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ANDN > SEC Filings for ANDN > Form 10-Q on 19-Aug-2013All Recent SEC Filings

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Form 10-Q for ANDAIN, INC.


19-Aug-2013

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.

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 technological / industrial accelerating 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 government grant, saving the need to pay future royalties. The Company's main challenge was to achieve production cost capable of competing with the low price of the insulin pen syringe injector for diabetes 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).

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The Company's team developed successfully the technology of the Gemini, a fully disposable pump, and lab tested all regulatory aspects of the Gemini pump, ready for the clinical trials initial production batch. During the first quarter of 2013, the Company's team focused on technology transfer for GMP/GLP production, and Helsinky approval for clinical trials.

The Company estimates that the Gemini's efforts of development, regulatory affairs and manufacturing in order to complete the required clinical trials, will require a budget of $750,000. In addition we estimate that $600,000 will be required to introduce the innovative pump to the market and to large distributors.

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 as 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 of carrying hydrophobic and hydrophilic molecules with a high drug load, providing exceptional drug delivery efficiency. During the first quarter of 2013, the Company's team mapped all intellectual properties used in developing the multi-task nano-particles to secure in its intellectual properties.

The Company estimates that the additional development, regulatory affairs and manufacturing in order to complete all required clinical trials, will require a budget of $1,100,000.

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. Based on these 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 tumors; 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 them to muscle cells, and reproducing them for an effective treatment. Currently, the Company is developing the upscale production process for commercial use.

The Company estimates that the additional development, regulatory affairs and manufacturing in order to complete all required pre-clinical trials, will require a budget of $650,000.

(b) Operations.

Insulin Pumps.

The Company separates its Gemini pump development in any aspect from the development of its 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 Gemini pump. During 2012 the Company further developed and enhanced the Gemini patents. Those enhancements will be filed in second half of 2013. 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 its technological industrial incubator from any royalties payment for the Gemini product line. The Company and its technology incubator also continue developing the semi-disposable Gaia-Med pump within its original program. Therefore, the Company intends to establish a new business unit to accommodate all assets and operations of the Gemini pump as soon as this pump is ready for clinical trials batch production.

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Nano-Particles.

The Company separates its new development in any aspect from previous development performed in its former subsidiary TPDS Ltd.

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 after the completion of the Company's next financing round. The Company's development success of new and separate technology that is not based or relates in any aspect to TPDS' technology precludes the Company and its technological industrial incubator from any royalties payment for this product line. Currently, the Company and its incubator halted development of TPDS technology, and now develop only its new technology. The Company will revisit the original TPDS development program during 2013, according to the pre-clinical results of the new technology and product.

With the next financing round the Company intends to establish a new business unit to accommodate all assets and operations of the new nano-particle technology and development.

Stem Cell Therapy.

The Company intends to establish a new business unit to accommodate all assets and operations of the new stem cell technology and development of the project as soon as the clinical trials commence.

Results of Operations.

(a) Total Revenue.

The Company had total revenue of $30,872 for the three months ended June 30, 2013 compared to $31,597 for the three months ended June 30, 2012, a decrease of $725 or approximately 2%. The Company had total revenue of $63,767 for the six months ended June 30, 2013 compared to $76,246 for the six months ended June 30, 2012, a decrease of $12,479 or approximately 16%. The decrease in total revenue resulted primarily from decrease in consulting revenue.

The Company had total revenue of $1,312,089 for the period of June 23, 2004 (date of inception) through June 30, 2013.

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(b) Research and development Expenses.

The Company had research and development expenses of $463,332 for the three months ended June 30, 2013 compared to $65,376 for the three months ended June 30, 2012, an increase of $397,956 or approximately 608%. The Company had research and development expenses of $463,332 for the six months ended June 30, 2013 compared to $352,576 for the six months ended June 30, 2012, an increase of $110,756 or approximately 31%. The increases in research and development expenses were mainly due to increase in technological consulting.

The Company had research and development expenses of $854,619 for the period of June 23, 2004 (date of inception) through June 30, 2013.

(c) General and Administrative Expenses.

The Company had general and administrative expenses of $97,143 for the three months ended June 30, 2013 compared to $35,923 for the three months ended June 30, 2012, an increase of $61,220 or approximately 170%. The Company had general and administrative expenses of $247,593 for the six months ended June 30, 2013 compared to $113,949 for the six months ended June 30, 2012, an increase of $133,644 or approximately 117%. The increases in general and administrative expenses were mainly due to increase in professional services.

The Company had general and administrative expenses of $7,348,040 for the period of June 23, 2004 (date of inception) through June 30, 2013.

(d) Net Profit (Loss).

The Company had a net loss of $549,612 for the three months ended June 30, 2013 compared to a net loss of $93,005 for the three months ended June 30, 2013, an increase of $456,607 or approximately 491%. The Company had a net loss of $667,167 for the six months ended June 30, 2013 compared to a net loss of $352,132 for the six months ended June 30, 2013, an increase of $315,035 or approximately 89%. The increases in net loss is the result primarily from the Company's corporate restructuring.

The Company had a net loss of $7,221,690 for the period of June 23, 2004 (date of inception) through June 30, 2013.

Operating Activities.

Net cash used by operating activities was $321,962 for the six months ended June 30, 2013 compared to net cash provided by operating activities of $12,291 for the six months ended June 30, 2012, a change of $334,883. This change was the result of the increase in the net loss.

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The net cash used in operating activities was $338,331 for the period of June 23, 2004 (date of inception) through June 30, 2013.

Investing Activities.

Net cash used in investing activities was $0 for the six months ended June 30, 2013 compared to $0 for the six months ended June 30, 2013.

Net cash used in investing activities was $552,949 for the period of June 23, 2004 (date of inception) through June 30, 2013.

Liquidity and Capital Resources.

As of June 30, 2013, the Company had total current assets of $109,017 and total current liabilities of $297,146 resulting in a working capital deficit of $188,129. The cash and cash equivalents was $0 as of June 30, 2013 compared to $0 as of December 31, 2012.

The net cash provided by financing activities was $312,442 for the six months ended June 30, 2013 compared to net cash provided by financing activities of $0 for the six months ended June 30, 2012. This increase is attributed to share issuance for cash and loans from key management in the six months ended June 30, 2013. Net cash provided by financing activities was $880,837 for the period of inception of June 23, 2004 (date of inception) through June 30, 2013.

The Company's current cash and cash equivalents balance will 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.

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.

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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; and (c) 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.

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(b) Impairment 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 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 ASC 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 ASC 718-10.

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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. 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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