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ANDN > SEC Filings for ANDN > Form 10-Q on 19-Nov-2012All Recent SEC Filings

Show all filings for ANDAIN, INC.

Form 10-Q for ANDAIN, INC.


19-Nov-2012

Quarterly Report


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

The following management's discussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with, the Company's unaudited financial statements and related notes included elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.

Overview.

(a) General Discussion.

Andain is involved in the biotech and medical fields, specializing in identifying technical innovations and providing a unique incubator/accelerator development and industrial platform. The company also offers technical know-how and business strategy expertise to commercialize new technologies into products. The Company's main efforts are to optimize development, engineering for production, regulation, pre-clinical and clinical trials and market penetration, respectfully, to each of its products. The Company is constantly working to enhance its products by new synergetic novel technologies keeping each of its products advantageous in its market.

The Company's industrial incubator specializes in utilization of the industrial infrastructure of companies that it works with, optimizing each product's research and development and engineering development to the "best-in-the-market" product.

The Company's team of experts manages all technological, medical, regulatory and other aspects needed to insure timely development, and market presence within the planed program and budget.

The Company operates five product lines:

Miniature insulin pump

Targeted drug delivery nano-particles

Stem cell therapy

Ultasonic catheter for brain cancer therapy

Peptide booster for anti-wrinkle cosmeceuticals

Miniature Disposable Insulin Pump.

Andain has developed a miniature insulin pump with ultra slim, small 'Band-Aid' patch size, fully disposable, water proof, fully programmable characteristics, designed to treat Type I and Type II diabetes for a full week. The pump's dimensions 49mm diameter, by less than 7 mm thick with 6CC (600 units) insulin, make it very comfortable and almost unnoticeable to wear. Its ultra-low cost makes it an affordable yet clinically superior replacement for pen injector products. Smart on-line monitoring provides a real-time alert for occlusions and leakages. The Company's main challenge was to achieve production price capable to compete with the low price of the insulin pen syringe injection for diabetic type II. The Company's detailed market survey showed a significant advantage of such a product in the market, providing the size and price comfort, yet accurate as the expensive top of the line insulin pumps and preventing any hyper or hypo life threatening situations to the patient (stable blood glucose level superior to the syringe use).


The Company's team successfully developed the technology of the MinIn (miniature insulin) fully disposable pump, and lab tested all regulatory aspects of the MinIn pup, ready for the clinical trials initial production batch. During the first quarter of 2012, the Company's team focused on the technology transfer for GMP/GLP production, and Helsinky approval for clinical trials. During the second quarter, the Company has produced parts and subassemblies for 2,000 units, adapting production and assembly lines.

The Company estimates that the MinIn development, regulatory, and manufacturing in order to complete all needed clinical trials, will require an additional $530,000.

Nano-particles Targeted Drug Delivery Technology.

Andain is also committed to develop its nano-particle technology with the capacity to accommodate hydrophobic (repelling water based molecules), as well hydrophilic (attracting water based molecules) properties. These developments will enable the Company's product to carry ultra strong antibiotics to treat VAP (ventilated associated pneumonia) at respiratory intensive care units (ICU) with an average mortality rate over 50%. The Company is using the VAP application to clinically test the technology, and start market test with its application for compassionate use before full Food and Drug Administration ("FDA") regulation will end. The Company is also developing its product to carry the GSK RELENZA (zanamivir) drug for swine flu (H1N1) therapy. The Company's lab results show very stable nano-particle with over a six months shelf life capable to carry hydrophobic and hydrophilic molecules with a high drug load, providing exceptional drug delivery efficiency. During the first quarter of 2012, the Company's team mapped all intellectual properties used to develop the multi-task nano-particles and to secure it in a separate its intellectual properties apart from those used by TPDS. During the second quarter of 2012, the Company's team prepared the all pre-clinical studies ready for animal tests. This work dramatically reduced the need for extended pre-clinical trials, saving time and money.

The Company estimates that the additional development, regulatory, and manufacturing in order to complete all needed clinical trials will require an additional $850,000 in order to conclude successful human trial.

Stem Cell Therapy for Muscular Injuries.

The Company has completed successful animal studies with positive results on limb therapy. The initial animal studies showed very promising rehabilitating results. Because of those results, the Company has modified and accelerated its development program with two pillar technologies with strong intellectual properties: (i) Direct a stem cell to a myogenic (muscle) cell without any spontaneous direction into unhealthy cells such as cancer; and (ii) mass produce the directed myogenic cells for patient treatment. As part of the of the development phase, the Company has developed a "harvesting" procedure of human fat tissue from the patient as a row material for extracting the stem cells, diverting and directing the stem cells to muscle cells and reproducing these cells for an effective treatment. Currently, the Company is developing the upscale production process for commercial use.


The Company estimates that the additional development, regulatory, and manufacturing in order to complete all needed pre-clinical trials, will require an additional $620,000.

(b) Operations.

Insulin Pumps.

The Company has postponed the registration and filing of the patent application from second quarter of 2012 to the end of 2012 due to the multiple miniaturizing, and sensory innovations emanated from the accelerated development program, which added to the Company's IP.

The Company's new pump is not based or relates in any aspect on Gaia-Med's technology that precludes the Company and the incubator from any royalty payments on this product line. Currently, the Company and the incubator discontinued the development of the semi-disposable Gaia-Med pump within its original program. The Company will revisit the Gaia-Med development program in the third quarter of 2012, according to a MOITL request.

Nano-Particles.

Andain separates the additional development in any aspect from the development done in TPDS.

The Company has successfully managed to develop new technology and intellectual properties to be secured by new patents, for the multi-tasking nano-particles. The Company the registration and filing of the patent application from second quarter of 2012 to the end of 2012 due to additional technological patentable developments emanated from the accelerated program. The Company's development success of new and separate technology that is not based or relates in any aspect on TPDS's technology that precludes the Company and the incubator from any royalty payments on this product line. Currently, the Company and the incubator-halted development of TPDS based technology, and now develop only its new technology. The Company will revisit the original TPDS development program in the third quarter of 2012, according to a MOITL request.

The Company plans to initiate the planed pre-clinical animal trials to enable it to begin human clinical trials in Rambam Medical Centre, ICU, for VAP patients.


Stem Cell Therapy.

Andain has developed the stem-cell technology and product line, conducted animal tests and successfully built massive intellectual properties without the need to separate and transfer the activity into owned subsidiary. Therefore the Company decided to postpone its intention as planed to establish in the second quarter of 2012 a new company to accommodate all assets and operations of the new technology and development of the project. The Company will revisit the need to transfer this activity to a separate subsidiary during the next two quarters.

Results of Operations.

(a) Total Revenue.

The Company had total revenue of $12,158 for the three months ended September 30, 2012 compared to $271,859 for the three months ended September 30, 2011, a decrease of $259,701 or approximately 96%.

The Company had total revenue of $88,404 for the nine months ended September 30, 2012 compared to $421,291 for the Nine months ended September 30, 2011, a decrease of $332,883 or approximately 79%.

These decreases in revenue were the result of a decrease in government grants.

The Company had total revenue of $1,170,428 for the period of inception (June 23, 2004) through September 30, 2012.

(b) General and Administrative Expenses.

The Company had general and administrative expenses of $32,179 for the three months ended September 30, 2012 compared to $309,127 for the three months ended September 30, 2011, a decrease of $276,948 or approximately 90%.

The Company had general and administrative expenses of $146,128 for the nine months ended September 30, 2012 compared to $763,130 for the nine months ended September 30, 2011, a decrease of $617,002 or approximately 81%.

These decreases in general and administrative expenses were due to reclassification to research and development expenses and reduction of general and administrative expenses to operations needs.

The Company had general and administrative expenses of $4,300,835 for the period of inception (June 23, 2004) through September 30, 2012.


(c) Research and Development Expenses.

The Company had research and development expenses of $107,270 for the three months ended September 30, 2012 compared to $220,388 for the three months ended September 30, 2011, a decrease of $113,118 or approximately 51%.

The Company had research and development expenses of $452,043 for the nine months ended September 30, 2012 compared to $220,388 for the nine months ended September 30, 2011, an increase of $231,655 or approximately 105%.

This increase in research and development expenses was due to reclassification of general and administrative expenses to research and development.

The Company had research and development expenses of $822,681 for the period of inception (June 23, 2004) through September 30, 2012.

(d) Net Profit (Loss).

The Company had a net profit of $436,914 for the three months ended September 30, 2012 compared to a net loss of $417,011 for the three months ended September 30, 2011.

The Company had a net profit of $84,782 for the nine months ended September 30, 2012 compared to a net loss of $722,881 for the nine months ended September 30, 2011.

These changes from period to period are the result of other income generated from forgiveness of debts.

The Company had a net loss of $3,751,930 for the period of inception (June 23, 2004) through September 30, 2012.

Operating Activities.

Net cash provided by operating activities was $1,046 for the nine months ended September 30, 2012 compared to net cash used in operating activities of $450,951 for the nine months ended September 30, 2011, a change of $452,744. This change is attributed mainly to decrease of payment for professional services.

The net cash used in operating activities was $478,049 for the period of inception (June 23, 2004) through September 30, 2012.

Investing Activities.

Net cash used in investing activities was $480 for the nine months ended September 30, 2012 compared to $952 for the nine months ended September 30, 2011.

Net cash used in investing activities was $670,179 for the period of inception (June 23, 2004) through September 30, 2012.


Liquidity and Capital Resources.

As of September 30, 2012, the Company had total current assets of $802,149 and total current liabilities of $994,924 resulting in a working capital deficit of $192,775. The cash and cash equivalents was $2,207 as of September 30, 2012 compared to $872 as of December 31, 2011, an increase of $1,335. This increase was due to share issuance for cash received in January 2012.

The net cash provided by financing activities was $0 for the nine months ended September 30, 2012 compared to $445,334 for the nine months ended September 30, 2011. This change is attributed to decrease in share issuance for cash and for share-based payments. Overall, cash and cash equivalents for the nine months ended September 30, 2012 increased by $547. The net cash provided by financing activities was $1,148,743 for the period of inception (June 23, 2004) through September 30, 2012.

The Company's current cash and cash equivalents balance will be not be sufficient to fund its operations for the next 12 months. The Company's ability to continue as a going concern on a longer-term basis will be dependent upon its ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, and to obtain additional financing, and ultimately attain profitability. The Company's continued operations, as well as the implementation of the Company's business plan will depend upon its ability to raise additional funds through bank borrowings and equity or debt financing.

On January 14, 2011, the Company entered into a Regulation S Stock Purchase Agreement with 1568934 Ontario Limited, an Ontario limited partnership ("Purchaser"). Under this agreement, the Purchaser purchased from the Company 266,667 restricted shares of common stock at $0.75 per share for a total consideration of $200,000. The Purchaser is an affiliate of the Company.

On May 24, 2011, the Company entered into a Regulation S Stock Purchase Agreement with the Purchaser. Under this agreement, the Purchaser purchased from the Company 140,000 restricted shares of common stock at $0.75 per share for a total consideration of $105,000.

On July 29, 2011, the Company entered into a Regulation S Stock Purchase Agreement with the Purchaser. Under this agreement, the purchaser purchased from the Company 66,667 restricted shares of common stock at $0.75 per share for a total consideration of $50,000.

On December 26, 2011, the Company entered into a Regulation S Stock Purchase Agreement with the Purchaser. Under this agreement, the Purchaser purchased from the Company 2,590,909 restricted shares of common stock at $0.11 per share for a total consideration of $285,000.

On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Sam Elimelech, the Company's President & CEO. Under this agreement, Sam Eliemelech purchased from the Company 18,000,000 restricted shares of common stock for a total consideration of $18,000 ($0.001 per share).


On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Gai Mar-Chaim, the Company's secretary/treasurer. Under this agreement, Mr. Mar-Chaim purchased from the Company 18,000,000 restricted shares of common stock for a total consideration of $18,000 ($0.001 per share).

On July 29, 2012, the Company entered into a Regulation S Stock Purchase Agreement with Eran Elimelech, son of Sam Elimelech (the Company's president) but not living in the same household. Under this agreement, Eran Elimelech purchased from the Company 2,000,000 restricted shares of common stock for a total consideration of $2,000 ($0.001 per share). Sam Elimelech disclaims any beneficial ownership of these shares.

Whereas the Company has been successful in the past in raising capital, no assurance can be given that these sources of financing will continue to be available to it and/or that demand for the Company's common stock will be sufficient to meet its capital needs, or that financing will be available on terms favorable to the Company. If funding is insufficient at any time in the future, the Company may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of the Company's planned product development and marketing efforts, any of which could have a negative impact on its business and operating results. In addition, insufficient funding may have a material adverse effect on the Company's financial condition, which could require it to:

curtail operations significantly;

sell significant assets;

seek arrangements with strategic partners or other parties that may require the Company to relinquish significant rights to products, technologies or markets; or

explore other strategic alternatives including a merger or sale of the Company.

To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to the Company's existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Company's operations. Regardless of whether the Company's cash assets prove to be inadequate to meet its operational needs, the Company may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to the Company's existing stockholders.

Inflation.

The impact of inflation on the Company's costs and the ability to pass on cost increases to its customers over time is dependent upon market conditions. The Company is not aware of any inflationary pressures that have had any significant impact on its operations over the past quarter and the Company does not anticipate that inflationary factors will have a significant impact on future operations.


Off-Balance Sheet Arrangements.

The Company does not maintain off-balance sheet arrangements nor does it participate in non-exchange traded contracts requiring fair value accounting treatment.

Critical Accounting Policies.

The SEC has issued Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company's most critical accounting policies include: (a) use of estimates; (b) impairment of long-lived assets; (c) revenue recognition; and (d) share-based compensation. The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results the Company reports in its financial statements.

(a) Use of Estimates.

The preparation of financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Company bases its estimates on historical experience and on various other assumptions that is believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

(b) Impairment of Long-Lived Assets.

For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company assesses the impairment of long-lived assets (including identifiable intangible assets) annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

When management determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we test for any impairment based on a projected undiscounted cash flow method. Projected future operating results and cash flows of the asset or asset group are used to establish the fair value used in evaluating the carrying value of long-lived and intangible assets. The Company estimates the future cash flows of the long-lived assets using current and long-term financial forecasts. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If this were the case, an impairment loss would be recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value.


(c) Revenue Recognition.

The Company recognizes revenue when all four recognition criteria have been met:
persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, seller's price to buyer is fixed or determinable, and collectability is reasonably assured.

(d) Share-Based Compensation.

The Company follows Accounting Standards Codification Topic 718-10, "Stock Compensation," which addresses accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. Topic 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Upon the adoption of Topic 718-10, the Company maintained its method of valuation for stock option awards using the Black-Scholes valuation model, which has historically been used for the purpose of providing pro-forma financial disclosures in accordance with Topic 718-10.

The use of the Black-Scholes valuation model to estimate the fair value of stock option awards requires the Company to make judgments and assumptions regarding the risk-free interest rate, expected dividend yield, expected term and expected volatility over the expected term of the award. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the actual amount of expense could be materially different in the future.

Compensation expense is only recognized on awards that ultimately vest.

Forward Looking Statements.

Information in this Form 10-Q contains "forward looking statements" within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended ("Securities Act"). When used in this Form 10-Q, the words "expects," "anticipates," "believes," "plans," "will" and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements regarding the adequacy of cash, expectations regarding net losses and cash flow, statements regarding growth, the need for future financing, dependence on personnel, and operating expenses.

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.


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