**COMMISSION**

**Washington, D.C.20549**

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**FORM 10-K**

**(Mark One)**

**[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012**

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**OR**

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**[ ] TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________**

 

**COMMISSION FILE NUMBER: 0-51216**

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ANDAIN, INC.

(Exact Name of Company as Specified in its Charter)

 

 

Company’s telephone number: (310)286-1777

 

Securities registered pursuant to Section 12(b)of the Act: None

Securities registered pursuant to Section 12(g)of the Act: common stock, $0.001 par value

 

Indicate by check markif the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes [ ] No [X].

 

Indicate by check markif the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: Yes [ ] No [X].

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) beensubject to such filing requirements for the past 90 days: Yes [X] No [ ].

 

Indicateby check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactivedata file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for suchshorter period that the registrant was required to submit and post such files). Yes [X] No [ ].

 

Indicate by check markif disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of Company’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K [ ].

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reportingcompany” in Rule 12b-2 of the Exchange Act:

 

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act: Yes [ ] No [X].

 

Theaggregate market value of the voting stock held by non-affiliates of the Company as of March31, 2013: $327,450.  As of March 31, 2013, the Company had 57,669,242 shares of common stock issued and outstanding.

 

**TABLE OF CONTENTS**

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**PART I.**

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**ITEM 1.  BUSINESS.**

 

**Business Development.**

 

Andain Inc.,a Nevada corporation (“Company”), was incorporated on July 23, 2004. The address for the Company is: 400South Beverly Drive, Suite 312, Beverly Hills, California 90212, its telephone number is: (310) 286-1777. The Company commercializesnovel technologies in the biotechnology and medical fields. The Company’s products include miniature disposable insulin pump,stem cell therapy for muscular injuries and organ-targeted nano-particles for drug delivery via inhalation.

 

The Company also operatesan in-house technological and industrial incubator, supported by its industrial associates and government funding. Through itsincubator program, the Company is constantly screening promising new technologies to commercialize. The Company’s focus ison patented technologies that can be commercialized within a period of 12-24 months and, preferably, provide lifesaving attributes.

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**Business of the Company.**

The Company is currently operatingeight business units:

 

Product-based business units:

 

 

 

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Service-based business units:

 

 

 

**1.  Miniature Disposable Insulin Pump.**

 

On July 1, 2010, the Company,through its subsidiaries Meizam – Advanced Enterprise Center Ltd., an Israel corporation (“Meizam Arad”), andMeizam Arad Investments Ltd. an Israel corporation (“Meizam Investments”), entered into an initial share purchase agreementwith Gaia Med Ltd., an Israel corporation (“Gaia Med”). On March 31, 2011 Gaia Med issued 600,000 shares to MeizamInvestments according to the Industrial Incubator Agreement, where Meizam Investments acquired 33% of Gaia Med shares for 2.25million New Israeli Shekels (“NIS”) (App. $650,000). During 2013, the Company does not expect to receive additionalresearch and development grants for Gaia Med from the Israeli Ministry of Industry, Trade, and Labor’s (“MOITL”)above the specified in the approved program.

 

On March 31, 2011 the Companytransferred all rights commitments, assets and holdings of Gaia Med from Meizam Arad to Meizam Investments.

 

On September 30, 2011,Gaia Med adjusted the share distribution to match unissued vested shares. After the adjustment, the Company holds 42.6% of itstotal issued and outstanding shares.

 

On December 28, 2011, GaiaMed bought back 27% of its share capital from some of its private shareholders. As a result, the Company increased its holdingin Gaia Med to 57.6%.

 

In addition, the Company develops advancedminiature, ultra slim, 'Band-Aid' patch size insulin pump, the Gemini. Our miniaturizingtechnology enabled the development of a fully disposable, waterproof, fully programmable insulin pump designed to treat Type Iand Type II diabetes for a week. The pump holds 6CC of insulin and is 49mm diameter by 7 mm thick 25 in size, making it very comfortableand almost unnoticeable to wear. Moreover, its ultra-low cost makes it an affordable and clinically superior replacement for peninjector products. Smart on-line monitoring provides a real-time alert for occlusions and leakages.

 

We also developed a plugin universal remote-control unit that provides the patient, clinic, and doctor dynamic control and on going monitoring of the patient’sinsulin treatment program. As a stand-alone, the pump is pre-programmed for patient treatments, providing tailored-made safe basalInsulin treatment and allows for the program-controlled delivery of manual bolus insulin dosages. A fail-safe mechanism preventsthe administration of multiple bolus insulin dosages and fully controls basal insulin to prevent hypo-glycemia.

 

The Company’s fullydisposable insulin pump product line based on miniaturizing technologies developed and implemented in our insulin pumps. Theseinsulin pumps address two market segments:

 

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**(a)  Fully-Disposable Nano-Pump.**

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On February 1, 2011 theCompany initiated an aggressive development program to develop a miniature band-aid patch-size waterproof fully disposable insulinpump suitable for Diabetics type I and type II. The Company’s miniature insulin pump's low cost offers an affordable replacementfor the pen-injections used by diabetic type II patients, with superior clinical performance.

 

The nano-pump is basedon an innovative, design:

 

 

 

 

 

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The development and in-vitrotest of the nano-pump were successfully completed, and meets the medical and marketing requirement for diabetic type I type IIat the planed manufacturing cost.

 

**(b)  Semi-Disposable Nano-Pump.**

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The Company has completedthe development, lab and in-vitro tests of the Diamond semi-disposable miniature pump, which has a disposable part and a reusablesophisticated multi-function part, and met the medical and marketing requirement for treating diabetes type-I and type II. TheDiamond semi-disposable miniature pump meets all medical regulatory requirements, and provides low-cost solution for diabeticstype I and type II patients.

 

The Company has concludedthe initial production batch of the semi-disposable Diamond pump for pre-clinical and clinical studies as required by regulations.The initial pre-clinical results showed promising results enabling the Company’s engineers further miniaturizing the pumpand dramatically reducing the production to a, very low cost and very reliable patch size pump.

 

As a result, the Companyis modifying the pre-clinical and clinical trials, as well the related regulatory applications to meet the new design of the fullydisposable and semi-disposable pumps. In addition, the Company is preparing a new patent application to secure the newly developedfully disposable technology.

 

**(c)  Current Status.**

 

The Company is currentlyputting significant efforts in manufacturing and regulatory affairs of the fully disposable miniature pump in order to enable uscompleting the FDA before end of 2013. During 2013, the Company plans to conduct clinical trials of diabetes type II treatmentwith our insulin pumps for market acceptance purposes. The Company is maintains its new patent application, which is separate fromthe semi-disposable pump patents and intellectual properties, in order to secure the newly developed technology.

 

The development and in-vitrotests of the Diamond semi-disposable pump were successfully completed and meet the medical and marketing requirements for diabetictype-I and type-II patients. The Company now intends further miniaturizing the pump and reducing its production cost.

 

**(d)  12 Month Operational Plan.**

 

Production– The Company’s design for production enables it to commence pump production for the clinical trials. The Company developsFDA standards production line of the fully disposable pump will at a GMP production facility certified for the same regulationand quality assurance as the commercial product.

 

Clinicaltrials – The Company’s our scheduled clinical trials will take place at the Diabetics Clinic of Diabetic Center, SchneiderMedical Center, Petach Tikva. The clinical trials are designed to support 3 groups of 200 patients per group, compared to the generalpopulation of diabetes type-II using conventional insulin pen injection:

 

Type Idiabetes – Pumps personally programmed for type I diabetics. The individual in the group is controlled by Soroka HospitalDiabetic Clinic.

 

Type IIdiabetes – Pumps personally programmed for type II diabetics. The individual in the group is controlled by Soroka HospitalDiabetic Clinic.

 

Type IIdiabetes – Pumps have general basal programming to be used as the reference group

 

TypeII diabetes – Patients use the conventional pen injection as a control group.

 

**(e)  The Market for Insulin Pumps.**

** **

Diabetes is a global epidemicwith over 285,000,000 diabetes patients worldwide and 7,000,000 patients contracting the disease annually (Source: InternationalDiabetes Federation, Diabetes Atlas 2010). Diabetes can be identified as: Type-1, Type-2 and gestational. Type-2 diabetes accountsfor more than 90% of all diabetes cases in developed countries (Source: The American Diabetes Association, 2010).

 

According to the NationalCenter for Chronic Disease Prevention and Health Promotion (CDC), in 2010 there were 18.8 million people diagnosed with diabetesin the U.S., of which 1.9 million were newly diagnosed in 2010; 26% of them were treated in insulin. The estimated direct costof diabetes in the U.S. is over $170 billion annually. In order to constrain spiraling healthcare costs and limit the progressionof full-blown type 2 diabetes and its complications among an aging and increasingly obese population, the development of more affordableand effective diabetes management (self-testing and treatment) products has become a top priority not only in the U.S., but worldwide.

 

In Type-1 diabetes, thebody fails to produce insulin as a result of an autoimmune response in which the immune system does not recognize its own isletcells and destroys them. This type of diabetes generally occurs in people under the age of 40 and is most commonly acquired duringchildhood. Type 1 diabetes is treated by insulin injections and diet.

 

Type-2 diabetes is themost common form of diabetes (90-95% of diabetes patients). It presents as high blood glucose levels despite an initial abundanceof the hormone insulin. The cells of the body ignore the insulin and do not allow glucose to enter the body’s cells. Thisinsulin resistance leads to high levels of glucose in the bloodstream, and eventually to beta-cell failure, where the beta cellsof the pancreas are no longer able to release insulin in response to high blood glucose levels. Patients may require insulin forcontrol of hyperglycaemia, if this is not achieved with diet alone or with oral hypoglycaemic agents.

 

Lifelong dependence oninsulin delivery forces the patient to manually inject insulin with every meal and to constantly monitor their glucose levels usingsyringes, pens or needle less injectors. The Diabetes Control and Complications Trial (DCCT) demonstratedthat intensive insulin therapy – multiple (three or more) daily injections (i.e. shots with syringe or insulin pen) of insulin(MDI) or insulin pump therapy – keeps blood sugar levels in a normal versus elevated (hyperglycemia) range, and slows theprogression of diabetic retinopathy, nephropathy, and neuropathy in Type 1 diabetics, at the expense of increased severe hypoglycemia(low blood sugar from too much insulin or too little glucose in the blood). The incidence of severe hypoglycemia in the trial,defined as treatment requiring assistance, was approximately three times higher in the intensive therapy group, and included alteredconsciousness, episodes of coma/seizure, and hospital/emergency room visits.

 

**(f)  Insulin Pumps.**

 

Diabetes management productsmarket, insulin injection devices and insulin pumps, insulin therapies and oral and injectable diabetes drugs—has becomeone of the largest medical device markets in the U.S. totalling more than $20 billion in 2008. As the population of diabetics continuesto increase, the market is expected to continue to grow at a double-digit rate over the next five years, reaching nearly $28 billionby 2013.

 

The insulin pump marketis sizeable and rapidly growing. Global markets sales are estimated to be over $1 billion annually with a 12% compound annual growthrate.

 

However, insulin pumpsare comparatively expensive, with the average price of $3,500-$5,000 at the U.S. market. The disposable infusion sets are $15-20each (replaceable every 3 days); while insulin reservoirs cost $5 each. As a result, most diabetes patients still do not use insulinpumps as the replacement of the inferior injection administration. Pumps are used by less than 3% of the potential insulin-injectingpatients, and nearly all by Type-1 diabetes patients almost none are used for Type 2 diabetics.

 

Insulin pumps provide analternative to daily injections and provide some Type 1 diabetics better control of their diabetes and a more flexible lifestyle.The standard insulin pump is about the size of a pager and is worn outside the body. The pump is programmed to deliver insulincontinuously (basal rate) and in specific increments (bolus) when needed usually before a meal. Insulin pump users fill up a newinsulin cartridge, which is placed inside the pump, every three to seven days (depending on cartridge size patient body mass anddaily insulin usage).

 

An infusion set of thin,flexible plastic tube with sub-dermal injection needle is attached to the pump and delivers the insulin from the pump to the patient.The infusion sets are inserted just beneath the skin, and need to be changed, on average, every three days. The infusion set tubingis uncomfortable and is susceptible for disconnections due to the physical patient movements and various obstacles.

 

The insulin pump providessuperior diabetes treatment with enhanced glycaemic control and reduces the risk of hypoglycaemic events that dramatically improvesa patient’s quality of life. According to the American Diabetes Association, some advantages of using an insulin pump insteadof insulin injections are:

 

Eliminates individual insulin injections

 

 

 

 

 

 

 

 

 

 

**(g)  Competition.**

 

Medtronic’s MiniMeddivision (acquired in August 2001) is the insulin pump market leader (Paradigm pump) in the US, while Roche’s Disetronicdivision (acquired in May 2003) is the market leader outside of the US. Until 2000, the U.S. insulin pump and disposables marketwas dominated by MiniMed and Disetronic. Animas began shipping its first generation R1000 insulin pump in July 2000, launched itssecond generation IR 1000 insulin pump in 2002, its third generation IR 1200 insulin pump in April 2004, and fourth generationIR 1250 in February 2005. In 20005 the US, Animas markets its products through both a direct sales force of about 55 sales representatives(paired with about 75 clinical diabetes educators) and distributors. Animas has shipped more than 14,500 pumps worldwide as ofMarch 2004, up to the end of 2005, and does not currently break out unit sales. In June 2003, Roche stopped shipping insulin pumpsto the US as a result of regulatory issues with the FDA, but continued to support its current customer base in terms of customersupport and shipping of disposables. Roche re-enter the U.S. market with its Accu-Chek Spirit in 2006.

 

Deltec introduced the Cozmoinsulin pump in December 2002, and partnered with Abbott to introduce its new CozMore Insulin Pump System in August 2004, whichworks with the Abbott (TheraSense) FreeStyle meter. Deltec has sold about 18,000 pumps as of July 2005, most of which were in theU.S. (Dana Diabecare pump) and Nipro (Amigo pump) also manufacture insulin pumps. Insulet was introduced to the diabetes pump marketin early 2007 with its OmniPod disposable insulin pump. Anima is launching its next generation IR 1275 and IR 1500 pumps in anddisposable insulin pump.

 

With miniaturizing technology,the insulin pump manufactures drive for a patch-size fully disposable pump. Several patch pumps are in various development stages:

 

 

 

 

 

 

 

 

**2.  Nano-particles Targeted Drug Delivery Technology.**

 

On June 11, 2006, the Companyentered into a Technology Purchase Agreement with Pangea Investments GmbH (“Pangea”). Pangea was the owner of the intellectualproperties, potential patent rights, know-how and research and development in process, and all related technical information, inconnection with technology as described in a U.S. patent application filed on June 7, 2006. In return for acquiring the rightsto use the technology covered by this applied patent, the Company paid to Pangea Investments GmbH 4,500,000 restricted shares ofcommon stock. On February 27, 2012, Pangea Investments GmbH sold all of the restricted shares of commonstock held in its name and is no longer a shareholder in the Company. 

 

This application coversa pulmonary inhalation drug delivery system for hydrophobic drug molecules for wet and dry inhalation. Hydrophobic refers to thephysical property of a molecule that is repelled from a massof water. Hydrophobic drugs such as these widely vary in levelsof toxicity but are very efficient antibiotics and the only solution capable to treat the MDR (multi drug resistance) bacteriathat COPD patients suffer from. They cannot mix and dissolve easily in water or in saline without use of additional toxic solventsand if used in a class IV administration form can cause imminent kidney failure, therefore used only in very extreme cases as alast resource.

 

On August 14, 2006, theCompany established TPDS Ltd., an Israel corporation (“TPDS”), as a subsidiary responsible for further developmentof the acquired technology into a commercially viable product in the field of respiratory care of chronic obstructive pulmonarydisease and ventilator-associated pneumonia patients. TPDS has developed organ-targeted drug delivery nano-particles with timelydrug release capacity. TPDS is located at Meizam Arad. Currently, the Company holds 93.6% of TPDS’s equity.

 

On March 31, 2011 The Companytransferred all rights commitments assets and holdings of TPDS from Meizam Arad to Meizam Investments.

 

On March 31, 2011 TPDSissued 9,367,350 shares to the Company to compensate for the over issuance to Dr. Leonid Luria as of the signed agreement withDr. Luria dated May 16, 2006. In addition TPDS issued 3,876,192 shares to Meizam Investments according to an industrial incubatoragreement, where Meizam Investments acquired 25% of TPDS shares for 2.25 million NIS (approximately $650,000).

 

TPDS (target particle deliverysystem)****is the Company’s product line based on unique nano-particles capable of carrying different drugs to specificorgans. Our nano-particle technology is capable of ultra-high drug loading of hydrophobic and hydrophilic drug types. The nano-particlereleases the drug on a pre-designed timing, and then decomposes to its natural ingredients and naturally dissolves by the body'sfunctions. Our nano-particle delivery technology improves significantly the effectiveness and efficiency of delivering antibioticsvia inhalation, thus providing a potentially better cure for pulmonary diseases.

 

TPDS lipid-based nano-particlescan deliver almost any drug with extremely high load capability. The nano-particles target only the specific designated organ withhardly any residual drug existence in other internal organs.

 

The nano-particles releasethe drug in the target organ in a well-timed and controlled manner. Such controlled release enables lower drug dosage while reducingtoxicity and harm.

 

TPDS nano-particles encapsulatethe drug molecules until the release-triggering mechanism releases the drug. As soon the drug is released, the nano particles dissolveto their natural ingredients and are absorbed by the surrounding tissue.

 

The Company’s primaryapplication is COPD (chronic obstructive pulmonary disease), which affects over 16 million patients in the U.S. alone. The initialtarget application is VAP (Ventilator-Associated Pneumonia), where patients are commonly treated in intensive care units and sufferhigh mortality rate, and the Company may offer lifesaving therapy.

 

TPDS nano-particle canalso carry a cocktail of drugs, handling persistent bacteria with anti-inflammatory agents, to prevent lung spasm and airway obstruction,in conjunction with the appropriate drugs. The formulation developed, handles the bacteria that flourish in the lungs, causinginflammation and edema, and eventually lung collapse with devastating effects.

 

The Company completed theinitial development and is preparing batch production for pre-clinical trials

 

**(a)  Current Status.**

 

Nano-particle accelerateddevelopment – The Company has completed development of the nano-particle technology capable to carry and accommodate hydrophobic(repelling water based molecules) as well hydrophilic (attracting water based molecules) medical drug molecules.

The Company has managed to expand significantlyits nano-particles capabilities to carry out also the GSK RELENZA (zanamivir) drug for swine flu (H1N1) therapy. About three yearsago, the FDA issued a warning letter regarding the use of RELENZA in inhalation since it has not been proven as safe and effective.Zanamivir is an effective drug for the swine flu. The request for this nano-particle application was referred to us by ProfessorPitlik formerly Head of Infectious Diseases Dept. at Belinson Medical Center. The Company estimates that the additional developmentenhancing the product’s capabilities will provide unique and significant technological advantage and will enhance the Company’sbusiness capabilities.

 

It is the Company’sgoal to enter into clinical trials with the modified nano-particle which will be capable of carrying additional drugs such as thezanamivir knowing that the use of its nano-particle may prevent solution foaming and increase the drug delivery effectiveness.

 

Ethical Committee ("Declarationof Helsinki") – The Company was asked to add one pre-clinical safety test. The Company will complete the regulatoryapplications for the planned clinical trials with its next investment round.

 

Clinical trials –with the next investment round the Company will perform the clinical trials at the respiratory intensive care unit at Rambam MedicalCenter (Haifa, Israel)

 

GMP production –The production will take place at Rotem Industries GMP facility. In April 2011 Rotem received the Ministry of Health's approvalfor producing TPDS drug with no cross-contamination risk!

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**(b)  12 MonthOperational Plan.**

 

GMP production Line –The Company is required to upgrade the production line at Rotem Industries and add a separate high-pressure homogenizer, in orderto avoid possible cross contamination with the other production lines at Rotem.

 

Initial batch Production– The Company plans to produce minimum 2,000 vials to meet the clinical trial needs of 21 days treatment course, 3 timesa day per patient (with spare).

 

Pre-Clinical Trials –The Company plans to perform the pre-clinical trials with large animals in order to meet all needed safety regulatory requirements.Although it was not requested by the regulations, we intend adding pharmacokinetics and pharmacodynamics tests to exhibit our technologysuperiority comparing to any other relevant available solutions.

 

Clinical Trials –2 cycles of patients in the Respiratory Intensive Care Unit at Rambam Medical Canter are planned. The duration of the first cyclewill be minimum 6 months, treating the VAP patients with TPDS nano-particles. The lung fluids will be analyzed for bacterial coloniesinfection after each treatment (min. 3 times a day). The second cycle will receive the same treatment without our nano-particle,using the same procedure analyzing bacterial colonies infection after each treatment (min. 3 times a day), and comparing the resultsbetween the 2 groups.

 

Lab tests and analytics– For each lung fluid test, the Company needs to test the patient blood-work and urine. Those tests will probably continueafter the treatment ends in order to analyze the decay of the delivered drug in the patient's body over time. The lung liquidsfor bacteria colonies have to be analyzed outside the hospital laboratories. This analysis will take place at Beer-Sheva Universityanalytical department.

 

**(c)  Market Overview**

 

Pulmonary Diseases.

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**COPD (Chronic ObstructivePulmonary Disease).**

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This is an umbrella termused to describe lung disease associated with airflow obstruction. Most generally, emphysema, chronic bronchitis and chronic asthmaeither alone or in combinations fall into this category. There is continuing debate as to whether this term also includes Asthma(non chronic), however as a general rule, it is not included as, even though it does have obstructive components to it, it is inpart reversible, and is more generally considered a restrictive lung disease. 

 

The symptoms of COPD canrange from chronic cough and sputum production to severe debilitating shortness of breath. In some individuals, chronic cough andsputum production are the first signs that they are at risk for developing the airflow obstruction and shortness of breath characteristicof COPD. In others, shortness of breath may be the first indication of the disease.

 

**ChronicBronchitis.**

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This is the inflammationand eventual scarring of the lining of the bronchial tubes. When the bronchi are inflamed and/or infected, less air is able toflow to and from the lungs and a heavy mucus or phlegm is coughed up. The condition is defined by the presence of a mucus-producingcough most days of the month, three months of a year for two successive years without other underlying disease to explain the cough.This inflammation eventually leads to scarring of the lining of the bronchial tubes. Once the bronchial tubes have been irritatedover a long period of time, excessive mucus is produced constantly, the lining of the bronchial tubes becomes thickened, an irritatingcough develops, and airflow may be hampered, the lungs become scarred. The bronchial tubes then make an ideal breeding place forbacterial infections within the airways, which eventually impedes airflow. Symptoms of chronic bronchitis include chronic cough,increased mucus, frequent clearing of the throat and shortness of breathe.

 

**Emphysema.**

 

This disease begins withthe destruction of air sacs (alveoli) in the lungs where oxygen from the air is exchanged for carbon dioxide in the blood. Thewalls of the air sacs are thin and fragile. Damage to the air sacs is irreversible and results in permanent “holes”in the tissues of the lower lungs.  As air sacs are destroyed, the lungs are able to transfer less and less oxygen to

 

 

thebloodstream, causing shortness of breath. The lungs also lose their elasticity, which is important to keep airways open. The patient experiences great difficulty exhaling. Emphysema does not develop suddenly.  It comes on very gradually. Yearsof exposure to the irritation of cigarette smoke usually precede the development of emphysema. Of the estimated 3.1 million Americansever diagnosed with emphysema, 95 percent were 45 or older. Symptoms of emphysema include cough, shortness of breath and a limitedexercise tolerance. Diagnosis is made by pulmonary function tests, along with the patient’s history, examination and othertests. 

 

Smoking is the primary risk factor for COPD.Smoking causes approximately 80 to 90 percent of COPD deaths. Female smokers are nearly 13 times as likely to die from COPD aswomen who have never smoked. Male smokers are nearly 12 times as likely to die from COPD as men who have never smoked. Other riskfactors of COPD include air pollution, second-hand smoke, history of childhood respiratory infections and heredity.  Occupationalexposure to certain industrial pollutants also increases the odds for COPD.  A recent study found that the fraction of COPDattributed to work was estimated as 19.2% overall and 31.1% among never smokers.

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Ventilator-Associated Pneumonia (VAP).

 

**Pseudomonas Aeruginosa.**

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This is an opportunisticpathogen, meaning that it exploits some break in the host defenses to initiate an infection. It causes urinary tract infections,respiratory system infections, dermatitis, soft tissue infections, bacterium, bone and joint infections, gastrointestinal infectionsand a variety of systemic infections, particularly in patients with severe burns and in cancer and AIDS patients who are immuno-suppressed.Pseudomonas aeruginosa infection is a serious problem in patients hospitalized with cancer, cystic fibrosis, and burns. The casefatality rate in these patients is 50%.

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Ventilator-AssociatedPneumonia (VAP).

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Thisaffects up to 28% of patients receiving mechanical ventilation in the intensive care unit. The mortality rate for VAP ranges from24 to 50% and can reach 76% in some specific settings or when lung infection is caused by high-risk pathogens common in ICU.

 

TPDS Technology.

 

TPDS is in the processof developing a proprietary lipid-based target particles technology that is intended to enable:

 

 

 

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Market Need.

 

**COPD**. 

 

It is estimated that thereare currently 16 million people in the United States diagnosed with COPD. It is estimated that an additional 14 million or moreare still undiagnosed, as they are in the beginning stages and have few or minimal symptoms and have not sought health care yet.It is predicted that close to 35 million cases could possibly be found just in the United States alone.

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COPD is the fourth leadingcause of death in America, claiming the lives of 120,000 Americans in 2002. Beginning in 2000, women have exceeded men in the numberof deaths attributable to COPD. In 2002, over 61,000 females died compared to 59,000 males.

 

In 2003, 10.7 million U.S.adults were estimated to have COPD. However, close to 24 million U.S. adults have evidence of impaired lung function, indicatingan under diagnosis of COPD. In 2004, the cost to the nation for COPD was approximately $37.2 billion, including healthcare expendituresof $20.9 billion in direct health care expenditures, $7.4 billion in indirect morbidity costs and $8.9 billion in indirect mortalitycosts.

 

TPDS nano-particle drugdelivery system carrying a cocktail of drugs, such as Colistin and other drugs handling persistence bacteria with anti-inflammatoryagents preventing lung spasm and obstruction of the airways, with anti-infection agents. TPDS formulation subscribed to the patientshandles the bacteria that flourishes in the sensitive lung causing inflammation and edema, eventually causing collapsing of thelung.

 

**VAP.**

 

Humanity developed in thelast decades multi drug resistance (MDR) mainly for antibiotics. MDR is a major cause of life threatening pulmonary diseases. Thereis no wide range drug treatment available. No efficient drug for pulmonary MDR diseases. Therefore there is massive failure tosave intensive care and chronicle respiratory patients.

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**3.  Stem Cell Therapy for Muscular Injuries.**

 

On November 16, 2010, theCompany’s subsidiary Meizam Investments signed an initial share purchasing agreement with OrCell Ltd., an Israel corporation(“OrCell”), to acquire 33% of OrCell's intellectual properties and intangible assets for 1.5 million NIS (around $400,000).OrCell has developed an innovative stem cell technology for healing and rehabilitating of severally damaged muscle tissue and initiatingstrong myogenetic regeneration in injuries such as myocardial infarction (MI), pressure ulcers, and regenerative diseases of muscle.The Orcel project is conducted at Meizam Arad.

 

The Company’s innovativestem cell therapy technology rehabilitates and heals damaged muscle tissue by initiating regenerative myogenic cells (cardiac muscle),as well as striated muscle cells (skeletal muscle) growth in damaged tissue sites such as the myocardium (cardiac muscle) followingan myocardial infarction (heart attack), limb pressure ulcers, and degenerative muscular diseases. The short-term application isdirected towards the treatment of patients with peripheral vascular disease, while the long term application is focused on thehealing and regeneration of cardiac muscle following acute myocardial infarction or chronic heart failure.

 

Employinga patient’s own cells (autologic transplantation), the Company’s unique technology and process diverts the patient'sown cells into specific targeted myogenic cells, which canthen be insertedinto the damaged tissue and accelerates the healing process. The administered myogenic or skeletal stem cells work as a network,acting in exactly the same way that the cells of skeletal and heart muscle tissue perform, and actually replenish the existingcells, thus strengthening the intended injured site following the transplantation process. This process can be utilized for differentclinical pathologies as mentioned above and can also be utilized for patient using different donor as the source of the stem cells.

 

Our developed technologyand protocols results in a promising safe regenerative therapy, without side effects, tissue rejection or the requirement of suppressiveimmunological treatment or malignant tumor hazard. Our technology alsoprovides a simple, fast and safe treatment, overcoming technological difficulties associated with using other stem cell therapiessources such as embryonic, placenta, or umbilical cord blood cells that require cryogenic storage. 

 

The product is based onan invention that allows controlled direction of stem cells toward only myogenic cells. This unique process allows the plantedmyogenic cells to work as a network (similar to the cells of skeletal and heart muscle tissue) suitable for transplantation use.

 

Apart from this technology,a mass production protocol is currently being developed allowing safe and efficient mass-production direction of human stem cellsinto myogenic cells for any human transplantation and human tissue engineering without rejection. The protocol currently showspromising safe human therapy without side effects and is integrated into the injured tissue without body rejection or suppressiveimmunological medical treatment.

 

**(a)  Current Status.**

 

The Company has completedsuccessful animal studies with positive results.

 

Initial animal tests –The Company’s initial development has being focused on limb therapy. The initial animal studies showed promising results.

 

Development – TheCompany has developed 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 forpatient treatment. As part of the of the development phase we have developed “harvesting” procedure of human fat tissuefrom the patient as a row material for extracting the stem cells, diverting and directing the stem cells to muscle cells and reproducingthese cells for an effective treatment. Currently we are developing the upscale production process for commercial use.

 

Production – Forclinical trials, the Company needs a GMP certified production facility to produce the stem cells for human use. Currently, theCompany is in a process of adapting the infrastructure at Rotem Industries.

 

**(b)  12 Month Operational Plan.**

** **

Production from human fat– The Company is further developing the production methods of diverted stem cells from patient fat to a commercial scale.The Company intends introducing a working production method and facility by end Q1, 2014.

 

Pre-Clinical trial –The Company intends commencing clinical trials in Q3 2013, using initial products produced in its production line.

 

Clinical trials –They will be conducted at the Regenerative Clinic of Sheba (Tel Hashomer) Medical Center. The Company intends commencing clinicaltrials in Q2, 2015.

 

Pre-clinical and ethicalapplications– Currently, the Company is in the process of animal studies and ethical regulatory process and applications.

 

**4.  Ultrasonic Catheter for Brain Cancer Therapy.**

 

On April 10, 2011, MeizamArad entered into initial share purchase agreement with Sonenco Ltd., an Israel corporation (“Sonenco”). As a considerationfor this investment, Sonenco issued to Meizam Arad 55% of its total issued and outstanding shares on a fully diluted basis, and,in addition, 5% of its total issued and outstanding shares on a fully diluted basis to Meizam Arad. As of December 31, 2012, theinitial share purchase agreement was not closed. During the period April 10, 2011 through December 31, 2012, the Company continuedthe development and technology enhancements, as a full IP proprietary of the Company. The Company will finalize the initial sharepurchase agreement if MOITAL will grant the funds and development grants for Sonenco. Soneneco is located at Meizam Arad.

 

On March 31, 2011 the Companytransferred all rights commitments, assets and holdings of Sonenco Ltd. from Meizam Arad to Meizam Investments.

 

The Company has developedan ultrasonic drug delivery catheter that enables the delivery of medication-coated nano-particles to specific organs and tissuesin the body. The initial application that has been developed is for the treatment of brain tumors by a stereotactic procedure.

 

The blood brain barrier(“BBB”) protects the brain against toxic substances that circulate in the blood stream. While this is a life-supportingprotection for the brain, the existence of the blood brain barrier is a severe limitation for the delivery of most drugs to thebrain because they cannot cross in sufficient amounts. A large number of potentially useful drugs, such as cytostatics and centralnervous system (“CNS”) in-vitro active agents, do not cross the blood brain barrier at all or in insufficient quantities.Sonenco has developed a novel method of delivering those drugs to the brain that are usually blocked from entering by the bloodbrain barrier.

 

The technology's promisingfuture application is in cardiac catheterization, where nano-particles offer a significant advantage in drug delivery over cardiacstents that suffer positioning difficulties and limited size. Those heavy mass solid nano carriers containing drug are hundredtimes smaller than average human cell and thus can penetrate and cross the human cells without causing any damage. Once stuck intheir final position the nano carrier will remain there for a very long period, allowing them to release the attached drug. Programmingthe nano drugs with a slow controlled release profile will enable them to perform an effective and comprehensive drug deliverytreatment.

 

The Company's solutionto drug delivery introduces the following advantages:

 

 

 

 

 

 

The estimated brain cancermarket potential for Sonenco’s pioneering drug delivery catheter exceeds $400 million per year in the major Western economies.

 

Sonenco has completed animal studies that showan outstanding dispersion performance, with no damage to the healthy brain tissue and the animal subject.

 

 

**5.  Peptide Booster for Anti-wrinkle Cosmetics**

** **

On October 16, 2010, theCompany’s subsidiary Meizam Investments signed an initial share purchasing agreement with NBCT Ltd., an Israel corporationin formation (“NBCT”), to acquire 35% of NBCT shares for 1.5 million NIS (around $400,000). As of December 31, 2012,the initial share purchase agreement was not closed. During the period of October 16, 2010 through December 31, 2012, the Companycontinued the development and technology enhancements, as a full IP proprietary of the Company. The NBCT project is conducted atMeizam Arad.

 

NBCT has developed an intra-dermalnano-technology enhancing skin penetration of collagen generating peptides in cosmetic anti-wrinkle products, and is preparingfor clinical trials to be conducted in 2012.

 

The lipid-based nano-particlesdeliver peptides to the dermis, and provide:

 

 

 

 

 

 

 

6.  Meizam – Advance EnterpriseCenter Arad Ltd. (Technological and Industrial Incubator).

 

Meizam Arad is the Company’ssubsidiary operating an industrial incubator program under the guidance and support of the Office of the Chief Scientist of MOITL.Meizam Arad board of directors decided not to extend the agreement period with MOITAL beyond the initial term. The Company willcontinue for the next 3 years to maintain all MOITAL guidelines to the projects funded by MOITAL. The industrial incubator programis aimed at young companies with proven technologies or prototypes that are on the verge of commercialization and industrialization.This program is designed to attract novel technologies and attractive new products supported by government funding at the pre-commercializationphase.

 

The Company establishedMeizam Arad on October 25, 2006 in the City of Arad, which is located in the south east of Israel, overlooking Massada and theDead Sea. Meizam Arad was established as a joint venture between the Company and the City of Arad, and the local industries, whichare strategic partners at the industrial incubator program. Currently, the Company holds 73.1% of Meizam Arad’s equity, andArad and the local industries hold the remaining 26.9%.

 

On July 27, 2008, MOITLannounced Meizam Arad as the winner of the national tender for a three-year license to operate an industrial incubator programsupported with government funding. The license entitles Meizam Arad to an annual management fee of NIS 1 million (about $280,000).In addition, each project (company) within the incubator program is entitled to an annual research and development grant of upto NIS 500,000 (about $140,000) per year for up to three years (i.e. a total of NIS 1,500,000 - about $420,000). Each project’sfunding is subject to the initial approval of the National Industrial Incubator Committee (“NIIC”) and the final approvalof MOITL. In January 2011, MOITL issued an updated regulation extending technology-oriented incubator licenses to six years. MeizamArad does not intend to apply to MOITL for such an extension.

 

On January 1, 2009, MOITLofficially launched Meizam Arad’s industrial incubator program. During 2009, the Company screened dozens of technology andbusiness opportunities, of which six projects were approved by NIIC.

 

On January 1, 2010, MOITLofficially launched the industrial incubator program for TPDS Ltd., which developed a nano-delivery carrier for inhalation drugs.

 

On July 1, 2010 MOITL officiallylaunched the industrial incubator program for Gaia Med Ltd., which has developed a miniature insulin pump for diabetic patients.

 

The local industries inthe City of Arad that have taken an interest in Meizam Arad include so far the following manufacturers:

 

 

 

 

 

 

Meizam Arad technological/industrialincubator provides to its member companies a vast industrial infrastructure of its industrial partners, as well as government fundsand a top-of-the-line management team. Arad industries support the incubator companies operations, providing manufacturing andengineering services that significantly accelerate the companies’ time-to-market. The incubator's highly skilled managementteam comprised of Impact Active Team professionals, supported by other The Company subsidiaries' professionals as well as expertsfrom the local industries.

 

Until on-going sales ofthe member companies are established, these industrial partners provide the services to the incubator member companies in exchangefor Meizam Arad’s common stock instead of cash, at a price of $1.00 per share, or at a higher price as will be establishedin a private placement. Those provided services are priced at the fair value and are registered as investments in the member companies.

 

For each dollar fundedby the Company to the incubator company, MOITL funded the incubator company with additional two dollars. Therefore, in exchangeof its funding the Company received (through its subsidiary Meizam Arad) shares of the incubator member company for the full programfunding including the MOITL funds.

 

**7.  Meizam Arad Investments Ltd.**

** **

The Company establishedMeizam Investments on February 9, 2011 as a business unit that provides all the required financing to the other Company's subsidiariesoperating under the industrial incubator program. Currently, the Company holds 73.1% of Meizam Arad’s equity

 

Meizam Investments wasestablished to meet MOITL’s requirement to operate Meizam Arad as a management service provider only, and separate the holdingand financing of the incubator through a different entity, as structured at other technology incubators in Israel.

 

On January 31, 2011, theCompany provided financing of $200,723 to the industrial incubator program through Meizam Investments. This financing was providedto Meizam Investments in an equity transaction, and Meizam Investment provided this financing to Meizam Arad in an equity transaction.

 

On June 3, 2011, the Companyprovided financing of $104,970 to the industrial incubator program through Meizam Investments. This financing was provided to MeizamInvestments in an equity transaction, and Meizam Investment provided this financing to Meizam Arad in a loan transaction.

** **

8.  Impact Active Team Ltd. (ManagementConsulting).

 

On July 3, 2006, the Companyentered into a Share Purchase Agreement with Pangea. Under this agreement, the Company purchased from Pangea all of the outstandingcommon stock of Impact Active Team Ltd., an Israeli corporation (“Impact”). In return for acquiring these shares, theCompany paid to Pangea 2,500,000 restricted shares of common stock. On February 27, 2012, Pangea InvestmentsGmbH sold all of the restricted shares of common stock held in its name and is no longer a shareholder in the Company. Currently, the Company holds 100% of Impact’s equity.

 

Impactis a management consulting firm specializing in strategic planning and management services: Executive management, strategic businessplanning, market research, planning and management, sales management, financial planning, strategic alliances, investor and publicrelations. 

 

Themain benefits that Impact provides to the Company are consulting assignments that may present new business opportunities in themedical and biotech fields, and the capability to evaluate these opportunities.

 

Impact has an affiliationagreement with P.O.C. Hi-Tech (1992) Ltd., a leading management consulting firm in Israel.

 

Impact does not employits consultants on a payroll basis. Consulting assignments are performed by Mr. Mar-Chaim and Mr. Elimelech, who are officers ofthe Company, as well as by various consultants and experts employed by Impact on a contractual basis.

** **

**Advisory Board**

 

The Company has an advisoryboard of experienced professionals in the academy and industry, who support our current new development and operations as wellas screening novel technologies and products.

 

Professor Itay Benhar, Ph.D.

Head of Biotech

 

Full Professor and chairmanof the Department of Molecular Microbiology and Biotechnology at Tel-Aviv University, Israel. He is also a member of the Departmentof Biomedical Engineering & Neufeld Cardiac Research Institute, Tel-Aviv University, Israel. Professor Benhar received in 1992a PhD in Molecular Biology from the Hebrew University, Hadassah Medical School Jerusalem, Israel, where he studied control of bacterialgene expression. Professor Benhar did his postdoctoral fellowship at the National Cancer Institute, NIH, working with Dr. Ira Pastanon recombinant immunotoxins.

 

In 1995, Professor Benharjoined the Department of Molecular Microbiology and Biotechnology of the George S. Wise Faculty of Life Sciences as a tenure-trackassistant professor. Professor Benhar received tenure at 2002, and became an associate professor in 2005 and a full professor in2008. In 2007, Professor Benhar was appointed as Department Chairman.

 

Professor Benhar’sis an expert and opinion leader in the field of antibody engineering. Over the 18 years of being active in that field, he preparedseveral phage display libraries from which antibodies against numerous targets were isolated. Professor Benhar publishes 68 researchpapers, wrote 10 book chapters and submitted 8 patent applications. Research in Professor Benhar’s group if currently focusedon three major topics: (1) evaluation of novel formats of antibody-toxin fusion proteins as potential anti-cancer agents. (2) Evaluationof death switches that are activated by viral proteases for potential eradication of virus-infected cells. (3) Application of filamentousphages as targeted drug-carrying nanomedicines. Research in Professor Benhar’s lab is currently funded with grants from theIsraeli Health ministry, the Israel Cancer Association and the Israel Science Foundation.

 

Professor Benhar spent2 years at the National Institute of Health during his post-doc fellowship program, Bethesda, MD, and 2 additional years in WashingtonHospital Center, Washington DC during his sabbatical from Tel-Aviv University.

 

Previously, Professor Benharwas a Committee Member of the Israeli Ministry of Health: Healthy People 2020 Initiative; Member of the National Council for HealthPromotion, Israel Ministry of Health; Member of the National Council for the Prevention and Treatment of Cardiovascular Diseases,Israel Ministry of Health; Chairman of The Israeli Group for Heart Research, Subsection of the International Society for HeartResearch.

 

Professor Mickey Scheinowitz, Ph.D., F.A.C.S.M.

Head of Regenerative Therapy

 

Professor Scheinowitz ishead of Regenerative Therapy Department of Biomedical Engineering and Neufeld Cardiac Research Institute, Tel-Aviv University,Israel. He spent two years at the National Institute of Health during his post-doctoral fellowship program, Bethesda, Maryland,and two additional years in Washington Hospital Center, Washington DC during his sabbatical from Tel-Aviv University.

 

 

Previously, Professor Scheinowitzwas a committee member of the Israeli Ministry of Health: Healthy People 2020 Initiative; member of the National Council for HealthPromotion, Israel Ministry of Health; member of the National Council for the Prevention and Treatment of Cardiovascular Diseases,Israel Ministry of Health; and chairman of The Israeli Group for Heart Research, Subsection of the International Society for HeartResearch.

 

Professor Scheinowitz haspublished more than 60 manuscripts in peered professional and scientific journals, presented over 100 abstracts in different meetingsworldwide, and he was invited to dozens of conferences as invited speaker. During his academic career he had supervised over 50graduate and doctorate students. Professor Scheinowitz also has vast experience with the industry specifically with the medicaldevice companies.

 

Dr. Orna Yosef, Ph.D.

Head of Stem Cell Technologies

 

Researcher, Lecturer anddirector of the cells and tissue engineering laboratory in the Department of Biomedical Engineering at Tel Aviv University, Israel.Dr. Yosef was one of the founders of a new lab, took a significant part in its design and the purchase of some of most advancedequipment of its kind in the country. Responsible for the lab curriculum including lectures and workshop, as well as the lab projectsin the field of cell cultures and cell engineering. Dr. Yosef Specializes in stem cells research, gene therapy, tissue cultures,molecular biology and in small animal studies models. 

 

Dr. Yosef received dualPost-Doctorate Degrees from Tel-Aviv University in Gene Therapy and Molecular virology as well as in Prostate pathology. Doctoratefrom Bar-Ilan University in molecular biology and physiology of skeletal muscle.

 

Dr. Yosef is a researcherat the Weizmann Institute in the field of signal transduction. Senior researcher in stem cells and cardiovascular research at the“Neufeld Cardiac Research Institute” in Sheba Medical Center, Tel Hashomer, Israel. Supervising undergraduate, graduateand M.D. degree students in clinical applied research.

 

Dr. Yosef is a reviewerfor the journal Cardiovascular Research on the topic of mesenchymal stem cells and Cardiovascular Research.

 

Dr. Gilead Asseo, M.D.

Head of Medical Affairs

 

Dr. Asseo is a founder,and currently acting as Director at Vaica Medical Ltd., a high tech company that has patented computerized medication dispensersand reminders, remotely connected to manned and Internet based call centers. He also serves as a medical consultant in the fieldof life science and medical devices to high tech companies and investor organizations.

Following film and televisionstudies at Tel Aviv University, Faculty of Art, Dr. Asseo worked as a TV cameraman, documenter and reporter for the Israel nationalTV, Vis News Association, and ABC News for 5 years, and was nominated for cameraman of the year 1980 by Vis News for the RoyalFilm Society in the UK.

 

Dr. Asseo finished hismedical training at Ben Gurion University in 1987, graduated as General Surgeon in 1996 at the Rabin Medical Center, and actedas Surgical Chief at the Safed Hospital ER.

 

Dr. Asseo entered the hightech industry, first as a Medical Director for Odin Technologies, and then founded his own company – MDG Medical in 2001,writing the patents, and acting as director and CEO. MDG Medical designed and is marketing a complex computerized medication deliverysystem for hospital wards, is currently invested at close to $50M, and is present in more than 250 hospitals in the USA, Europeand Israel.

 

Dr. Asseo founded and ranthe first hospital based telemedicine center in Israel at Safed Hospital, and served as lecturer at Safed Nursing School coveringsurgery and basic science. He also acted as medical reporter with a personal column for NRG – Maariv’s Internet portal.

 

Ronen Smooha

Head of Software

 

Mr. Smooha is a formerMicrosoft executive and veteran of the Israeli software industry. After joining Microsoft Israel in 2001, he went on to lead thesubsidiary’s ISV business development services and Developer Evangelism. In this capacity, Mr. Smooha was responsible for..NET platform adoption across the market, growing revenue and impact worldwide, while forming long term relations with the ISVeco-system. He formed RDS Business Development in 2009, which provides business development support for seasoned start-ups andIT companies and business and technical due diligence for International companies, angel investors and Israeli software incubationcenters. Mr. Smooha is on the board of E4D solutions LTD, advisory board of SkilliQ, and on the investment committee of Meizam.org,an industrial incubation center.

** **

**Forward Looking Business Development.**

 

In addition to the abovebusiness activities, the Company will continue to search for business opportunities, particularly toward small and medium-sizedenterprises. The Company does not propose to restrict its search to any particular geographical area or industry, and may, therefore,engage in essentially any business, to the extent of its limited resources. This includes industries such as service, manufacturing,high technology, product development, medical, communications and others. The Company’s discretion in the selection of businessopportunities is unrestricted, subject to the availability of such opportunities, economic conditions, and other factors. No assurancecan be given that the Company will be successful in finding or acquiring a desirable business opportunity, and no assurance canbe given that any acquisition, which does occur, will be on terms that are favorable to the Company or to its stockholders. Business

opportunities may come to the Company’sattention from various sources, including professional advisers such as attorneys and accountants, venture capitalists, membersof the financial community, and others who may present unsolicited proposals. The Company may pay a finder’s fee in connectionwith any such transaction.

 

The Company will not restrictits search to any specific kind of firm, but may acquire a venture which is in its preliminary or development stage, one whichis already in operation, or in a more mature stage of its corporate existence. The acquired business may need to seek additionalcapital, may desire to have its shares publicly traded, or may seek other perceived advantages which the Company may offer. However,the Company does not intend to obtain funds to finance the operation of any acquired business opportunity until such time as theCompany has successfully consummated the merger or acquisition transaction.

 

The analysis of businessopportunities will be under the supervision of the Company’s officers and directors with MOITL. In analyzing prospectivebusiness opportunities, management will consider such matters as available technical, financial and managerial resources; workingcapital and other financial requirements; history of operations, if any; prospects for the future; nature of present and expectedcompetition; the quality and experience of management services which may be available and the depth of that management; the potentialfor further research, development, or exploration; specific risk factors not now foreseeable, but which then may be anticipatedto impact the Company’s proposed activities; the potential for growth or expansion; the potential for profit; the perceivedpublic recognition or acceptance of products, services, or trades; name identification; and other relevant factors. In many instances,it is anticipated that the historical operations of a specific business opportunity may not necessarily be indicative of the potentialfor the future because of a variety of factors, including, but not limited to, the possible need to expand substantially, shiftmarketing approaches, change product emphasis, change or substantially augment management, raise capital and the like.

 

Company management intendsto meet directly with other key personnel of the target business entity as part of its investigation. To the extent possible, theCompany intends to utilize written reports and personal investigation to evaluate the above factors.

 

Prior to making a decisionto participate in a business opportunity, it is the Company’s policy to receive written materials regarding the businessopportunity containing as much relevant information as possible, including, but not limited to, such items as a description ofproducts, services and company history; management resumes; financial information; available projections, with related assumptionsupon which they are based; an explanation of proprietary products and services; evidence of existing patents, trademarks, or servicemarks, or rights thereto; present and proposed forms of compensation to management; a description of transactions between suchcompany and its affiliates during the relevant periods; a description of present and required facilities; an analysis of risksand competitive conditions; a financial plan of operation and estimated capital requirements; audited financial statements, orif they are not available at that time, unaudited financial statements, together with reasonable assurance that audited financialstatements would be able to be produced within a required period of time; and the like.

 

The Company will participatein a business opportunity only after the negotiation and execution of appropriate agreements. Although the terms of such agreementscannot be predicted, generally such agreements will require certain representations and warranties of the parties thereto, willspecify certain events of default, will detail the terms of closing and the conditions which must be satisfied by the parties priorto and after such closing, outline the manner of bearing costs, including costs associated with the Company’s attorneys andaccountants, and will include miscellaneous other terms.

** **

Employees.

 

The Company has three fulltime employees and eight part-time service providers who are engaged by the Company’s and its subsidiaries Impact ActiveTeam Ltd and Meizam – Advanced Enterprise Center Arad Ltd.

** **

**ITEM 1A.  RISK FACTORS.**

** **

In addition to the otherinformation contained in this Form 10-K, the following risk factors should be considered carefully in evaluating the Company’sbusiness. The Company’s business, financial condition, and results of operations could be materially adversely affected byany of these risks. Please note that additional risks not presently known to the Company or that it currently deems immaterialmay also impair its business and operations.

** **

**Risks Relating to the Business.**

 

**(a)  The Company Has a Historyof Losses That is Likely to Continue, Requiring Additional Sources of Capital, Which May Result in Curtailing of Operations andDilution to Existing Stockholders.**

 

The Company has incurreda net loss of $2,504,588 for the year ended December 31, 2012, $1,359,896 for the year ended December 31, 2011, and $6,547,265for the period of inception (July 23, 2004) through December 31, 2012. The Company cannot provide assurance that it can achieveor sustain profitability or even generate positive cash flow in the future. If revenues grow more slowly than anticipated, or ifoperating expenses exceed expectations or cannot be adjusted accordingly, the Company will continue to incur losses. The Companywill continue to incur losses until it is able to establish reasonable levels of sales. The Company’s possible success isdependent upon the successful development and marketing of its products and services, as to which there is no assurance. Any futuresuccess that the Company might enjoy will depend upon many factors, including factors out of its control or which cannot be predictedat this time. These factors may include changes in or increased levels of competition, including the entry of additional competitorsand increased success by existing competitors, changes in general economic conditions, increases in operating costs, includingcosts of supplies, personnel and equipment, reduced margins caused by competitive pressures and other factors. These conditionsmay have a materially adverse effect upon the Company or may force it to reduce or curtail operations. In addition, the Companywill require additional funds to sustain and expand

its sales and marketing activities, particularlyif a well-financed competitor emerges. The Company will need to raise up to $10,000,000 in the next 36 months to implement itsplan of operation. In the event that the Company needs additional financing, there can be no assurance that financing will be availablein amounts or on terms acceptable, if at all. The inability to obtain sufficient funds from operations or external sources wouldrequire the Company to curtail or cease operations. Any additional equity financing may involve substantial dilution to then existingstockholders.

** **

**(b)**  **TheIndependent Registered Public Accounting Firm Has Expressed Substantial Doubt About the Company’s ability to Continue asa Going Concern, Which May Hinder the Ability to Obtain Future Financing.**

 

In its report dated May2, 2013, the Company’s independent auditor stated that the financial statements for the year ended December 31, 2012 wereprepared assuming that the Company would continue as a going concern. The Company's ability to continue as a going concern is anissue raised as a result of cash flow constraint, an accumulated deficit, and recurring losses from operations. The Company continuesto experience net losses. The Company's ability to continue as a going concern is subject to the ability to execute a businesscombination and thereafter to generate a profit and/or obtain necessary funding from outside sources, including obtaining additionalfunding from the sale of the Company's securities, increasing sales or obtaining loans from various financial institutions wherepossible. The continued net losses and stockholders' deficit increases the difficulty in meeting such goals and there can be noassurances that such methods will prove successful.

** **

**(c)  The Company May Not Be Able to AccommodateRapid Growth Which Could Decrease Revenues.**

 

To manage anticipated growth,the Company must continue to implement and improve its operational, financial and management information systems. The Company mustalso hire, train and retain qualified personnel, continue to expand and upgrade core technologies, and effectively manage its relationshipswith end users, suppliers and other third parties. The Company’s expansion could place a significant strain on its currentservices and support operations, sales and administrative personnel, capital and other resources. The Company could also experiencedifficulties meeting demand for its products and services. The Company cannot guarantee that its systems, procedures or controlswill be adequate to support operations, or that management will be capable of fully exploiting the market. The Company’sfailure to effectively manage growth could adversely affect the business’s financial position and results of operations.

** **

**(d)  Protection of Proprietary RightsMay Affect the Company’s Success and Ability to Compete.**

 

The Company’s successand ability to compete will be dependent in part on the protection of its patents, trademarks, trade names, service marks and otherproprietary rights. The Company intends to rely on trade secret and copyright laws to protect the intellectual property that itplans to develop, but there can be no assurance that such laws will provide sufficient protection, that

others will notdevelop products that are similar or superior to the Company’s, or that third partieswill not copy or otherwise obtain and use its proprietary information without authorization. In addition, certain of the Company’sknow-how and proprietary technology may not be patentable.

 

The Company may rely oncertain intellectual property licensed from third parties, and may be required to license additional products or services in thefuture, for use in the general operations of its business plan. There can be no assurance that these third party licenses willbe available or will continue to be available to the Company on acceptable terms or at all. The inability to enter into and maintainany of these licenses could have a material adverse effect on the Company’s business, financial condition or operating results.

 

There is a risk that someof the Company’s products may infringe the proprietary rights of third parties. In addition, whether or not the Company’sproducts infringe on proprietary rights of third parties, infringement or invalidity claims may be asserted or prosecuted againstit and it could incur significant expense in defending them. If any claims or actions are asserted against the Company, it maybe required to modify its products or seek licenses for these intellectual property rights. The Company may not be able to modifythe Company’s products or obtain licenses on commercially reasonable terms, in a timely manner or at all. The Company’sfailure to do so could have a negative effect on its business and revenues.

** **

**(e)  The Company’s Dependence onOutside Suppliers and Manufacturers May Affect Its Ability to Conduct Business.**

 

The Company will dependon a number of outside suppliers and manufacturers components for its products. There is an inherent risk that certain componentsof the Company’s products will be unavailable for prompt delivery or, in some cases, discontinued or only available at substantiallyhigher costs. Due to the current political crisis in the Middle East and corresponding predicted continued increase in taxes, energycosts, the price of production and transportation of goods is likely to dramatically increase, thus increasing supply price. Ifsuch supply price increases occur, the Company will either suffer from decrease in margins or be required to raise the Company’sprices, which could compromise demand. The Company has only limited control over any third-party manufacturer as to quality controls,timeliness of production, deliveries and various other factors. Should the availability of certain components be compromised, itcould force the Company to develop alternative designs using other components, which could add to the cost of goods sold and compromisedelivery commitments. If the Company is unable to obtain components in a timely manner, at an acceptable cost, or at all, it mayneed to select new suppliers, redesign or reconstruct processes used. In such an instance, the Company would not be able to manufactureany products for a period of time, which could materially adversely affect the Company’s business, results from operations,and financial condition.

 

**(f)  The Company Will Face Strong Competitionin Its Markets, Which Could Make It Difficult for It to Generate Revenues.**

 

Themarket for the Company’s products and services will be competitive. The Company’s future success will depend on itsability to adapt to rapidly changing technologies, evolving industry standards, product offerings and evolving demands of the marketplace.

 

Some of the Company’scompetitors have:

 

 

 

 

 

Competitors may developor offer services that provide significant technological, creative, performance, price or other advantages over the products offeredby the Company. If the Company fails to gain market share or lose existing market share, the Company’s financial condition,operating results and business could be adversely affected and the value of the investment in the Company could be reduced significantly.The Company may not have the financial resources, technical expertise or marketing, distribution or support capabilities to competesuccessfully.

** **

**(g)  The Company Could Fail to DevelopNew Products to Compete in this Industry of Rapidly Changing Technology, Resulting in Decreased Revenues.**

 

The markets in which theCompany intends to compete are characterized by rapid technological change, frequent new product introductions, evolving industrystandards and changing needs of customers. There can be no assurance that the Company’s products and services will continueto be properly positioned in the market or that the Company will be able to introduce new or enhanced products into the marketon a timely basis, or at all.

 

There is the risk to theCompany that there may be delays in initial shipments of new products or services. Further risks inherent in new product introductionsinclude the uncertainty of price-performance relative to products of competitors, competitors’ responses to the introductionsand the desire by customers to evaluate new products for longer periods of time.

** **

**(h)  New Versions of The Company’sProducts May Contain Errors or Defects, Which Could Affect Its Ability to Compete.**

 

The Company’s productswill be complex and, accordingly, may contain undetected errors or failures when first introduced or as new versions are released.This may result in the loss of, or delay in, market acceptance of the Company’s products. The Company may in the future discovererrors and additional scalability limitations in new releases or new products after

the commencement of commercial shipments orbe required to compensate customers for such limitations or errors, as a result of which the Company’s business, cash flow,financial condition and results of operations could be materially adversely affected.

** **

**(i)  The Company’s Ability to Growis Directly Tied to Its Ability to Attract and Retain Customers, Which Could Result in Reduced Revenue.**

 

The Company has no wayof predicting whether its marketing efforts will be successful in attracting new business and acquiring substantial market share.If the Company’s marketing efforts fail, it may fail to attract new customers and fail to retain existing ones, which wouldadversely affect the Company’s business and financial results.

** **

**(j)  If Government Regulation of The Company’sBusiness Changes, the Company May Need to Change the Manner in Which It Conducts Business, or Incur Greater Operating Expenses.**

 

The adoption or modificationof laws or regulations relating to the Company’s business could limit or otherwise adversely affect the manner in which theCompany currently conducts its business. If the Company is required to comply with new regulations or legislation or new interpretationsof existing regulations or legislation, this compliance could cause the Company to incur additional expenses or alter the Company’sbusiness model.

 

The manner in which legislationmay be enacted and enforced cannot be precisely determined and may subject either the Company or its potential customers to possibleliability, which in turn could have an adverse effect on the Company’s business, results of operations and financial condition.

 

The TPDS products willrequire approval by the U.S. Food and Drug Administration before sales can be made in this country. This process, which ordinarilyrequires clinical approvals, may take some time before any approval is given. This process could affect the ability of the Companyin its overall marketing of these products, which will, in turn affect the Company’s business and the ability to generaterevenues.

** **

(k)  Operating Results May Be AdverselyAffected by the Uncertain Geopolitical Environment and Unfavorable Factors Affecting Economic and Market Conditions.

 

Adverse factors affectingeconomic conditions worldwide have contributed to a general inconsistency in the power industry and may continue to adversely impactthe Company’s business. Terrorist and military actions may continue to put pressure on economic conditions. If such an attackshould occur or if the economic and market conditions could deteriorate as a result of a terrorist attack, the Company mayexperience a material adverse impact on its business, operating results, and financial condition as a consequence of the abovefactors or otherwise.

 

**(l)  The Company May Incur SignificantCosts to Ensure Compliance with U.S. Corporate Governance and Accounting Requirements.**

 

 

The Company may incur significantcosts associated with its public company reporting requirements, costs associated with newly applicable corporate governance requirements,including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. The Company expects all of these applicable rules and regulations to increase its legal and financial compliance costs andto make some activities more time-consuming and costly.  The Company also expects that these applicable rules and regulationsmay make it more difficult and more expensive for it to obtain director and officer liability insurance and the Company may berequired to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for the Company to attract and retain qualified individuals to serve on its board ofdirectors or as executive officers.  The Company is currently evaluating and monitoring developments with respect to thesenewly applicable rules, and it cannot predict or estimate the amount of additional costs the Company may incur or the timing ofsuch costs.

 

**(m)  Any Required Expenditures as a Resultof Indemnification Will Result in an Increase in Expenses.**

 

TheCompany’s bylaws include provisions to the effect that it may indemnify any director, officer, or employee. In addition,provisions of Nevada law provide for such indemnification, as well as for a limitation of liability of directors and officers formonetary damages arising from a breach of their fiduciary duties. Any limitation on the liability of any director or officer, orindemnification of any director, officer, or employee, could result in substantial expenditures being made by the Company in coveringany liability of such persons or in indemnifying them.

** **

(n)  The Company’s Success IsLargely Dependent on the Abilities of Its Personnel.

** **

The Company’s successis largely dependent on the personal efforts and abilities of its senior management. The loss of certain key members of the Company’ssenior management, including its president, could have a materially adverse effect on the Company’s business and prospects.

 

The Company intends torecruit skilled employees who are experts in the biotechnology and medical industry. The failure to recruit these key personnelcould have a materially adverse effect on the Company’s business. As a result, the Company may experience increased compensationcosts that may not be offset through either improved productivity or higher revenue. There can be no assurances that the Companywill be successful in retaining existing personnel or in attracting and recruiting experienced qualified personnel.

 

Risks Relating to the Common Stock.

 

**(a)  The Company’s Common StockPrice May Be Volatile.**

 

The trading price of theCompany’s common stock, once a public offering is made, may fluctuate substantially. The price of the common stock may behigher or lower than the price you pay for your shares, depending on many factors, some of which are beyond the Company’scontrol and may not be directly related to its operating performance. These factors include the following:

 

 

 

 

 

 

 

 

Due to the continued potentialvolatility of the stock price, the Company may be the target of securities litigation in the future. Securities litigation couldresult in substantial costs and divert management’s attention and resources from the business.

 

**(b)  Absence ofCash Dividends May Affect Investment Value of the Company’s Stock.**

** **

Theboard of directors does not anticipate paying cash dividends on the common stock for the foreseeable future and intends to retainany future earnings to finance the growth of the Company’s business. Payment of dividends, if any, will depend, among otherfactors, on earnings, capital requirements and the general operating and financial conditions of the Company as well as legal limitationson the payment of dividends out of paid-in capital.

 

(c)  No Assurance of a Public TradingMarket and Risk of Low Priced Securities May Affect Market Value of the Company’s Stock.

 

The Securities and ExchangeCommission (“SEC”) has adopted a number of rules to regulate “penny stocks.” Such rules include Rule 3a51-1and Rules 15g-1 through 15g-9 under the Securities Exchange Act of 1934. Because the Company’s securities may constitute“penny stocks” within the meaning of the rules (as any equity security that has a market price of less than $5.00 pershare or with an exercise price of less than $5.00 per share, largely traded in the Over the Counter Bulletin Board or the PinkSheets), the rules would apply to the Company and its common stock.

 

The SEC has adopted Rule15g-9 which established sales practice requirements for certain low price securities. Unless the transaction is exempt, it shallbe unlawful for a broker or dealer to sell a penny stock to, or to effect the purchase of a penny stock by, any person unless priorto the transaction:

 

 

 

In order to approve a person’s accountfor transactions in penny stock, the broker or dealer must:

 

 

 

 

 

It is also required thatdisclosure be made as to the risks of investing in penny stock and the commissions payable to the broker-dealer, as well as currentprice quotations and the remedies and rights available in cases of fraud in penny stock transactions. Statements, on a monthlybasis, must be sent to the investor listing recent prices for the penny stock and information on the limited market.

 

There has been no publicmarket for the Company’s common stock. The Company intends to have a market maker file an application on the Company’sbehalf with the Over the Counter Bulletin Board in order to make a market in the Company’s common stock. However, until thishappens, if the market maker is successful with such application, and even thereafter, an investor may find it difficult to disposeof, or to obtain accurate quotations as to the market

value of the Company’s securities. Theregulations governing penny stocks, as set forth above, sometimes limit the ability of broker-dealers to sell the Company’scommon stock and thus, ultimately, the ability of the investors to sell their securities in the secondary market.

** **

Potential stockholdersof the Company should also be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recentyears from patterns of fraud and abuse. Such patterns include:

 

 

 

 

 

** **

**(d)  Failure ToRemain Current In Reporting Requirements Could Result in the Company Being Delisting From The Over The Counter Bulletin Board.**

 

Companies that trade onthe Over the Counter Bulletin Board (such as the Company) must be reporting issuers under Section 12 of the Securities ExchangeAct of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privilegeson the Bulletin Board. When the Company becomes listed on that market, if it fails to remain current in the Company’s reportingrequirements, the Company could be delisted from the Over the Counter Bulletin Board.

 

In addition, the NationalAssociation of Securities Dealers, Inc., which operates the Bulletin Board, has adopted a change to its Eligibility Rule. The changemakes those Over the Counter Bulletin Board issuers that are cited for filing delinquency in its Form 10-K’s/Form 10-Q’sthree times in a 24-month period and those Bulletin Board issuers removed for failure to file such reports two times in a 24-monthperiod ineligible for quotation on the Bulletin Board for a period of one year. Under this rule, a company filing with the extensiontime set forth in a Notice of Late Filing (Form 12b-25) is not considered late. This rule does not apply to a company’s CurrentReports on Form 8-K (but failure to timely file a Form 8-K could have other ramifications for the Company).

 

As a result of these rules,the market liquidity for the Company’s common stock could be severely adversely affected by limiting the ability of broker-dealersto sell the Company’s securities and the ability of stockholders to sell their securities in the secondary market.

** **

**(e)  Failure to Maintain Market MakersMay Affect Value of the Company’s Stock.**

 

If the Company is unableto maintain National Association of Securities Dealers, Inc. member broker/dealers as market makers, the liquidity of the commonstock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possibledelays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lackof market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market. Therecan be no assurance the Company will be able to maintain such market makers.

 

**(f)  Issuance of Common Stock in Exchangefor Services or to Repay Debt Would Dilute Proportionate Ownership and Voting Rights, and Could Have a Negative Impact on the MarketPrice of the Company’s Stock.**

 

The Company’s boardof directors may issue shares of common stock to pay for debt or services, without further approval by its stockholders based uponsuch factors as the board of directors may deem relevant at that time.  It is likely that the Company will issue securitiesto pay for services and reduce debt in the future.  It is possible that the Company will issue additional shares of commonstock under circumstances it may deem appropriate at the time.

 

**(g)  If The Company is Unable to RaiseNecessary Additional Capital as Needed, Its Business May Fail or its Operating Results and the Stock Price May Be Materially AdverselyAffected.**

 

To secure additional neededfinancing, the Company may need to borrow money or sell more securities, which may reduce the value of its outstanding common stock.Selling additional stock, either privately or publicly, would dilute the equity interests of the Company’s stockholders.In addition, if the Company raises additional funds by issuing equity securities, the holders of the new equity securities mayhave rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the votingpower of shares of its common stock.  If the Company raises additional funds by issuing debt securities, the holders of thesedebt securities may have some rights senior to those of the holders of shares of common stock, and the terms of these debt securitiescould impose restrictions on operations and create a significant interest expense for the Company.

 

(h)  Shares Eligible For Future Sale.

 

All of the shares currentlyheld by management have been issued in reliance on the private placement exemption under the Securities Act of 1933. Such shareswill not be available for sale in the open market without separate registration except in reliance upon Rule 144 under the SecuritiesAct of 1933. In general, under Rule 144 a person (or persons whose shares are

aggregated) who has beneficially owned sharesacquired in a non-public transaction for at least one year, including persons who may be deemed affiliates of the Company (as thatterm is defined under that rule) would be entitled to sell within any three-month period a number of shares that does not exceed1% of the then outstanding shares of common stock, provided that certain current public information is then available. If a substantialnumber of the shares owned by these stockholders were sold pursuant to Rule 144 or a registered offering, the market price of thecommon stock at that time could be adversely affected.

** **

**ITEM 1B.  UNRESOLVED STAFF COMMENTS.**

 

Not Applicable.

** **

**ITEM 2.  PROPERTIES.**

 

The Company does not ownany fixed property and has no agreements in place or planned to acquire any properties. The Company currently maintains an officeof 1,000 square feet at 400 South Beverly Drive, Suite 312, Beverly Hills, California, 90212. The Company pays an annual rent foruse of this office in restricted shares of Company common stock. These offices are currently adequate for the needs of the Company.

 

All commercialization andresearch and development operations are performed through the Company’s subsidiaries, Impact Active Team Ltd., Meizam AradInvestments Ltd., TPDS Ltd., Meizam – Advanced Enterprise Center Arad Ltd., and Gaia Med Ltd., and the principal supportfacilities are located in 36 Hayarkon St. Yavne, Israel. The operation facilities include a biological, chemical, and miniaturizinglaboratories.

 

The Company believes thatthese facilities are sufficient to support its anticipated operations and any additional needs we may encounter for at least thenext five years. The Company also believes that, if it becomes necessary, it will be able to obtain alternative facilities.

** **

**ITEM 3.  LEGAL PROCEEDINGS.**

 

Other than as set forthbelow, there are no known legal or other proceedings against the Company that could at the time of submitting this report thatcould have a materially adverse effect on the Company’s financial position or operations.

 

The Company instituteda claim of NIS 12,000,000 against the City of Arad, Israel in respect of an award by the Israeli government for operating an industrialincubator project that becomes due in 2011. The City of Arad was unable to comply the Company’s payment claims; therefore,the Company intends in the near future to institute legal proceedings in this matter.

 

**ITEM 4.  MINE SAFETY DISCLOSURES.**

 

Not applicable.

 

**PART II.**

** **

**ITEM 5.  MARKET FOR REGISTRANT’SCOMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.**

 

**Market Information.**

 

The Company’s commonstock began trading on the OTCBB under the symbol “ANDN”. The range of closing prices shown below is as reported bythe OTCBB. The quotations shown reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarilyrepresent actual transactions.

 

Per Share Common Stock Bid Prices by Quarter

For the Fiscal Year Ended on December 31, 2012 

 

 

Per Share Common Stock Bid Prices by Quarter

For the Fiscal Year Ended on December 31, 2011 

 

 

(1) The Company’scommon stock commenced quotation on the OTCBB on June 29, 2011.

 

Holders of Common Equity.	

 

As of March 31,2013, the Company had 66 record holders of its common stock.  The number of record holders was determined from the recordsof the Company’s transfer agent.  The number of record holders excludes any estimate of the number of beneficial ownersof common shares held in street name.

 

**Dividends.**

 

TheCompany has not declared or paid a cash dividend to stockholders since it was organized. The Board of Directors presently intendsto retain any earnings to finance the Company’s operations and does not expect to authorize cash dividends in the foreseeablefuture. Any payment of cash dividends in the future will depend upon the Company’s earnings, capital requirements and otherfactors.	

 

**Equity Securities Sold Without Registration.**

** **

There were no sales ofunregistered (restricted) securities not during the year ended on December 31, 2012 not previously reported by the Company, exceptas follows:

 

On June 14, 2012, the Companyissued 200,000 restricted shares of common stock to the Company’s transfer agent, Globex Transfer,LLC, for professional services rendered valued at $10,000. 

** **

**ITEM 6.  SELECTED FINANCIAL DATA.**

** **

Not applicable.

** **

**ITEM 7.  MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

The following management’sdiscussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with,the Company’s audited financial statements and related notes presented in a separate section of this report following Item15, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

 

**Overview.**

** **

(a)  General Discussion.

 

The Company investsin commercialization of its technologies and products. The Company’s main efforts are to optimize development, engineeringfor production, regulation, pre-clinical and clinical trials and market penetration, respectfully, to each of its products. TheCompany is constantly working to enhance its products by new synergetic novel technologies keeping each of its products advantageousin 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 teamof experts manages all technological, medical, regulatory and other aspects needed to insure timely development, and market presencewithin the planed program and budget.

The Company operates fiveproduct lines:

 

 

** **

 

 

** **

Miniature Disposable Insulin Pump.

** **

The Company is committedto develop a fully disposable miniature insulin pump, suitable for diabetics type I and type II as well, without any MOITAL grant,saving the need to pay future royalties. The Company’s main challenge was to achieve production price capable to competewith the low price of the insulin pen syringe injection for diabetic type II. The Company’s detailed market survey showeda 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 bloodglucose level superior to the syringe use).

 

The Company’s teamsuccessfully developed the technology of the MinIn (Miniature Insulin) fully disposable pump, and lab tested all regulatory aspectsof the MinIn pup, ready for the clinical trials initial production batch. During the first quarter of 2012, The Company’steam focused on the technology transfer for GMP/GLP production, and Helsinky approval for clinical trials.

 

The Company estimates thatthe Gemini development, regulatory, and manufacturing in order to complete all needed clinical trials, will require an additional$750,000. In addition we estimate that it will require $600,000 to introduce the innovative pump to the market and large distributors

 

Nano-particles Targeted Drug Delivery Technology.

 

The Company is also committedto develop its nano-particle technology with the capacity to accommodate hydrophobic (repelling water based molecules), as wellhydrophilic (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 shelflife 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-particlesand to secure it in a separate its intellectual properties apart from those used by TPDS.

 

The Company estimates thatthe additional development, regulatory, and manufacturing in order to complete all needed clinical trials, will require an additional$1,100,000.

 

Stem Cell Therapy for Muscular Injuries.

** **

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

 

The Company estimates thatthe additional development, regulatory, and manufacturing in order to complete all needed pre-clinical trials, will require anadditional $650,000.

** **

**(b)  Operations.**

 

Insulin Pumps.

 

The Company separates thedevelopment in any aspect from the development of the Gaia Med Diamond semi-disposable pump. The Company has successfully managedto develop Gaia-Med’s technology and intellectual properties secured by patents, and develop new, separate intellectual propertiesfor the Gemini pump During 2012 the Company further developed and enhanced the Gemini patents. Those enhancements will be filedin second quarter of 2013. The Company’s development success of new and separate technology that is not based or relatesin any aspect on Gaia-Med’s technology precludes the Company and the incubator from any royalties' payment on the Geminiproduct line. The Company and the incubator also continue to develop the semi-disposable Gaia-Med pump within its original program.Therefore, the Company intends to establish a new company to accommodate all assets and operations of the Gemini pump as soon asthis pump is ready for clinical trials batch production.

 

Nano-Particles.

 

The Company separates theadditional development in any aspect from the development done in TPDS.

 

The Company has successfullymanaged to develop new technology and intellectual properties to be secured by new patents, for the multi-tasking nano-particles,to be filed in as with the Company's next investment round. The Company’s development success of new and separate technologythat is not based or relates in any aspect on TPDS’s technology precludes the Company and the incubator from any royalties’payment on this product line. Currently, the

Company and the incubator-halted developmentof TPDS based technology, and now develop only its new technology. The Company will revisit the original TPDS development programduring 2013, according the pre-clinical results of the new technology and product.

 

With the next investmentround the Company intends to establish a new company to accommodate all assets and operations of the new technology and development

 

Stem Cell Therapy. 

 

The Company intends toestablish a new company to accommodate all assets and operations of the new technology and development of the project as soon theclinical trials will commence.

 

Results of Operations.

 

**(a)  Total Revenue.**

 

The Company had total revenueof $181,298 for the year ended December 31, 2012 compared to $325,006 for the year ended December 31, 2011, a decrease of $143,708or approximately 44%. This decrease in net revenue was the result of no government grants received by the Company’s operatingsubsidiary, Meizam Arad, from MOITL during 2012 as compared to $312,990 in 2011.

 

The total revenue for theyear ended December 31, 2012 ($181,298) was generated by consulting activities compared to $12,016 for the year ended December31, 2011, an increase of $169,282 or approximately 1,409%. This was due to the fact that the Company made a strategic decisionto allow the OCS agreement to expire and not renew it (the agreement expiration does not prevent the Company to get governmentgrants subject to other regulations).

 

The Company had total revenueof $1,248,322 for the period of inception (June 23, 2004) through December 31, 2012.	

** **

**(b)  General and Administrative Expenses.**

 

The Company had generaland administrative expenses of $2,870,407 for the year ended December 31, 2012 compared to $1,235,679 for the year ended December31, 2011, an increase of $1,634,728 or approximately 132%. This increase in general and administrative costs was mainly due tostock based compensation of $1,862,000 to key management in 2012 as compared to no stock based compensation to key management in2011.

 

The Company had generaland administrative expenses of $7,100,447 for the period of inception (June 23, 2004) through December 31, 2012.****

 

**(c)  Research and Development Expenses.**

 

The Company had researchand development expenses of $55,359 for the year ended December 31, 2012 compared to $223,878 for the year ended December 31, 2011,a decrease of $168,519 or approximately 75%. This decrease in research and development was due to the following reasons:

 

 

 

The Company had researchand development expenses of $391,287 for the period of inception (June 23, 2004) through December 31, 2012.

 

**(d)  Other Income, Net.**

** **

The Company had $236,175other income for the year ended December 31, 2012 compared to $15,000 for the year ended December 31, 2011 generated by debt forgivenessof service providers.

** **

**(e)  Net Loss.**

 

The Company had a net lossof $2,504,588 for the year ended December 31, 2012 compared to $1,359,896 for the year ended December 31, 2011, an increase of$1,144,692 or approximately 84%. The increase in net loss is the result primarily from the Company’s accelerated developmentand engineering for production of our disposable insulin pump.

 

The Company had a net lossof $6,547,265 for the period of inception (June 23, 2004) through December 31, 2012.

** **

**Operating Activities.**

 

The net cash used in operatingactivities was $343,498 for the year ended December 31, 2012 compared to $275,472 for the year ended December 31, 2011, an increaseof $68,026 or approximately 25%. This change is mainly attributed to increase in share-based payments.

** **

**Investing Activities.**

 

Net cash used in investingactivities was $0 for the year ended December 31, 2012 compared to $20,649 for the year ended December 31, 2011, a decrease of100% that is attributed to patent and acquisition of a subsidiary during 2011.

** **

**Liquidity and Capital Resources.**

As of December 31, 2012,the Company had total current assets of $499,250 and total current liabilities of $700,613, resulting in a working capital deficitof $201,363.  The cash and cash equivalents was $0 as of December 31, 2012 compared to $872 for the year ended December 31,2011, a decrease of $872 or 100%.  This decrease resulted from negative cash flows from operations. 

 

The net cash provided byfinancing activities was $342,626 for the year ended December 31, 2012 compared to $259,265 for the year ended December 31, 2011,an increase in cash provided financial activities of $83,361 or approximately 32%. This increase resulted primarily from proceedsfrom stock issued for cash.

 

The Company’s currentcash and cash equivalents balance will not be sufficient to fund its operations for the next 12 months. The Company’s abilityto continue as a going concern on a longer-term basis will be dependent upon its ability to generate sufficient cash flow fromoperations 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 itsability to raise additional funds through bank borrowings and equity or debt financing.

 

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

 

 

 

 

 

To the extent that theCompany raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities mayresult 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 couldimpose restrictions on the Company’s operations. Regardless of whether the Company’s cash assets prove to be inadequateto meet its

operational needs, the Company may seek tocompensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to the Company’sexisting stockholders.

** **

**Inflation.**

 

The impact of inflationon 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 quarterand the Company does not anticipate that inflationary factors will have a significant impact on future operations.

** **

**Off-Balance Sheet Arrangements.**

 

The Company has enteredinto numerous purchase agreements with local biotech companies through its subsidiary Meizam Arad under its industrial incubatorprogram. These projects are detailed under Item 1, Business.

** **

**Critical AccountingPolicies.**

** **

TheSEC 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 portrayalof a company’s financial condition and operating results, and require management to make its most difficult and subjectivejudgments, 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) share-based compensation; and (d) government grants. The methods, estimates and judgments the Companyuses in applying these most critical accounting policies have a significant impact on the results the Company reports in its financialstatements. 

** **

**(a)  Use of Estimates.**

** **

Thepreparation 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 Companyevaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Company bases itsestimates 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 readilyapparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

** **

**(b)  Impairment Long-Lived Assets.**

** **

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

 

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

** **

**(c)  Share-Based Compensation.	**

** **

The Company follows ASC Topic 718-10, “StockCompensation,” which addresses accounting for transactions in which an entity exchanges its equity instruments for goodsor 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 basedon the grant-date fair value of the award. Upon the adoption of Topic ASC 718-10, the Company maintained its method of valuationfor stock option awards using the Black-Scholes valuation model, which has historically been used for the purpose of providingpro-forma financial disclosures in accordance with Topic ASC 718-10.

 

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

	

Compensation expense isonly recognized on awards that ultimately vest.

** **

**(d)  Government Grants.**

 

Government grants are notrecognized until there is reasonable assurance that the Group will comply with the conditions attaching then and the grants willbe received.

 

Government grants are recognizedin profit and loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for whichthe grants are intended to compensate.

 

Government grants thatare receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial supportto the Group with no future costs are recognised in profit and loss in the period in which they become receivable.

 

**(e)  New Accounting Pronouncements**

 

In July 2012, the FinancialAccounting Standards Board issued new accounting guidance intended to simplify the testing of indefinite-lived intangible assetsfor impairment. Entities will be allowed the option to first perform a qualitative assessment on impairment for indefinite-livedintangible assets to determine whether a quantitative assessment is necessary. This guidance is effective for impairment testsperformed in the interim and annual periods for fiscal years beginning after September 15, 2012. Early adoption is permitted. Theadoption of this guidance is not expected to have a material impact on our Consolidated Financial Statements.

** **

**Forward Looking Statements.**

 

Informationin this Form 10-K 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-K, the words “expects,”“anticipates,” “believes,” “plans,” “will” and similar expressions are intendedto 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 needfor future financing, dependence on personnel, and operating expenses.

 

Forward-lookingstatements 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 undertakingto release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectationswith regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

**ITEM 7A.  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK.**

 

Not applicable.

** **

**ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARYDATA.**

 

Audited financial statementsas of and for the years ended December 31, 2012 and 2011, and for the period of inception (July 23, 2004) through December 31,2012, are presented in a separate section of this report following Item 15.

** **

**ITEM 9.  CHANGES IN AND DISAGREEMENTSWITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.**

 

(a) Effective on January28, 2013, Crowe Horwath (Israel), the independent registered public accounting firm who was previously engaged as the principalaccountant to audit the Company’s financial statements, was terminated by the Company. The decision to change principal accountantswas approved by the Company’s Board of Directors.

 

Crowe Horwath (Israel)did not audit any of the Company’s financial statements.

 

Crowe Horwath (Israel)completed its review of the Company’s interim financial statements for the periods ended June 30, 2012. No further reviewswere provided by Crowe Horwath (Israel) to the Company (a review of the interim financial statements dated September 30, 2012 wasconducted by AS Financial Auditors, an independent public accounting firm, using professional standards and procedures for conductingsuch reviews). During the period from July 15, 2012 (the date of engagement of this firm) through January 28, 2013, there wereno disagreements with Crowe Horwath (Israel) on any matter of accounting principles or practices, financial statement disclosure,or auditing scope or procedure. In addition, there were no “reportable events” as described in Item 304(a)(1)(iv)(B)1through 3 of Regulation S-K that occurred during the period from July 15, 2012 through January 28, 2013.

 

(b) On February 3, 2013,the Company engaged Yarel + Partners as successor to Crowe Horwath (Israel) as its independent registered public accounting firmto audit the Company’s financial statements. Prior to that date, neither the Company (nor someone on its behalf) consultedthe newly engaged accountant regarding any matter.

** **

**ITEM 9A.  ****CONTROLSAND PROCEDURES.**

** **

**Evaluation of Disclosure Controls and Procedures.**

 

The Company maintains disclosurecontrols and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 (“ExchangeAct”)) that are designed to ensure that information required to be disclosed in its periodic reports filed under the ExchangeAct is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and thatsuch information is accumulated and communicated to management, including the principal executive officer and the principal financialofficer, to allow timely decisions regarding required disclosure.

 

The Company’s management,with the participation of the principal executive officer and the principal financial officer, evaluated the effectiveness of itsdisclosure controls and procedures as of December 31, 2012. Based on that evaluation, the principal executive officer andthe principal financial officer concluded that, as of that date, the Company’s disclosure controls and procedures were noteffective at the reasonable assurance level because of the identification of material weaknesses in its internal control over financialreporting, which the Company views as an integral part of its disclosure controls and procedures.

 

Management’s Annual Report on InternalControl over Financial Reporting.

 

The Company’s managementis responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inRule 13a-15(f) under the Exchange Act, and in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-OxleyAct”).

 

The Company’s managementconducted an evaluation, under the supervision and with the participation of the principal executive officer and the principalfinancial officer, of the effectiveness of the Company’s internal control over financial reporting as of December 31,2012 based on the criteria established in the report entitled “InternalControl – Integrated Framework” published by the Committee of Sponsoring Organizations(COSO) of the Treadway Commission. Based on this evaluation, management concluded that the Company’sinternal control over financial reporting was not effective as of December 31, 2012. Specifically the Companydid not maintain an effective control environment based on the criteria established in the COSO framework.

 

A material weakness isa control deficiency, or combination of control deficiencies that results in more than a remote likelihood that a material misstatementof the annual or interim consolidated financial statements will not be prevented or detected. The followingmaterial weaknesses were identified related to the Company’s control environment:

 

 

 

These control environment material weaknessescontributed to the material weaknesses described below:

 

 

 

 

 

 

 

Additional material weaknesses identified wereas follows:

 

 

 ** **

**(a)  Remediation of Material Weaknesses.**

 

The Company has begun remediationefforts with respect to the material weaknesses that have been identified above. The Company plans to continue to review and makenecessary changes to the design of its internal control environment, including the roles and responsibilities of each functionalgroup within the organization and reporting structure, and to enhance and document policies and procedures to improve the effectivenessof its internal control over financial reporting.

 

Becausethe Company must not only design new controls to remediate these material weaknesses, but also implement and test them in orderto ensure that the weaknesses have been remediated, the Company expects that a number of these material weaknesses will not beremediated by December 31, 2013, the next date as of which the Company must assess its internalcontrol over financial reporting. While unremediated, these material weaknesses have 

the potential to result in the Company’sfailure to prevent or detect misstatements in its consolidated financial statements.

 

The Company has taken,or will take, the following actions:

 

 

 

 

 

**(b)  Management’s Conclusions onthe Remediation Plan.**

 

TheCompany believes that the remediation measures described above will strengthen its internal control over financial reportingand remediate the material weaknesses that have been identified. However, the Company has not yet implemented all of these measures and/or testedthem. The Company is committed to continuing to improve its internal control processes and will continue to diligently review itsfinancial reporting controls and procedures in order to ensure compliance with the requirements of the Sarbanes-Oxley Act and therelated rules promulgated by the SEC. As the Company continues to evaluate and work to improve its internal control over financialreporting, the Company may take additional measures to address these control deficiencies.

  

On September 15, 2010,the SEC, in Release Nos. 33-9142 and 34-62914, adopted amendments to remove the requirement for a non-accelerated filer to includein its annual report an attestation report of the filer’s registered public accounting firm. In addition, the SEC clarifiedthat an auditor of a non-accelerated filer need not include in its audit report an assessment of the issuer’s internal controlover financial reporting. Therefore, the Company, as a smaller reporting company, does not include an attestation report of itsindependent registered public accounting firm regarding internal control over financial reporting in this Form 10-K.

 

**Inherent Limitations of Control Systems.**

 

The Company’s internalcontrol over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with GAAP.

 

Management,including the Company’s principal executive officer and the principal financial officer,does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, nomatter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the controlsystem are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefitsof controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluationof internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls maybecome inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures maydeteriorate.

** **

**Changes in InternalControl Over Financial Reporting.**

 

There have not been anychanges in the Company’s internal control over financial reporting during the fourth quarter of 2012 that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

**ITEM 9B.  OTHER INFORMATION.**

 

**Subsequent Event.**

** **

Subsequent to December31, 2012 and through the date these financial statements were issued, 400,000 free trading shares of common stock were issued underthe 2011 Stock and Option Plan in connection with the conversion of accounts payables for services provided with the issuanceof stock of common shares.

 

**PART III.**

** **

**ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS,AND CORPORATE GOVERNANCE.**

** **

**Directors and ExecutiveOfficers.**

** **

Thenames, ages, and respective positions of the directors and executive officers of the Company are set forth below. The directorsnamed below will serve until the next annual meeting of stockholders or until their successors are duly elected and have qualified.Directors are elected for a term until the next annual stockholders’ meeting. Officers will hold their positions at the willof the board of directors, absent any employment agreement, of which none currently exist or are contemplated.

Thereare no family relationships between any two or more of the directors or executive officers. There are no arrangements or understandingsbetween any two or more of the directors or executive officers. There is no arrangement or understanding between any of the directorsor executive officers and any other person pursuant to which any director or officer was or is to be selected as a director orofficer, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their votingrights to continue to elect the current board of directors. There are also no arrangements, agreements or understandings betweennon-management stockholders that may directly or indirectly participate in or influence the management of the Company’s affairs.There are no other promoters or control persons of the Company. There are no legal proceedings involving the executive officersor directors of the Company.

 

(a)  Sam Shlomo Elimelech, President/Director.

** **

Mr.Elimelech, age 55, has executive and multidisciplinary technical experience and has founded and led several hi-tech companies inthe communication field. During the period of 1982 to 2000, he had extensive executive, management and technical experience intelecommunications. From January 2000 to June 2002, Mr. Elimelech served as a director and CEO of Impact Active Team Ltd.,providing executive consulting for that company’s turn-around process up to an IPO. For the period of July 2002 tothe present, he has served as an investment manager of Pangea Investments GmbH’s office in Israel, a Swiss-basedinvestment company, and from July 2003 to September 2005, he was an investment manager in Pangea’ssubsidiary, Enterprise Capital AG.  

** **

**(b)  Gai Mar-Chaim, Secretary/Treasurer/Director.**

 

Mr.Mar-Chaim, age 50, has over twenty years of experience in strategic planning for more than 300 hi-tech companies. In May 1987 hejoined P.O.C. Capital Investments Ltd., a leading management-consulting firm in Israel, an affiliateof Arthur D. Little, and managed its technology & industrial division. In January 2000, Mr. Mar-Chaim joinedFantine Group, a business development and venture capital group, and managed its management consulting practice; in January 2001,he left this firm to resume his consulting activities at P.O.C. In June 2002 he joined Pangea as an investment manager in its Israeloffice and in July 2003 joined Enterprise Capital as an investment manager, a position he held until September 2005. Mr. Mar-Chaimholds a Masters of Business Administration (finance) degree from Tel Aviv University.

** **

**Legal Proceedings.**

** **

Legal proceedings involvingMr. Elimelech, and Mr. Mar-Chaim:

 

(a)	OnOctober 19, 2006, P.O.C., the landlord of Enterprise Capital’s premises in Israel, filed a lawsuit in the Tel-Aviv Courtclaiming alleged utility debt of Enterprise Capital of about $14,000, plus interest.  Impact Active (and not the Companyas previously reported), Mr. Elimelech, and Mr. Mar-Chaim are also named as defendants in this action. The defendants have filed answers in this action. On September 24, 2012, the court ruled against Impact Active Team Ltd. and dismissedMr. Elimelech and Mr. Mr Mar-Chaim from the action.

(b)	On November 23,2006, Mercantile Bank filed a lawsuit in the Tel-Aviv Court is claiming a debt of $40,000, plus interest, from Enterprise Capital.Impact Active team Ltd, Mr. Elimelech, and Mr. Mar-Chaim are also individually named as defendants in this action, as the guarantorsto the loan provided to the Enterprise Capital. The defendants have filed answers in this action. 	

** **

**Compliance with Section 16(a) of the SecuritiesExchange Act.**

 

Section 16(a) of the SecuritiesExchange Act of 1934 requires the Company’s directors, certain officers and persons holding 10% or more of the Company’scommon stock to file reports regarding their ownership and regarding their acquisitions and dispositions of the Company’scommon stock with the SEC. Such persons are required by SEC regulations to furnish the Company with copies of all Section 16(a)forms they file.

 

Basedsolely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under Rule 16a-3(d) during fiscal year 2012,and certain written representations from executive officers and directors, the Company is aware that the following requiredreports were not timely filed:

 

(a) Ralph Marthaler: Form 4 to reportthat Pangea Investments GmbH (controlled by Mr. Marthaler) sold all of the shares held in its name to the following individuals:Sam Elimelech, a Company director and president (2,471,878 shares); Gai Mar-Chaim, a Company director and secretary/treasurer (2,471,878shares); and Ralph Marthaler, the control person of Pangea (600,000 shares). After the reported transaction, Mr. Marthler helda total of 650,000 shares (600,000 purchased in this transaction and 50,000 already held in his own name).

 

(b) Gerald Fialkov: Form 4 to report:(a) the sale by 1568934 Ontario Limited of 5,000 shares on June 8, 2012; (b) the acquisition of 600,000 restricted shares of commonstock from the Company on September 21, 2012 as payment for office rent for 2012; and (c) the acquisition of an additional 20,000restricted shares of common stock issued effective on January 1, 2012 in order that the total value of the shares issued for 2011(80,000 - $0.75 per share) for rent of offices provided by 1568934 Ontario Limited located in Beverly Hills, California equals$60,000 (the Company pays restricted shares of common stock to cover the value of $5,000 each monthfor rent, electricity, telephones, and other expenses of the office) - on August 8, 2011, the Company issued 60,000 restrictedshares of common stock, valued at $45,000. 

 

(c) Sam Elimelech: Form 4 to reportthe following purchases by Mr. Elimelech: (1) 1,000 shares on January 19, 2012; (2) 2,000 shares on January 26, 2012; (3) 1,000shares on February 1, 2012; (4) 5,000 shares on February 16, 2012; (5) 2,471,878 shares on February 27, 2012; (6) 5,000 shareson March 8, 2012; and (7) 18,000,000 shares on September 20, 2012. A Form 4 to report the return to the Company’s treasuryeffective on January 1, 2012 of 2,720,000 shares of common stock from the because of a reclassification of the value of the 4,000,000shares of common stock issued by the

Company under a RegulationS Stock Purchase Agreement between Mr. Elimelech and the Company, dated January 5, 2011.

 

(d) Gai Mar-Chaim: Form 4 to reportthe following purchases by Mr. Mar-Chaim: (1) 2,471,878 shares on February 27, 2012; and (2) 18,000,000 shares on September 20,2012. A Form 4 to report the return to the Company’s treasury effective on January 1, 2012 of 2,720,000 shares of commonstock from the because of a reclassification of the value of the 4,000,000 shares of common stock issued by the Company under aRegulation S Stock Purchase Agreement between Mr. Mar-Chaim and the Company, dated January 5, 2011.

 

All of these reports have either been preparedand filed with the SEC, or are in the process of being prepared for filing.

** **

Corporate Governance.

 

The primary function ofthe Company’s board of directors is oversight of management so that identifying and addressing the risks and vulnerabilitiesthat the Company faces is an important component of the board of directors’ responsibilities, whether monitoring ordinaryoperations or considering significant plans, strategies, or proposed transactions. The risk management process that the Companyhas established is overseen by the Audit Committee, which is also responsible for oversight of risk issues associated with ouroverall financial reporting and disclosure process and with legal compliance as well as reviewing policies on risk control assessmentand accounting risk exposure. While the board of directors is ultimately responsible for risk oversight, our management is responsiblefor day-to-day risk management processes. The Company believes this division of responsibilities is the most effective approachfor addressing the risks facing the Company and that its board of directors leadership structure supports this approach.

 

Code of Ethics.

** **

The Company has not adopteda code of ethics that applies to the Company’s principal executive officer, principal financial officer, principal accountingofficer or controller, or persons performing similar functions. The Company has not adopted such a code of ethics because all ofmanagement’s efforts have been directed to building the business of the Company; at a later time, the board of directorsmay adopt such a code of ethics.

 

Audit Committee.

 

The Company’s boardof directors functions as audit committee for the Company.

 

The primary responsibilityof the Audit Committee will be to oversee the financial reporting process on behalf of the Company’s board of directors andreport the result of their activities to the board. Such responsibilities include, but are not limited to, the selection, and ifnecessary the replacement, of the Company’s independent registered public accounting firm,

review and discuss with suchindependent registered public accounting firm: (i) the overall scope and plans for the audit, (ii) the adequacy and effectivenessof the accounting and financial controls, including the Company’s system to monitor and manage business risks, and legaland ethical programs, and (iii) the results of the annual audit, including the financial statements to be included in the annualreport on Form 10-K.

 

The Company’s policyis to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. Theseservices may include audit services, audit-related services, tax services and other services. Pre-approval is generally providedfor up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subjectto a specific budget. The independent registered public accounting firm and management are required to periodically report to theaudit committee regarding the extent of services provided by the independent registered public accounting firm in accordance withthis pre-approval, and the fees for the services performed to date. The audit committee may also pre-approve particular serviceson a case-by-case basis.

** **

Other Committee of the Board of Directors.

** **

The Company presently doesnot have a nominating committee, an executive committee of the board of directors, stock plan committee or any other committees.

** **

Recommendation of Nominees.

 

The Company does not havea standing nominating committee or committee performing similar functions. Because of the small size of the Company, the boardof directors believes that it is appropriate for the Company not to have such a committee. All the directors participate in theconsideration of director nominees.

 

The board of directorsdoes not have a policy with regard to the consideration of any director candidates recommended by security holders. Because ofthe small size of the Company, and the limited number of stockholders, the board of directors believes that it is appropriate forthe Company not to have such a policy.

** **

When evaluating directornominees, The Company considered the following factors:

 

 

 

 

 

 

The Company’s goalis to assemble a board that brings together a variety of perspectives and skills derived from high quality business and professionalexperience.  

** **

**ITEM 11.  EXECUTIVE COMPENSATION.**

 

The following table presentscompensation information for the years ended December 31, 2012, 2011, and 2010 for the persons who served as principal executiveofficer and principal financial officer (and directors)