UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019

OR

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

Commission file number:   000-55882

(786) 871-3333

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:

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

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes       ☑        No       ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes       ☐                No       ☒

As of August 9, 2019, there were 3,778,150 shares of Class A Common Stock, and 1,500,000 shares of Class B Common Stock, outstanding.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or the negative thereof or other variations thereon or other comparable terminology. All statements other than statements of historical facts included in this Quarterly Report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding expectations for revenues, cash flows and financial performance and the anticipated results of our ongoing development and business strategies.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not limited to, the following:

Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. Except as required by law, we undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

ANDOVER NATIONAL CORPORATION 

For the Quarter Ended June 30, 2019

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ANDOVER NATIONAL CORPORATION 

BALANCE SHEETS

  The accompanying notes are an integral part of these unaudited financial statements.

ANDOVER NATIONAL CORPORATION

STATEMENTS OF OPERATIONS

(Unaudited)

 The accompanying notes are an integral part of these unaudited financial statements.

ANDOVER NATIONAL CORPORATION

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements.

ANDOVER NATIONAL CORPORATION

STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements.

ANDOVER NATIONAL CORPORATION 

Notes to the Financial Statements (Unaudited)

For the six months ended June 30, 2019

Note 1 – Nature of the Business

Andover National Corporation (the “Company”) was organized in the State of Utah on July 11, 2007, and reincorporated on March 20, 2014. The Company is a full XML, XBRL and HTML compliant EDGAR and XBRL filing company. The Company provides these filing services to a limited number of small public companies that are required to file reports with the Securities and Exchange Commission (the “SEC”) pursuant to the Exchange Act, or file registration statements or other documents with the SEC pursuant to the Securities Act.

Effective February 14, 2019, the Company completed a change of domicile to Delaware from Utah (the “Reincorporation”) by means of a merger of the Company with and into the Company’s wholly-owned subsidiary, Andover National Corporation, a Delaware corporation (“Andover”). The Company and Andover entered into an agreement and plan of merger on January 9, 2019, which was previously disclosed and attached as an appendix to the definitive information statement on Schedule 14C filed with the SEC on January 22, 2019. The certificate of merger was accepted by the state of Delaware on February 7, 2019. The Reincorporation was approved by a majority of the Company’s stockholders acting by written consent, dated January 9, 2019. All share and per share amounts have been retrospectively restated to reflect the Reincorporation.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements and related notes have been prepared pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019. For further information, refer to the financial statements and footnotes thereto included in Andover’s annual financial statements for the year ended December 31, 2018, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2019.

Net Earnings (Loss) Per Common Share

The Company computes earnings per share under ASC 260-10, “Earnings Per Share.” Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted loss per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. There were 3,150,000 and 0 potentially dilutive shares, which include outstanding common stock options, warrants, convertible preferred stock and convertible notes, as of June 30, 2019 and June 30, 2018, respectively.

The potential shares, which are excluded from the determination of basic and diluted net loss per share as their effect is anti-dilutive, are as follows:

Cash and Cash Equivalents

The Company’s financial instruments included cash and cash equivalents, including investments in U.S. Treasury Bills which mature within 90 days of the reported balance sheet date. These investments are highly liquid, and the fair values of cash and cash equivalents approximated carrying values because of the short-term nature of these instruments. The Company’s policy is to report these as cash equivalents, and to report at fair values.

The Company has elected ASC Topic 825, Financial Instruments, whereby the carrying amounts reported in the balance sheets for cash and cash equivalents each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

Note 3 – Going Concern

In connection with the preparation of unaudited financial statements for the six months ended June 30, 2019, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the financial statements are issued.

The Company considered the following:

Ordinarily, conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern relate to the entity’s ability to meet its obligations as they become due. The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued by considering the following:

Management concluded that the above factors alleviate doubts about the Company’s ability to maintain enough cash for operations to satisfy its obligations for the next twelve months from the issuance date of these financial statements.

As of June 30, 2019, the Company had $13,712,101 in cash and cash equivalents.

Note 4 – Accounts Payable and Accrued Liabilities

As of June 30, 2019 and December 31, 2018, current liabilities consisted of the following:

Note 5 – Capital Stock

The authorized capital of the Company consisted of 72,500,000 shares of capital stock, including 60,000,000 shares of Class A Common Stock, 7,500,000 shares of Class B Common Stock and 5,000,000 shares of preferred stock with a par value of $0.001 per share.

As of June 30, 2019, there were a total of 3,778,150 shares of Class A Common Stock issued and outstanding, and 1,500,000 shares of Class B Common Stock issued and outstanding.

Reincorporation

In connection with the Reincorporation, and effective upon the effectiveness of the Reincorporation, each of the Company’s issued and outstanding shares of common stock, par value $0.001 per share, automatically converted into and became one-fifth (¹ / ₅^th ) of one validly issued, fully paid and non-assessable share of Class A Common Stock of Andover, without any action on the part of the Company’s stockholders. In addition, each of the Company’s issued and outstanding shares of Series A preferred stock, par value $0.001 per share, automatically converted into and became one-fifth (¹ / ₅^th ) of one validly issued, fully paid and non-assessable share of Class B Common Stock of Andover, without any action on the part of the Company’s stockholders. All share and per-share amounts have been retrospectively restated.

Newly Issued Shares

During the six months ended June 30, 2019, the Company entered into separate subscription agreements with certain accredited investors (the “Investors”), pursuant to which the Company, in a private placement, issued and sold to the Investors an aggregate of 1,437,100 shares of its Class A Common Stock at an offering price of $10.00 per share, for gross proceeds of $14,371,000, and incurred offering costs of $142,200.

During the six months ended June 30, 2019, the Company issued 1,050 shares for services valued at $10,500.

During the six months ended June 30, 2019, the Company agreed to issue 10,000 fully vested shares for services for a total value of $100,000. During the six months ended June 30, 2019, the Company expensed $41,677 related to this agreement representing five months of expense. These shares were not issued as of June 30, 2019.

During the six months ended June 30, 2019, the Company did not issue any additional shares of Class B Common Stock.

Note 6 – Related Party Transactions

As of June 30, 2019, $192,254 of the legal expenses and $2,507 of the accounts payable were related to a certain law firm. One of the officers of the Company is related to one of the partners of this firm through marriage. The partner does not perform legal services for the Company, is not consulted on any matters pertaining to the Company, and is not compensated directly from the fees paid to the law firm by the Company.

As of June 30, 2019, $37,496 of the rent expense, and $37,496 of the accounts payable, were related to the Company’s Executive Chairman, Peter Cohen. The Company occupies a portion of commercial office space that is leased by Mr. Cohen who provides the space to the Company on a month-to-month basis for $6,500 per month. There is no formal lease agreement or security deposit associated with this agreement.

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

Forward-Looking Statements

The following discussion of the financial condition and results of operations of Andover National Corporation (hereafter, the “Company,” “we,” “our,” or “us”) should be read in conjunction with the unaudited financial statements and related Notes thereto included herein. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act of 1934, including, without limitation, statements regarding the Company’s expectations, beliefs, intentions, or future strategies that are signified by the words “expects,” “anticipates,” “intends,” “believes,” or similar language. Actual results could differ materially from those projected in the forward-looking statements. Prospective investors should carefully consider the information set forth herein, and the Company cautions investors that its business and financial performance is subject to substantial risks and uncertainties.

Overview

We were initially organized in the State of Utah on March 20, 2014, as Acadia Technologies, Inc. Our initial business model included outsourced technical support services in addition to our current suite of regulatory services comprising administrative support, merchant and regulatory filing services to include full-service XML, XBRL and HTML compliant EDGAR and XBRL filings. We changed our name to Edgar Express, Inc. on September 15, 2016. Regulatory filing services, which comprise the bulk of our revenue at this time, are provided to a limited number of small public companies that are required to file reports with the Securities and Exchange Commission (the “SEC”) pursuant to the Exchange Act, or file registration statements or other documents with the SEC pursuant to the Securities Act.

Effective February 14, 2019, we completed a change of domicile to Delaware from Utah (the “Reincorporation”) by means of a merger of the Company with and into the Company’s wholly-owned subsidiary, Andover National Corporation, a Delaware corporation (“Andover”). The Company and Andover entered into an agreement and plan of merger on January 9, 2019, which was previously disclosed and attached as an appendix to our definitive information statement on Schedule 14C filed with the SEC on January 22, 2019. The certificate of merger was accepted by the state of Delaware on February 7, 2019. The Reincorporation was approved by a majority of the Company’s stockholders acting by written consent, dated January 9, 2019. We changed our name to Andover National Corporation in connection with the Reincorporation. Our business office and mailing address is 333 Avenue of the Americas, Suite 2000, Miami, Florida 33131. Our telephone number is (786) 871-3333.

General and administrative expenses have been comprised of administrative wages and benefits, occupancy and office expenses, outside legal, accounting and other professional fees, travel and other miscellaneous office and administrative expenses. Selling and marketing expenses include selling and marketing wages and benefits, advertising and promotional expenses, as well as travel and other miscellaneous related expenses.

Recent Developments

Additional Financing

For the six months ended June 30, 2019, we issued and sold an aggregate of 1,437,100 shares of our Class A Common Stock for total gross proceeds of $14,371,000.

The shares of Class A Common Stock issued and sold pursuant to the subscription agreements have not been registered under the Securities Act, or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The shares of Class A Common Stock were issued in reliance upon the exemptions from registration under the Securities Act provided by Section 4(a)(2) and Rule 506 of Regulation D promulgated thereunder. The investors are “accredited investors” as that term is defined in Rule 501 of Regulation D and acquired the shares of Class A Common Stock for investment only and not with a present view toward, or for resale in connection with, the public sale or distribution thereof.

Results of Operations

Three Months Ended June 30, 2019 and 2018

Revenues

We generated net revenues of $9,264 during the three months ended June 30, 2019, compared to $13,015 during the three months ended June 30, 2018. Our revenue was generated from regulatory filing services provided to publicly traded companies.

General and Administrative

Our general and administrative expenses for the three months ended June 30, 2019, were $379,722, an increase of $349,438, or 1,154%, as compared to $30,284 for the three months ended June 30, 2018. General and administrative expenses consisted primarily of wages and related taxes, which were $229,880 during the three months ended June 30, 2019, compared to $14,546 during the three months ended June 30, 2018, and professional fees (consisting mostly of legal fees) which were $69,184 during the three months ended June 30, 2019, compared to $11,665 during the three months ended June 30, 2018.

Net Loss

As a result of the foregoing, for the three months ended June 30, 2019, we recorded a net loss of $324,985 compared to a net loss of $23,401 for the three months ended June 30, 2018.

Six Months Ended June 30, 2019 and 2018

Revenues

We generated net revenues of $12,384 during the six months ended June 30, 2019, compared to $26,410 during the six months ended June 30, 2018. Our revenue was generated from regulatory filing services provided to publicly traded companies.

General and Administrative

Our general and administrative expenses for the six months ended June 30, 2019, were $733,749, an increase of $682,369, or 1,328%, as compared to $51,380 for the six months ended June 30, 2018. General and administrative expenses consisted primarily of wages and related taxes, which were $463,220 during the six months ended June 30, 2019, compared to $29,135 during the six months ended June 30, 2018, and professional fees (consisting mostly of legal fees) which were $164,890 during the six months ended June 30, 2019, compared to $15,603 during the six months ended June 30, 2018.

Net Loss

As a result of the foregoing, for the six months ended June 30, 2019, we recorded a net loss of $675,892 compared to a net loss of $37,212 for the six months ended June 30, 2018.

Liquidity and Capital Resources

As of June 30, 2019, our primary source of liquidity consisted of approximately $13.7 million in cash. We hold our cash reserves in commercial checking accounts with local financial institutions, and have invested available cash in US Treasury securities through local financial institutions. Since inception we have financed our operations primarily through the private placement of our capital stock, and the sale of warrants.

Operating Activities

During the six months ended June 30, 2019, we used $885,463 of cash in operating activities, primarily as a result of our net loss of $675,892, stock compensation of $52,167, and $(261,738) in changes in operating assets and liabilities.

During the six months ended June 30, 2018, we used $21,524 of cash in operating activities, primarily as a result of our net loss of $37,212, provision for doubtful accounts of $817, and $14,871 in changes in operating assets and liabilities.

Investing Activities

During the six months ended June 30, 2019 and 2018, we did not have investing activities.

Financing Activities

During the six months ended June 30, 2019, our financing activities provided $14,229,000 in net proceeds from sales of Class A Common Stock.

During the six months ended June 30, 2018, our financing activities provided $18,288 in proceeds from loans payable which have been repaid.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Critical accounting policies

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. Our accounting policies are described in Note 1 to our audited financial statements for 2018 appearing in our Annual Report on Form 10-K for the year ended December 31, 2018.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

As a smaller reporting company, we are not required to provide this information.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Form 10-Q, management performed, with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Management’s evaluation identified the following material weakness as of June 30, 2019: insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting.  Based on the foregoing evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2019, our disclosure controls and procedures were not effective.

Changes in Internal Control over Financial Reporting

There was no change to our internal controls or in other factors that could affect these controls during the six month period ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, our management is currently seeking to improve our controls and procedures in an effort to remediate the deficiency described above.

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

We are not currently subject to any legal proceedings, and to the best of our knowledge, no such proceeding is threatened, the results of which would have a material impact on our financial condition or results of operations. Nor, to the best of our knowledge, are any of our officers or directors involved in any legal proceedings in which we are an adverse party.

From time to time, we are also a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with purchasers and suppliers. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A.  Risk Factors

As a smaller reporting company, we are not required to provide the information required by this item.

Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The following documents are filed as exhibits to this Form 10-Q:

SIGNATURES

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