due to a focus in 2012 on citrus pilot lines, while in 2011 the Company commenced small scale sales of products treating citrus fruits and potatoes.

 

R&D Expenses: Total net R&D Expenses for the 6 month ended June 30, 2012 of $330,633 decreased $22,155 or 6% from $352,788 for the 6 months ended June 30, 2011, due to decrease in cost of materials in the amount of $45,235, partially balanced by increase in cost of labor and professional services in the amount of $12,090, and increase in travel and other expenses in the amount of $10,990.

 

 

General and Administrative Expenses: General and administrative expenses decreased by $2,913 or 2% in the 6 months ended June 30, 2012 to $168,934 from $171,847 in the 6 months ended June 30, 2011, due to decrease in office maintenance and other expenses of ($14,292), partially balanced by increase in labor and professional fee expenses of $11,379.

 

Loss from Operations: Loss from operations for the 6 months ended June 30, 2012 of $371,272 was up $7,137 or 2% from the loss from operations in the 6 months ended June 30, 2011 of $364,135 as a result of decrease in sales of $32,205, partially balanced by decrease in R&D expenses of ($22,155) and decrease in G&A expenses of ($2,913).

 

Financing Expenses: Total financing expenses for the 6 months ended June 30, 2012 amounted to $31,605, which was $17,767 lower than our financing expenses of $49,372 in the 6 months ended June 30, 2011. This was mostly a result of decrease in convertible loans interest expenses.

 

Net Loss: Net loss of $402,877 in the 6 months ended June 30, 2012 was $10,630 or 3% lower than the net loss in the 6 months ended June 30, 2011 of $413,507 due to decrease in R&D expenses ($22,155), decrease in G&A expenses of ($2,913) and decrease in financing expenses of ($17,767), partially balanced by decrease of sales of $32,205.

 

 

THREE MONTHS ENDED JUNE 30, 2012 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2011

 

Total Net Sales: Total Net Sales decreased $39,737, or 59%, to $27,352 in the 3 months ended June 30, 2012 from $67,089 for the 3 months ended June 30, 2011. The decrease is due to (a) our focus in 2012 on citrus pilot lines, while in 2011 the Company commenced small scale sales of products treating citruses and potatoes, and (b) the fact that citrus season has ended in April 2012.

 

R&D Expenses: Total net R&D Expenses for the 3 months ended June 30, 2012 of $170,346 decreased $5,133, or 3%, from $175,479 for the 3 months ended June 30, 2011, due to decrease in cost of materials in the amount of ($25,875), partially balanced by increase in cost of labor and professional services in the amount of $18,244 and increase in travel and other expenses in the amount of $2,498.

 

General and Administrative Expenses: General and administrative expenses increased by $7,245, or 8%, in the 3 months ended June 30, 2012 to $98,961 from $91,716 in the 3 months ended June 30, 2011 due to increase in labor and professional fee expenses $13,401, partially balanced by decrease in other expenses of $6,156.

 

Loss from Operations: Loss from operations for the 3 months ended June 30, 2012 of $241,955 was up $41,849, or 21%, from the loss from operations in the 3 months ended June 30, 2011 of $200,106, due to the decrease in sales of $39,737 and increase in G&A expenses of $7,245, partially balanced by decrease in R&D expenses of ($5,133).

 

Financing Expenses: Total financing expenses in the 3 months ended June 30, 2012 amounted to $16,501, which were $8,760 lower than our financing expenses of $25,261 in the 3 months ended June 30, 2011. This was mostly a result of decrease in convertible loans interest expenses.

 

Net Loss: Net loss of $258,456 in the 3 months ended June 30, 2012 was $33,089, or 15%, higher than the net loss in the 3 months ended June 30, 2011 of $225,367 due to the decrease in sales of $39,737, increase in G&A expenses of $7,245, partially balanced by decrease in R&D expenses of ($5,133) and decrease in financing expenses of ($8,760).

 

 

Liquidity and Capital Resources

 

As of June 30, 2012, we had liabilities of $1,099,240 ($560,356 as of December 31, 2011), including $751,981 ($174,356 as of December 31, 2011) of Convertible Bonds and preferred stock, $233,680 ($280,291 as of December 31, 2011) of third party liabilities, and $113,579 ($105,709 as of December 31, 2011) was due to related parties. The amounts due to related parties are for consulting services and salaries.

 

As of June 30, 2012 we had unused credit lines in the sum of $15,294 and have $283,402 in cash. As of August 1, 2012 we had unused credit lines in the sum of $15,113 and cash on hand in the net amount of $241,230. Currently our net burn rate is approximately $53,000 per month. Thus, we anticipate that we will use all our cash and credit lines through December 31, 2012.

 

 

The Company has sustained operating losses and its cash needs extend beyond its current resources. In addition, the Company does not have a reliable consistent source of future funding. These factors create an uncertainty about the Company’s ability to continue as a going concern.

 

The Company anticipates that it will begin to realize material revenues starting with the citrus and potato season of 2012 (the fourth quarter of 2012), as clients will begin to utilize and pay for the Company’s product and technologies. Realization of revenues is subject to regulatory approval by the relevant regulators, in each country where we intend to deliver, distribute and sell our products, which we currently do not have, except for the State of Israel and the U.S for our SpuDefender™.

 

Our management believes that as a result of capital raised in 2012, and with certain revenues to be received from the sale and delivery of its products to clients, there will be sufficient capital to meet cash needs for the year ended December 31, 2012, including meeting certain regulatory requirements and to generate sales of development stage products such as Potatoes, Citrus, Yams, Onions and others to come. However, we anticipate that the Company will need to raise additional capital in order to meet its ongoing operations in 2013. If such additional capital is required and cannot be raised, then the Company may be forced to curtail its development activities or adopt other cost savings measures, any of which might negatively affect its operating results.

 

 

Net Cash Used in Operating Activities for the six months period ended June 30, 2012 and June 30, 2011

 

Net cash used in operating activities, generated from continuing operations was $302,396 and $399,080 for the six months period ended June 30, 2012 and 2011, respectively. Net cash used in operating activities primarily reflects the net loss (not including foreign currency translation adjustments) for those periods of $402,877 and $413,507 respectively, which was reduced in part by non-cash stock-based compensation of $470 and $14,860 respectively, interest and beneficial expenses on convertible bonds $6,400 and $33,872 respectively, and reduced (increased) by cash provided (used) due to the adjustment to the net loss and changes in operating assets and liabilities in the amounts of $76,292 and $(51,771), respectively.

 

Net Cash Used in Investing Activities for the six months period ended June 30, 2012 and June 30, 2011

 

Net cash used in investing activities was $9,464, and $9,224 for the 6 month period ended June 30, 2012 and 2011 respectively, and was used primarily to purchase R&D equipment, and fund deposits in respect of employees’ rights upon retirement.

 

Net Cash Used in Financing Activities for the six months period ended June 30, 2012 and June 30, 2011

 

Net cash provided by financing activities was $573,400, and $684,436 for the 6 month periods ended June 30, 2012 and 2011 respectively, which is primarily attributable to capital raised in the amounts of $573,400 and $748,118 respectively, and (charge) of credit lines in the amount of $0 and ($63,682) respectively.

 

Off-Balance Sheet Arrangement

 

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

ITEM 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of June 30, 2012. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in reports, it files or submits under the Exchange Act is accumulated and communicated to management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

 

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2012, our disclosure controls and procedures were not effective, in ensuring that material information relating to us required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission rules and forms

 

Management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a – 15(f). Management conducted an assessment as of June 30, 2012 of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that evaluation, management concluded that our internal control over financial reporting as of June 30, 2012, was not effective in the specific areas described in the “Disclosure Controls and Procedures” section above and as specifically described in the paragraphs below.

 

The material weaknesses we have identified include:

 

As of December 31, 2011, our Chief Executive Officer and Chief Financial Officer identified the following specific material weaknesses in the Company’s internal controls over its financial reporting process:

 

-

There is a lack of sufficient accounting staff, which results in a lack of segregation of duties necessary for a good system of internal control.

-

The Company does not have an audit committee to oversee the financial reporting and disclosure process.

 

In light of the forgoing, once we have adequate funds, management plans to hire additional personnel and implement an audit committee charter for oversight of the financial reporting and disclosure process. We believe these actions will remediate the material weaknesses. However, the material weaknesses will not be considered remediate until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements should they occur. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the control procedure may deteriorate.

 

 

(b) Changes in Internal Control Over Financial Reporting. During the quarter ended June 30, 2012, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1. Legal Proceedings

 

From time to time, we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We are currently not a party to any material pending legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, management is not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Should any liabilities be incurred in the future, they will be accrued based on management’s best estimate of the potential loss. As such, there is no adverse effect on our consolidated financial position, results of operations or cash flow at this time. Furthermore, management does not believe that there are any proceedings to which any director, officer, or affiliate of the Company, any owner of record of the beneficially or more than five percent of the common stock of the Company, or any associate of any such director, officer, affiliate of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company.

 

 

ITEM 1A. Risk Factors

 

In addition to other information set forth in this Report, you should carefully consider the risk factors previously disclosed in “Item 1A to Part 1” of our Annual Report on Form 10-K for the year ended December 31, 2011. There were no material changes from the risk factors during the three months ended June 30, 2012.

 

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

 

None.

 

ITEM 3. Defaults Upon Senior Securities

 

None.

 

ITEM 4. Mine Safety Disclosures

 

None.

 

ITEM 5. Other Information

 

None.

 

ITEM 6. Exhibits

 

EXHIBIT
NUMBER		DESCRIPTION
31.1		Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302 (1)
31.2		Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302 (1)
32.1		Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (1)
32.2		Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (1)

(1) Filed herewith.

 

SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 20^th day of August 2012.

	PIMI AGRO CLEANTECH, INC.
	By:	/s/ Ami Sivan
		Ami Sivan
		Chief Executive Officer
		Principal Executive Officer
	By:	/s/ Avi Lifshitz
		Avi Lifshitz
		Chief Financial Officer
		Principal Accounting and Financial Officer