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 |
For the three months ended March 31, 2021September 30, 2022
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-56026
TODOS MEDICAL LTD.
(Exact name of registrant as specified in its charter)
| Israel | Not Applicable | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
121 Derech Menachem Begin, 30th Floor, Tel Aviv, 6701203Israel
(Address of principal executive offices and Zip Code)
+972 (52)642-0126
(Registrant’s telephone number, including area code)
(I.R.S. Employer Identification No.)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act: None
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 [X] ☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes [X] ☒ No [ ]☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
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.
| Large accelerated filer | Accelerated filer | ||
| Non-accelerated filer | Smaller reporting company | ||
| Emerging growth company |
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 [X] ☒
As of June 17, 2021,November 14, 2022, the registrant had 602,418,612 ordinary shares outstanding.
TODOS MEDICAL LTD.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2021September 30, 2022
| 2 |
General and Where You Can Find Other Information
Unless otherwise indicated, all references to the “Company,” “we,” “our,” “Todos” and “Todos Medical” refer to Todos Medical Limited and its subsidiaries, Todos Medical USA, a Nevada corporation, Todos Medical Singapore Pte. Ltd., a Singaporean corporation, and to Corona Diagnostics, LLC, a Nevada limited liability company and a subsidiary of Todos Medical USA, and Breakthrough Diagnostics Inc., a Nevada corporation, 3CL Sciences Ltd., an Israeli corporation, 3CL Pharma USA, Inc., a Nevada corporation and Todos Botanicals, Inc., a Texas corporation. References to “revenues” refer to net revenues. References to “U.S. dollars,” “dollars,” “U.S. $” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to new Israeli shekels. All references to “shares” in this quarterly report on Form 10-Q refer to the pre-reverse split ordinary shares of Todos Medical Ltd., par value NIS 0.01 per share. As is discussed elsewhere in this annualquarterly report on Form 10-Q, on May 11, 2020,September 28, 2021, Todos’ shareholders approved a reverse split of its shares based upon a ratio to be determined by Todos’ management, and at their next annual meeting, Todos’ shareholders will be asked to approve an extension of the deadline for the reverse split.management.
| 3 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2021SEPTEMBER 30, 2022
| F-1 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2022
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| F-2 |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2021
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands except share and per share amounts)
As of March 31, | As of December 31, | As of September 30, | As of December 31, | |||||||||||||
| 2021 | 2020 | 2022 | 2021 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 136 | $ | 935 | $ | 57 | $ | 189 | ||||||||
| Trade receivables | 419 | 378 | 670 | 2,520 | ||||||||||||
| Inventories | 1,590 | 536 | 1,320 | 1,603 | ||||||||||||
| Other current assets | 161 | 601 | 540 | 404 | ||||||||||||
| Total current assets | 2,306 | 2,450 | 2,587 | 4,716 | ||||||||||||
| Non-current assets: | ||||||||||||||||
| Investment in affiliated companies accounted for under equity method, net | 680 | 745 | ||||||||||||||
| Investment in affiliated companies, net | 40 | 40 | ||||||||||||||
| Investment in other company | 455 | 224 | 455 | 455 | ||||||||||||
| Property and equipment, net | 2,596 | 1,999 | 1,598 | 2,045 | ||||||||||||
| Prepaid expenses | 361 | 591 | ||||||||||||||
| Right of use asset arising from operating lease | 98 | 143 | ||||||||||||||
| Goodwill | 6,216 | 6,216 | ||||||||||||||
| Intangible assets | 1,500 | 1,500 | ||||||||||||||
| Other long term assets (Note 1A) | 1,733 | - | ||||||||||||||
| Total non-current assets | 4,092 | 3,559 | 11,640 | 10,399 | ||||||||||||
| Total assets | $ | 6,398 | $ | 6,009 | $ | 14,227 | $ | 15,115 | ||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Receivables financing facility, net | $ | - | $ | 1,306 | ||||||||||||
| Revolving line of credit | $ | 2,527 | $ | - | ||||||||||||
| Loans, net | 2,175 | 1,672 | 3,330 | 2,023 | ||||||||||||
| Accounts payable | 1,346 | 1,640 | 4,119 | 2,276 | ||||||||||||
| Deferred revenues | - | 844 | ||||||||||||||
| Other current liabilities | 3,003 | 2,316 | 3,761 | 4,284 | ||||||||||||
Current amount of liability for minimum royalties | 293 | 291 | ||||||||||||||
| Liability for minimum royalties | 474 | 377 | ||||||||||||||
| Total current liabilities | 6,817 | 8,069 | 14,211 | 8,960 | ||||||||||||
| Non-current liabilities: | ||||||||||||||||
| Convertible bridge loans, net | $ | 15,885 | $ | 5,965 | 29,797 | 25,406 | ||||||||||
| Derivative warrants liability, net | 100 | 301 | ||||||||||||||
| Fair value of bifurcated convertible feature of convertible bridge loans | 2,859 | 2,500 | 136 | 4,182 | ||||||||||||
| Liability for minimum royalties, net of current amount | 195 | 185 | ||||||||||||||
| Operating lease liability | 82 | 141 | ||||||||||||||
| Deferred taxes | 315 | 315 | ||||||||||||||
| Liability for minimum royalties | 216 | 183 | ||||||||||||||
| Other non-current liabilities | 105 | 140 | ||||||||||||||
| Total non-current liabilities | 19,039 | 8,951 | 30,651 | 30,367 | ||||||||||||
| Commitments and contingent liabilities | ||||||||||||||||
| Shareholders’ deficit: | ||||||||||||||||
| Ordinary Shares of NIS 0.01 par value each: | ||||||||||||||||
| Authorized: 1,000,000,000 shares at March 31, 2021 and December 31, 2020; Issued and outstanding: 552,345,481 shares and 376,335,802 shares at March 31, 2021 and December 31, 2020, respectively | 1,595 | 1,059 | ||||||||||||||
| Authorized: and shares at September 30, 2022 and December 31, 2021, respectively; Issued and outstanding: shares and shares at September 30, 2022 and December 31, 2021, respectively | 4,045 | 2,913 | ||||||||||||||
| Additional paid-in capital | 43,785 | 35,211 | 75,341 | 63,470 | ||||||||||||
| Accumulated deficit | (64,838 | ) | (47,281 | ) | (110,596 | ) | (90,595 | ) | ||||||||
| Total shareholders’ deficit | (19,458 | ) | (11,011 | ) | (31,210 | ) | (24,212 | ) | ||||||||
| Non-controlling interests | 575 | - | ||||||||||||||
| Total deficit | (30,635 | ) | (24,212 | ) | ||||||||||||
| Total liabilities and shareholders’ deficit | $ | 6,398 | $ | 6,009 | ||||||||||||
| Total liabilities and deficit | $ | 14,227 | $ | 15,115 | ||||||||||||
*) Representing an amount less than $1.
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-3 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands except share and per share amounts)
| Three month period ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Unaudited | ||||||||
| Revenues | $ | 5,031 | $ | - | ||||
| Cost of revenues | (3,235 | ) | - | |||||
| Gross profit | 1,796 | - | ||||||
| Research and development expenses | (713 | ) | (104 | ) | ||||
| Sales and marketing expenses | (1,358 | ) | (750 | ) | ||||
| General and administrative expenses | (1,562 | ) | (330 | ) | ||||
| Operating loss | (1,837 | ) | (1,184 | ) | ||||
| Financing expenses, net | (15,(654 | (3,454 | ) | |||||
| Share in losses of affiliated companies accounted for under equity method, net | (66 | ) | - | |||||
| Net loss for the period | $ | (17,557 | ) | $ | (4,638 | ) | ||
| Basic net loss per share | $ | (0.04 | ) | $ | (0.03 | ) | ||
Diluted net loss per share | $ | (0.04 | ) | $ | (0.03 | ) | ||
Weighted average number of ordinary shares outstanding attributable to ordinary shareholders used in computing basic net loss per share | 462,650,478 | 139,223,048 | ||||||
Weighted average number of ordinary shares outstanding attributable to ordinary shareholders used in computing diluted net loss per share | 464,214,552 | 139,223,048 | ||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
Nine months period ended September 30, | Three months period ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Revenues | $ | 6,292 | $ | 7,773 | $ | 1,914 | $ | 1,010 | ||||||||
| Cost of revenues | (3,615 | ) | (5,191 | ) | (1,274 | ) | (1,043 | ) | ||||||||
| Gross profit | 2,677 | 2,582 | 640 | (33 | ) | |||||||||||
| Research and development expenses | (600 | ) | (685 | ) | (145 | ) | (166 | ) | ||||||||
| Sales and marketing expenses | (2,368 | ) | (2,387 | ) | (540 | ) | (429 | ) | ||||||||
| General and administrative expenses | (7,639 | ) | (5,198 | ) | (1,757 | ) | (1,869 | ) | ||||||||
| Operating loss | (7,930 | ) | (5,688 | ) | (1,802 | ) | (2,497 | ) | ||||||||
| Financing expenses, net | (11,735 | ) | (17,360 | ) | (3,859 | ) | (6,875 | ) | ||||||||
| Other losses | (396 | ) | - | - | - | |||||||||||
| Share in losses of affiliated companies, net | - | (1,499 | ) | - | (1,007 | ) | ||||||||||
| Net loss | $ | (20,061 | ) | $ | (24,547 | ) | $ | (5,661 | ) | $ | (10,379 | ) | ||||
| Less: net loss attributable to non-controlling interests | 60 | - | 31 | - | ||||||||||||
| Net loss attributable to the Company | $ | (20,001 | ) | $ | (24,547 | ) | $ | (5,630 | ) | $ | (10,379 | ) | ||||
| Basic and diluted net loss per share attributable to Company’s stockholders’ | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.00 | ) | $ | (0.01 | ) | ||||
| Weighted average number of ordinary shares outstanding used in computation of basic and diluted net loss per share | 1,167,267,564 | 637,916,356 | 1,279,535,548 | 736,939,641 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-4 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
THREE MONTH PERIOD ENDED MARCH 31, 2021
(U.S. dollars in thousands except share and per share amounts)
| Ordinary shares | Additional paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | capital | deficit | deficit | ||||||||||||||||
| Balance as of December 31, 2020 | 376,335,802 | $ | 1,059 | $ | 35,211 | $ | (47,281 | ) | $ | (11,011 | ) | |||||||||
| Changes during the three months period ended March 31, 2021: | ||||||||||||||||||||
| Issuance of ordinary shares as settlement of previous commitments | 2,500,000 | 8 | (8 | ) | - | - | ||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares (see Note 4B9) | 134,358,817 | 409 | 6,461 | - | 6,870 | |||||||||||||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction (see Note 3D) | 2,000,000 | 6 | 82 | - | 88 | |||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received (see Note 3B) | - | - | 792 | - | 792 | |||||||||||||||
| Issuance of ordinary shares in exchange for equity line received (see Note 4B8) | 5,229,809 | 16 | 239 | - | 255 | |||||||||||||||
| Issuance of ordinary shares as collateral for loan repayment (see Note 4B10) | 20,000,000 | 61 | 809 | - | 870 | |||||||||||||||
| Issuance of ordinary shares or commitment for issuance of fixed number of ordinary shares to service providers (see Note 4B11) | 11,921,053 | 36 | 30 | - | 66 | |||||||||||||||
| Stock-based compensation to employees and directors (see Note 5) | - | - | 169 | - | 169 | |||||||||||||||
| Net loss for the period | - | - | - | (17,557 | ) | (17,557 | ) | |||||||||||||
| Balance as of March 31, 2021 (unaudited) | 552,345,481 | $ | 1,595 | $ | 43,785 | $ | (64,838 | ) | $ | (19,458 | ) | |||||||||
| COMPANY STOCKHOLDERS | ||||||||||||||||||||||||||||
| Ordinary shares | Additional paid-in | Accumulated | Total stockholders’ | Non-controlling | Total | |||||||||||||||||||||||
| Shares | Amount | capital | deficit | deficit | interests | deficit | ||||||||||||||||||||||
| Balance as of December 31, 2021 | 975,644,432 | $ | 2,913 | $ | 63,470 | $ | (90,595 | ) | $ | (24,212 | ) | - | $ | (24,212 | ) | |||||||||||||
| Changes during the three months period ended March 31, 2022: | ||||||||||||||||||||||||||||
| Issuance of ordinary shares for call option to acquire potential acquiree | 49,620,690 | 152 | 1,652 | - | 1,804 | - | 1,804 | |||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | 97,611,464 | 305 | 2,962 | - | 3,267 | - | 3,267 | |||||||||||||||||||||
| Conversion of warrants into ordinary shares | 16,000,000 | 49 | (49 | ) | - | - | - | - | ||||||||||||||||||||
| Stock-based compensation to employees and directors | - | - | 887 | - | 887 | - | 887 | |||||||||||||||||||||
| Issuance of ordinary shares to service providers | 1,500,000 | 4 | 707 | - | 711 | - | 711 | |||||||||||||||||||||
| Sale of subsidiary shares to non-controlling interests | - | - | 75 | - | 75 | 635 | 710 | |||||||||||||||||||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction | ||||||||||||||||||||||||||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction, shares | ||||||||||||||||||||||||||||
| Issuance of ordinary shares in exchange for equity line received | ||||||||||||||||||||||||||||
| Issuance of ordinary shares in exchange for equity line received, shares | ||||||||||||||||||||||||||||
| Issuance of ordinary shares as collateral for loan repayment | ||||||||||||||||||||||||||||
| Issuance of ordinary shares as collateral for loan repayment, shares | ||||||||||||||||||||||||||||
| Stock-based compensation to service providers | ||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | (7,588 | ) | (7,588 | ) | - | (7,588 | ) | ||||||||||||||||||
| Balance as of March 31, 2022 (unaudited) | 1,140,376,586 | 3,423 | 69,704 | (98,183 | ) | (25,056 | ) | 635 | (24,421 | ) | ||||||||||||||||||
| Changes during the three months period ended June 30, 2022: | ||||||||||||||||||||||||||||
| Issuance of ordinary shares as partial settlement of financial liability | 11,160,714 | 35 | 165 | - | 200 | 200 | ||||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | 15,625,000 | 16 | 202 | - | 218 | 218 | ||||||||||||||||||||||
| Issuance of shares in acquisition of an asset | 24,000,000 | 77 | 319 | - | 396 | 396 | ||||||||||||||||||||||
| Stock-based compensation to employees and directors | - | - | 228 | - | 228 | 228 | ||||||||||||||||||||||
| Issuance of ordinary shares to service providers | 2,012,821 | 6 | 389 | - | 395 | 395 | ||||||||||||||||||||||
| Net loss for the period | - | - | - | (6,783 | ) | (6,783 | ) | (29 | ) | (6,812 | ) | |||||||||||||||||
| Balance as of June 30, 2022 (unaudited) | 1,193,175,121 | 3,557 | 71,007 | (104,966 | ) | (30,402 | ) | 606 | (29,796 | ) | ||||||||||||||||||
| Changes during the three months period ended September 30, 2022: | ||||||||||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | 151,194,061 | 458 | 3,792 | - | 4,250 | - | 4,250 | |||||||||||||||||||||
| Stock-based compensation to employees and directors | - | - | 218 | - | 218 | 218 | ||||||||||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | - | 44 | - | 44 | - | 44 | |||||||||||||||||||||
| Issuance of ordinary shares to service providers | 10,000,000 | 30 | 280 | - | 310 | 310 | ||||||||||||||||||||||
| Net loss for the period | - | - | - | (5,630 | ) | (5,630 | ) | (31 | ) | (5,661 | ) | |||||||||||||||||
| Balance as of September 30, 2022 (unaudited) | 1,354,369,182 | $ | 4,045 | $ | 75,341 | $ | (110,596 | ) | $ | (31,210 | ) | $ | 575 | $ | (30,635 | ) | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-5 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
THREE MONTH PERIOD ENDED MARCH 31, 2020
(U.S. dollars in thousands except share and per share amounts)
| Ordinary shares | Additional paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | capital | deficit | deficit | ||||||||||||||||
| Balance as of December 31, 2019 | 103,573,795 | $ | 280 | $ | 10,979 | $ | (17,508 | ) | $ | (6,249 | ) | |||||||||
| Changes during the three months period ended March 31, 2020: | ||||||||||||||||||||
| Issuance of ordinary shares for call option to acquire potential acquiree | 17,091,096 | 49 | 951 | - | 1,000 | |||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | 27,336,061 | 78 | 1,508 | - | 1,586 | |||||||||||||||
| Classification of derivative warrants liability into equity as result of partial conversion of convertible bridge loans into ordinary shares | - | - | 333 | - | 333 | |||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | 466 | 466 | ||||||||||||||||||
| Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions | 350,000 | 1 | 376 | - | 377 | |||||||||||||||
| Issuance of units consisting of ordinary shares (or fixed number of shares to be issued) and warrants | - | - | 30 | - | 30 | |||||||||||||||
| Issuance of ordinary shares or commitment for issuance of fixed number of ordinary shares to service providers | 5,718,588 | 17 | 815 | - | 832 | |||||||||||||||
| Net loss for the period | - | - | - | (4,638 | ) | (4,638 | ) | |||||||||||||
| Balance as of March 31, 2020 (unaudited) | 154,069,540 | $ | 425 | $ | 15,458 | $ | (22,146 | ) | $ | (6,263 | ) | |||||||||
| Shares | Amount | capital | deficit | deficit | ||||||||||||||||
| COMPANY STOCKHOLDERS | ||||||||||||||||||||
| Ordinary shares | Additional paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | capital | deficit | deficit | ||||||||||||||||
| Balance as of December 31, 2020 | 376,335,802 | $ | 1,059 | $ | 35,211 | $ | (47,281 | ) | $ | (11,011 | ) | |||||||||
| Changes during the three months period ended March 31, 2021: | ||||||||||||||||||||
| Issuance of ordinary shares as settlement of previous commitments | 2,500,000 | 8 | (8 | ) | - | - | ||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | 134,358,817 | 409 | 6,461 | - | 6,870 | |||||||||||||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction | 2,000,000 | 6 | 82 | - | 88 | |||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | - | 792 | - | 792 | |||||||||||||||
| Issuance of ordinary shares in exchange for equity line received | 5,229,809 | 16 | 239 | - | 255 | |||||||||||||||
| Issuance of ordinary shares as collateral for loan repayment | 20,000,000 | 61 | 809 | - | 870 | |||||||||||||||
| Issuance of ordinary shares or commitment for issuance of fixed number of ordinary shares to service providers | 11,921,053 | 36 | 30 | - | 66 | |||||||||||||||
| Stock-based compensation to employees and directors | - | - | 169 | - | 169 | |||||||||||||||
| Net loss for the period | - | - | - | (17,557 | ) | (17,557 | ) | |||||||||||||
| Balance as of March 31, 2021 (unaudited) | 552,345,481 | 1,595 | 43,785 | (64,838 | ) | (19,458 | ) | |||||||||||||
| Changes during the three months period ended June 30, 2021: | ||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | 55,415,011 | 170 | 1,606 | - | 1,776 | |||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | - | 3,430 | - | 3,430 | |||||||||||||||
| Stock-based compensation to service providers | - | - | 21 | - | 21 | |||||||||||||||
| Commitment to issue shares in acquisition of subsidiary | - | - | 1,699 | - | 1,699 | |||||||||||||||
| Stock-based compensation to employees and directors | - | - | 143 | - | 143 | |||||||||||||||
| Net income for the period | - | - | - | 3,390 | 3,390 | |||||||||||||||
| Balance as of June 30, 2021 (unaudited) | 607,760,492 | 1,765 | 50,684 | (61,448 | ) | (8,999 | ) | |||||||||||||
| Beginning balance | 607,760,492 | 1,765 | 50,684 | (61,448 | ) | (8,999 | ) | |||||||||||||
| Changes during the three months period ended September 30, 2021: | ||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | 238,190,489 | 739 | 7,179 | - | 7,918 | |||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | - | 728 | - | 728 | |||||||||||||||
| Stock-based compensation to service providers | 3,000,000 | 9 | 76 | - | 85 | |||||||||||||||
| Issuance of shares in acquisition of subsidiary | 25,862,069 | 80 | (80 | ) | - | - | ||||||||||||||
| Stock-based compensation to employees and directors | - | - | 148 | - | 148 | |||||||||||||||
| Net income for the period | - | - | - | (10,379 | ) | (10,379 | ) | |||||||||||||
| Net income (loss) for the period | - | - | - | (10,379 | ) | (10,379 | ) | |||||||||||||
| Balance as of September 30, 2021 (unaudited) | 874,813,050 | $ | 2,593 | $ | 58,735 | $ | (71,827 | ) | $ | (10,499 | ) | |||||||||
| Ending balance | 874,813,050 | 2,593 | 58,735 | (71,827 | ) | (10,499 | ) | |||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-6 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
| Three months period ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (17,557 | ) | $ | (4,638 | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 156 | 7 | ||||||
| Liability for minimum royalties | 12 | 9 | ||||||
| Stock-based compensation (see Note 4B11 and Note 5) | 235 | 832 | ||||||
| Expiration of call options to acquire potential acquiree (See Note 6) | - | 1,000 | ||||||
| Share in losses of affiliated company | 66 | - | ||||||
| Modification of terms relating to straight loan transaction (see Note 3D and Note 6)) | (6 | ) | - | |||||
| Modification of terms relating to convertible bridge loans transactions | - | (3,463 | ) | |||||
| Direct and incremental issuance costs allocated to conversion feature of convertible bridge loan (see Note 3B) | 169 | - | ||||||
| Exchange differences relating to loans from shareholders | - | (9 | ) | |||||
| Change in fair value of convertible bridge loans (See Note 6) | 11,976 | 4,369 | ||||||
| Amortization of discounts and accrued interest on convertible bridge loans (See Note 6) | 3,057 | - | ||||||
| Amortization of discounts and accrued interest on straight loans (See Note 6) | 861 | 292 | ||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired (See Note 6) | (201 | ) | 919 | |||||
| Change in fair value of liability related to conversion feature of convertible bridge loans (See Note 6) | (977 | ) | - | |||||
| Increase in trade receivables | (41 | ) | - | |||||
| Increase in inventories | (1,054 | ) | - | |||||
| Decrease (increase) in other current assets | 670 | (47 | ) | |||||
| Increase (decrease) in accounts payable | (389 | ) | 100 | |||||
| Decrease in deferred revenues | (844 | ) | - | |||||
| Increase (decrease) in other current liabilities | 687 | (46 | ) | |||||
| Net cash used in operating activities | (3,180 | ) | (675 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (658 | ) | - | |||||
| Investment in other company | (231 | ) | - | |||||
| Net cash used in investing activities | (889 | ) | - | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from straight loans, net (see also Note 3A and Note 3F) | 1,677 | 697 | ||||||
| Repayment of Receivables financing facility | (1,056 | ) | - | |||||
| Repayment of straight loans | (941 | ) | - | |||||
| Repayment of convertible bridge loans | (677 | ) | - | |||||
| Proceeds from issuance of units consisting of convertible bridge loans and stock warrants, net (see Note 3B and Note 3E) | 4,012 | - | ||||||
| Proceeds from issuance of units consisting of ordinary shares and stock warrants | - | 30 | ||||||
| Proceeds from issuance of ordinary shares through equity line (see Note 4B8) | 255 | - | ||||||
| Net cash provided by financing activities | 3,270 | 727 | ||||||
| Change in cash, cash equivalents | (799 | ) | 52 | |||||
| Cash, cash equivalents at beginning of period | 935 | 17 | ||||||
| Cash, cash equivalents at end of period | $ | 136 | $ | 69 | ||||
| Supplemental disclosure of non-cash activities: | ||||||||
| Purchasing of property and equipment included in accounts payable | $ | 95 | $ | - | ||||
| Issuance of ordinary shares as collateral for loan repayment (see Note 4B10) | $ | 870 | $ | - | ||||
| Partial conversion of convertible bridge loans and liability related to conversion feature of convertible bridge loans into ordinary shares (see Note 4B9) | $ | 6,870 | $ | 1,586 | ||||
| Fair value of derivative warrants liability and convertible bridge loans classified into equity in connection with convertible bridge loans converted | $ | - | $ | 333 | ||||
| Issuance of stock warrants as part of convertible bridge loan received (see Note 3B) | $ | 792 | $ | 466 | ||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction (see Note 3D) | $ | 88 | $ | - | ||||
| 2022 | 2021 | |||||||
Nine months period ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | Unaudited | Unaudited | ||||||
| Net loss | $ | (20,061 | ) | $ | (24,547 | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 584 | 556 | ||||||
| Impairment of investment in a subsidiary | 396 | - | ||||||
| Interest on short term loans and revolving credit line | 786 | - | ||||||
| Sale of subsidiary shares to non-controlling interests | 710 | - | ||||||
| Liability for minimum royalties | 131 | 53 | ||||||
| Stock-based compensation | 2,752 | 633 | ||||||
| Modification of terms relating to straight loan transaction | - | 88 | ||||||
| Share in losses of affiliated company | - | 1,499 | ||||||
| Change in fair value, amortization of discounts and accrued interest on convertible bridge loans | 13,076 | 18,080 | ||||||
| Amortization of discounts and accrued interest on straight loans | - | 2,290 | ||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired | - | (299 | ) | |||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (3,651 | ) | (3,777 | ) | ||||
| Decrease (increase) in trade receivables | 1,850 | (1,629 | ) | |||||
| Decrease (increase) in inventories | 283 | (806 | ) | |||||
| Decrease in other current assets | 64 | 705 | ||||||
| Increase (decrease) in accounts payable | 1,844 | (961 | ) | |||||
| Decrease in deferred revenues | - | (857 | ) | |||||
| Increase (decrease) in other current liabilities | (559 | ) | (326 | ) | ||||
| Operating lease liability | (77 | ) | - | |||||
| Net cash used in operating activities | (1,872 | ) | (9,299 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (74 | ) | (965 | ) | ||||
Increase in other long term assets | (1,733 | ) | - | |||||
| Cash used in purchased of subsidiary | - | (1,176 | ) | |||||
| Investment in other companies | - | (1,024 | ) | |||||
| Net cash used in investing activities | (1,807 | ) | (3,165 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from straight loans and revolving credit line | 6,291 | 2,496 | ||||||
| Repayment of Receivables financing facility | - | (1,249 | ) | |||||
| Repayment of straight loans | (3,244 | ) | (1,329 | ) | ||||
| Repayment of convertible bridge loans | - | (2,165 | ) | |||||
| Proceeds from issuance of units consisting of convertible bridge loans, stock warrants and shares, net | 500 | 13,687 | ||||||
| Proceeds from issuance of ordinary shares through equity line | - | 255 | ||||||
| Net cash provided by financing activities | 3,547 | 11,695 | ||||||
| Change in cash, cash equivalents | (132 | ) | (769 | ) | ||||
| Cash, cash equivalents at beginning of period | 189 | 935 | ||||||
| Cash, cash equivalents at end of period | $ | 57 | $ | 166 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-7 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)
(U.S. dollars in thousands)
Nine months period ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | Unaudited | |||||||
| Supplemental disclosure of non-cash activities: | ||||||||
| Issuance of warrants as part of bridge loan transactions | - | 4,157 | ||||||
| Partial conversion of convertible bridge loans and liability related to conversion feature of convertible bridge loans into ordinary shares | 9,536 | 16,493 | ||||||
| Issuance of ordinary shares for call option to acquire potential acquiree | 1,804 | - | ||||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction | - | 792 | ||||||
| Sale of subsidiary shares to non-controlling interests | 635 | - | ||||||
| Shares issued in settlement of a financial liability | 200 | - | ||||||
| Issuance of shares upon acquisition of an asset | 396 | - | ||||||
| Cash used in purchase of subsidiary consolidated for the first time: | ||||||||
| Working capital (excluding cash and cash equivalents) | (18 | ) | ||||||
| Fixed assets | 183 | |||||||
| Long term assets | 3 | |||||||
| Net assets acquired | 168 | |||||||
| Goodwill acquired | 7,761 | |||||||
| Intangible assets acquired | 1,500 | |||||||
| Second cash installment payable | (1,250 | ) | ||||||
| Consideration in convertible promissory note | (4,989 | ) | ||||||
| Consideration in Shares | (1,699 | ) | ||||||
| Deferred tax liability | (315 | ) | ||||||
| Net cash used in purchase of subsidiary consolidated for the first time | 1,176 | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-8 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 1 – GENERAL
| A. | Operations |
Todos Medical Ltd. (the “Company” or “Todos”) was incorporated under the laws of the State of Israel and commenced its operations on April 22, 2010. The Company engineers life-saving diagnostic solutions for the early detection of a variety of cancers. The Company’s patented Todos Biochemical Infrared Analyses (TBIA) is a proprietary cancer-screening technology using peripheral blood analysis that deploys deep examination into cancer’s influence on the immune system, looking for biochemical changes in blood mononuclear cells and plasma. Todos’ two internally developed cancer-screening tests, TMB-1 and TMB-2, have received a CE mark in Europe.
Todos is also developing blood tests for the early detection of neurodegenerative disorders, such as Alzheimer’s disease. The Lymphocyte Proliferation Test (LymPro Test™) is a diagnostic blood test that determines the ability of peripheral blood lymphocytes (PBLs) and monocytes to withstand an exogenous mitogenic stimulation that induces them to enter the cell cycle. LymPro is unique in the use of peripheral blood lymphocytes as a surrogate for neuronal cell function, suggesting a common relationship between PBLs and neurons in the brain.
Additionally, commencingCommencing 2020, the Company through its U.S. subsidiary (Corona Diagnostics, LLC) has entered into several distribution agreements with other companies to distribute certain novel coronavirus (COVID-19) test kits. The agreements cover multiple international suppliers of PCR testing kits and related materials and supplies, as well as antibody testing kits from multiple third-party manufacturers after completing validation of said testing kits and supplies in certified laboratory in the United States.
Additionally, during 2021, upon completion of the Share Purchase Agreement for the purchase of Provista Diagnostics, Inc. (see below), the Company, through Provista Diagnostics, Inc. provide diagnostic testing laboratory services currently performing COVID-19 PCR testing, primarily for the medical and entertainment industries.
In December 2020, the Company announced the commercial launch of its proprietary 3CL protease inhibitor dietary supplement Tollovid™. Tollovid, a mix of botanical extracts, is being targeted to support healthy immune function against circulating coronaviruses. Tollovid was granted a Certificate of Free Sale by the US Food and Drug Administration (FDA) in August 2020, allowing its commercial sale anywhere in the United States. In May 2021, the FDA granted the Company a new Certificate of Free Sale for a second dosing regimen for Tollovid™ as a dietary supplement, under which the Company is authorized to market Tollovid with a dosing regimen of 60 pills over a five-day period, equivalent to 12 pills per day.
ForOn March 11, 2022, the periodCompany entered into a Share Purchase Agreement with 3CL Sciences Ltd. (“3CL”) and NLC Pharma Ltd. (“NLC”), pursuant to which Todos will acquire % of three months ended March 31, 2021,the issued and outstanding shares of 3CL and NLC will acquire % of the issued and outstanding shares of 3CL (the “Share Purchase Agreement”). Immediately prior to the closing of the Share Purchase Agreement, NLC will convey to 3CL all of the revenuetherapeutic, diagnostic, dietary supplement and pharmaceutical assets from NLC that relate to 3CL protease biology (which is used in the development, manufacture, sale and distribution of Tollovid™ and Tollovir™).
In consideration of the 3CL shares to be issued to the Company, Todos undertook to raise $for 3CL and committed to pay $2,000 to NLC and to issue to NLC $3,800 worth of the Company’s ordinary shares, based upon the closing price for our ordinary shares the day before the closing of the Share Purchase Agreement. The Company and NLC agreed to identify a seasoned biopharmaceutical CEO to run 3CL going forward. The board of directors of 3CL will be made up of five (5) individuals: three (3) appointed by the Company and two (2) appointed by NLC. The Company anticipate that the Share Purchase Agreement will close during the second half of 2022, subsequent to the date on which these unaudited condensed consolidated financial statements are issued. As of September 30, 2022, the Company forwarded 3CL $1,733 on account of the investment.
Revenues of the nine months ended September 30, 2022, resulted from sales of COVID-19 related products.products, lab testing services, testing kits and dietary supplement, Tollovid™. Through March 31, 2021,September 30, 2022, the Company has not yet generated any revenue from its developed cancer-screening tests TMB-1 and TMB-2 or LymPro Test™ , or its dietary supplement, Tollovid™.
| F-9 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except shares amounts)
| B. | Foreign operations |
| 1. | Todos Medical (Singapore) Pte Ltd |
On January 27, 2016, the Company incorporated a wholly owned subsidiary in Singapore under the name of Todos Medical (Singapore) Pte Ltd. (“Todos Singapore”) for the purpose of purpose of advancing clinical trials of the Company’s core technology for breast cancer in Southeast Asia. As of March 31, 2021,September 30, 2022, Todos Singapore has not yet commenced its business operations.
| 2. | Todos Medical USA |
In January 2020, the Company incorporated a U.S. subsidiary named Todos Medical USA (“Todos U.S.”) for the purpose of conducting business as medical importer and distributor focused on the distribution of the Company’s testing products and services to customers in the North America and Latin America.
| 3. | Corona Diagnostics, LLC |
In April 2020, the Company incorporated a U.S. subsidiary named Corona Diagnostics, LLC (“Corona Diagnostics”) for the purpose of marketing COVID-19 related products in the United States to validate potential products the Company is contemplating distributing and creating marketing materials for the testing products based upon those validations.
| 4. | Breakthrough Diagnostics, Inc. |
On February 27, 2019,July 28, 2020, the Company entered into Shares Purchase and Assignmentcompleted the purchase of License Agreement with Amarantus Bioscience Holdings, Inc. (“Amarantus”), under which the Company purchased 19.99%100% of the issued and outstanding common stock of Breakthrough Diagnostics, Inc. (“Breakthrough”), a U.S based company, for entering into the field of early detection of Alzheimer’s disease.
Breakthrough was determined to be excluding substantive process as required under the definition of business in accordance with the provisions of ASC Topic 805 “Business Combination”, it was also determined that the asset purchased had no alternative future use and therefore the entire purchase price allocated to the acquired IPR&D was charged to expense in the consolidated statement of operations.
| 5. | Provista Diagnostics, Inc |
On July 28, 2020,April 19, 2021, the Company entered into Amendment No. 1an agreement to the Shares Purchase and Assignment of License Agreement with Amarantus, pursuant to which the Company completed the purchasing of the remaining 80.01%purchase 100% of the issued and outstanding common stock of BreakthroughProvista Diagnostics, Inc. Provista is a molecular diagnostics company based in the U.S focused on developing and commercializing proprietary blood-based proteomic diagnostic, prognostic and monitoring tests in women’s cancer, Videssa®, such as breast and gynecologic cancers. Provista also operates a laboratory for considerationpurposes of test validation and commercialization activities related to the distribution and sampling of COVID-19 testing.
On March 14, 2022, the Company entered into a Revolving Line of Credit Agreement with Testing 123, LLC. Under the terms of the Revolving Line of Credit Agreement, the Company agreed to deliver to Testing 123, LLC, shares, equal to a 10% ownership stake in Provista. In the event that wasadditional shares of Provista are issued, the Company committed to issue the Lender additional shares so that his 10% stake in Provista is maintained.
| 6. | Bio Imagery Ltd. |
In August 2020, the Company entered into an agreement with Care GB Plus Ltd, under which Bio Imagery Ltd. (“Bio Imagery”) has been incorporated in Israel for the purpose of developing, marketing and commercializing the Products and all the Intellectual Property of the Company (“Todos Cancer Assets”), developing new Intellectual Property, products and services, and pursue the business based on the Todos Cancer Assets and on new intellectual property that will be developed by Bio Imagery. Under the agreement, the Company granted Bio Imagery an irrevocable, perpetual, exclusive license to distribute, market and sale of the products and new products in Israel, Europe and Africa (the “Territories”). Distribution, marketing and sale in other Territories (except China) are authorized by the Company’s shares.written and in advance approval.
| F-10 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)thousands except shares amounts)
NOTE 1 - GENERALOn April 5, 2022 the Company entered into an Agreement Addendum according to which the Company issued ordinary shares of the Company to Care GB Plus Ltd to increase its holding in Bio Imagery to 51%. The Company estimated the value of the shares issued based on the share price of the Company as of the agreement date at $396.
At the Agreement Addendum Closing Date, Bio Imagery was determined to be excluding substantive process as required under the definition of business in accordance with the provisions of ASC Topic 805 “Business Combination”. The entire additional investment was charged to expenses at the acquisition date as “other expenses” in the profit and loss as Bio Imagery has not yet commenced its business operations.
| 7. | ||||||
| ||||||
In September 2022, the Company incorporated a U.S. subsidiary named Todos Botanicals, Inc (“Todos Botanicals”) for the purpose of manufacturing, marketing and sales of its proprietary 3CL protease inhibitor immune support dietary supplement Tollovid™ and botanical ‘0% THC’ CBD products in pill, tincture, gummy, candy and cream finished products to third parties.
| 8. | Other entities |
In June 2020, the Company entered into agreement with NLC Pharma Ltd., under which Antigen COVID Test Killer (“CATK”) was formed as a Israeli based company, for the purpose of development of diagnostic candidate Antigen Killer and product commercialize through the Company’s sales channels. As of September 30, 2022, the Company hold 15% of the outstanding equity of CATK. As of September 30, 2022, CATK has not commenced its business operations.
See also note 1 regarding the Share Purchase Agreement with 3CL Sciences Ltd. Signed on March 11, 2022.
The Company and its entities herein considered as the “Group”.
| F-11 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 1 - GENERAL
| C. | Going concern uncertainty |
The Company has devoted substantially all of its efforts to research and development of its cancer and other disease diagnostics products and raising capital to fund this development, along with its dietary supplement distribution.development. The development and commercialization of the Company’s products are expected to require substantial further expenditures. To date, the Company has not yet generated sufficient revenues from operations to support its activities, and therefore it is dependent upon external sources for financing its operations. Since inception through March 31, 2021,September 30, 2022, the Company has incurred accumulated losses of $64,838.$110,596. As of March 31, 2021,September 30, 2022, the Company’s current liabilities exceed its current assets by $4,511,$11,624, and there is a shareholders’ deficit of $19,458.$30,635. The Company has generated negative operating cash flow for all periods. As of November 14, 2022 (date of approval of these financial statements), the total cash and cash equivalent balance is approximately $215. Management has considered the significance of such condition in relation to the Company’s ability to meet its current obligations and to achieve its business targets and determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to finance its operations through the sale of equity and to the extent available, short-term and long-term loans (including through issuance of convertible loans together with other financial instruments) and also through revenues from sales of corona testing related products. There can be no assurance that the Company will succeed in obtaining the necessary financing or generating revenues from product sales to continue its operations as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
During the year ended December 31, 2020, the Company raised net amounts of $2,617, $1,574, $2,368 and $4,126 through receivables financing facility, straight loans, private placement transactions (including equity line), and convertible bridge loans transactions, respectively. During the period of three months ended March 31, 2021, the Company raised net amounts of $1,677, $4,012 and $255 through straight loans, convertible bridge loans transactions and private placement transaction, respectively. In connection with raising capital and business combination transaction subsequent to March 31, 2021, see also Note 7A and Note 7B.
| COVID-19 |
As described in the above paragraph, the Company has a limited operating history and faces a number of risks and uncertainties, including risks and uncertainties regarding to potential dispute which related to commercial terms in connection with unpaid invoices (related to sales, net yet recognized as revenue) with one of its significant clients.
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 1 - GENERAL (Cont.)
On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all of the regions in which the Company does business, and governmental authorities around the world have implemented numerous measures attempting to contain and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shutdowns, limitations or closures of non-essential businesses, and social distancing requirements.
The global spread of COVID-19 and actions taken in response have caused and may continue to cause disruptions and/or delays in our supply chain and shipments and caused significant economic and business disruption to the Company’s customers and vendors.
The COVID-19 pandemic has created and may continue to create significant opportunity under the uncertainty in macroeconomic conditions, which may cause further demand for the Company’s core business related to PCR testing kits and related materials and supplies as already reflected by recognized revenues of $5,207$ 6,276 and $5,031$7,773 during the year ended December 31, 2020 and the period of threenine months ended March 31,September 30, 2022 and 2021, respectively, substantially all of which was generated after July 2020.respectively. However, the Company may face uncertainties around its estimates of revenue collectability and accounts receivable credit losses and its expectation to receive funds from external sources for financing its operations.operations. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. The Company estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosedemerges.
| F-12 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in the Company’s consolidated financial statements.thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
| A. | Basis of presentation |
The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, as filed with the Securities and Exchange Commission (“SEC”) on April 21, 2021March 31, 2022 (the “2020“2021 Form 10-K”). The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company’s financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature.
The results for the threenine months ended March 31, 2021September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 20212022 or for any other interim period or for any future period.
| B. | Use of estimates in the preparation of financial statements |
The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these interim financial statements, the most significant estimates and assumptions include (i) identification of and measurement of financial instruments in funding transactions; (ii) initialInitial measurement of investment in affiliated companies and subsequent equity method implications; (iii) determination whether an acquired company or formed entities represents a ‘business’; (iv) determination whether acquired or formed entities are considered Variable Interest EntitiesEntity (VIE) and if so, whether the Group is its Primary Beneficiary (PB) (v) deferred income taxes and (v)(vi) measurement of the fair value of equity awards.
| C. | Principles of Consolidation |
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and when applicable its majority owned entities that were determined to be VIE and that the Group was determined as their Primary Beneficiary (PB). Intercompany transactions and balances have been eliminated upon consolidation.
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
| D. |
Cash equivalentsGoodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in business combinations accounted for in accordance with the “purchase method” and is allocated to reporting units at acquisition. Goodwill is not amortized but rather tested for impairment at least annually in accordance with the provisions of ASC Topic 350, “Intangibles - Goodwill and Other”. The Company performs its goodwill annual impairment test for the reporting units at December 31 of each year, or more often if indicators of impairment are short-term highly liquid investmentspresent.
Intangible assets with finite lives will be amortized using the straight-line basis over their useful lives, to reflect the pattern in which include short term bank deposits (up tothe economic benefits of the intangible assets are consumed or otherwise used up. The Company will start amortizing the intangible asset when the asset will be brought into actual use.
During the nine and three months from dateended September 30, 2022 the Company recorded $0, of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.impairment losses.
| E. | Basic and diluted net loss per ordinary share |
The Company computes net loss per share in accordance with ASC 260, “Earning per Share”, which requires presentation of both basic and diluted loss per share on the face of the statement of operations.
Basic net loss per ordinary share is computed by dividing the net loss for the period applicable to ordinary shareholders, by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share gives effect to all potentially dilutive common shares outstanding during the year using the treasury stock method with respect to stock options and certain stock warrants (accounted for as derivative liability) and using the if-converted method with respect to convertible bridge loans and certain stock warrants. In computing diluted loss per share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. During the period of nine months ended September 30, 2022 and 2021 the total weighted average number of ordinary shares related to outstanding stock options, restricted stock units, stock warrants and convertible bridge loans excluded from the calculation of the diluted loss per share was and , respectively.
| F-13 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
SCHEDULE OF WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
| Three month period ended | ||||||||
| 2021 | 2020 | |||||||
| Numerator: | ||||||||
| Net loss attributable to common shareholders | $ | 17,577 | $ | 4,638 | ||||
| Revaluation of liability related to warrants to purchase shares of common stock | 168 | - | ||||||
| Net loss attributable to common shareholders | $ | 17,745 | $ | 4,638 | ||||
| Denominator: | ||||||||
| Shares of common stock used in computing basic net loss per share | 462,650,478 | 139,223,048 | ||||||
| Incremental shares from assumed exercise of warrants to purchase shares of common stock | 1,564,074 | - | ||||||
| Shares of common stock used in computing diluted net loss per share | 464,214,552 | 139,223,048 | ||||||
| Net loss per share of common stock, basic and diluted | $ | 0.04 | $ | 0.03 | ||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Nine month period ended | Three month period ended | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) attributable to common shareholders | $ | (20,001 | ) | $ | (24,547 | ) | $ | (5,630 | ) | $ | (10,379 | ) | ||||
| Denominator: | ||||||||||||||||
| Shares of common stock used in computing basic and diluted net income (loss) per share | 1,167,267,564 | 637,916,356 | 1,279,535,548 | 736,939,641 | ||||||||||||
| Net income (loss) per share of common stock, basic and diluted | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.00 | ) | $ | (0.01 | ) | ||||
During the period of three months ended March 31, 2021 and 2020 the total weighted average number of potentially dilutive ordinary shares related to outstanding stock options, stock warrants and convertible bridge loans excluded from the calculation of the diluted loss per share was 323,874,156 and 9,808,979, respectively.
| F. | Recent Accounting Pronouncements |
In June 2016,On October 1, 2021, the FASB issuedCompany early adopted ASU 2016-13, “FinancialNo. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments - Credit Losses (Topic 326): Measurementand Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for convertible instruments by reducing the number of Credit Losses on Financial Instruments” (“ASU 2016-13”) which changes the impairment modelaccounting models available for most financial assets and certain otherconvertible debt instruments. For trade and other receivables, held-to-maturity debt securities, loans, and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. TheThis guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires increased disclosures. For the Company,use of the amendments in the update were originallyif-converted method. The new standard was effective for fiscal yearsus beginning after December 15, 2019, including interim periods within those fiscal years. In November 2019, the FASB issued ASU No. 2019-10, which delayed the effective dateJanuary 1, 2022, with early adoption permitted. The adoption of ASU 2016-13 for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted.
The Company is currently assessing thethis new standard did not have a material impact the guidance will have on itsour consolidated financial statements.
Other new pronouncements issued but not effective as of September 30, 2022 are not expected to have a material impact on the Company’s consolidated financial statements.
| F-14 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS
| A. |
On December 31, 2020 (the “Effective Date”), the Company entered into Secured Convertible Equipment Loan Agreement with a private lender (the “Lender”), under which at the Effective Date and for the purpose for purchasing two Liquid Handler Machines (the “Collateral”) to be placed in the laboratory of a Company’s client, the Company will receive from the Lender a net cash amount of $450 which is including an original issue discount at the rate of 40% valued at $300, representing a face value of $750 for the loan (the “Aggregate Loan Principal Amount”). In addition, the Company incurred incremental and direct costs of $54.
In addition, under the terms of the Secured Convertible Equipment Loan Agreement, the Lender will be entitled to receive a royalty at a rate of 12.5% of all amounts resulting from any diagnostic tests performed by the two liquid handler machines. During the initial payback period and up until the earlier of either (a) April 30, 2021, or (b) the aggregate loan amount is paid in full, all royalty payments made to Lender will be counted towards their loan balance. Thereafter, the royalties continue so long as the machines are in use.
The Aggregate Loan Principal Amount was received in January 2021.
The Company has determined that its obligation for future royalties under the Secured Convertible Equipment Loan Agreement represent contingent interest feature. However, it was determined that such feature is not required to be bifurcated and accounted for as derivatives, as they are eligible for the scope exception prescribed under ASC Topic 815-10-15-59 (d) with respect to certain contracts that are not traded on an exchange, as the underlying is an entity specific performance measure. Accordingly, the obligation for future royalties was accounted for in accordance with the provisions of ASC Topic 450, Contingencies.
As the secured loan upon its original term does not include conversion feature (such feature will only become applicable as a penalty, upon the Company's failure to repay the Aggregate Loan Principal Amount by the Maturity Date), the liability was accounted for using the effective interest method over the term of the loans until their stated Maturity Date.
As of March 31, 2021, the Aggregate Loan Principal Amount is amounting to $603, which representing discount amortization expenses of $207, was recorded as part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations for the period of three months ended March 31, 2021. As of March 31, 2021, the Aggregate Loan Principal Amount is presented as part of the Loan, net account on the balance sheet.
On January 22, 2021, the Company entered into a Securities Purchase Agreement with Yozma Global Genomic Fund 1 (“Yozma”) pursuant to which Yozma purchased from Todos a convertible note in the original principal amount of up to $4,857. The original principal amount has been originally issued with 30% discount of aggregated amount of $1,457, bearing per annum interest at a flat rate of 4% (the “Interest”) until it becomes due and payable, whether upon the maturity date, which is January 22, 2022, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof) (the “Maturity Date”). In addition, the outstanding principal amount to be converted, redeemed or otherwise with respect to which this determination is being made and the accrued and unpaid Interest with respect to such outstanding principal amount shall be converted into shares of the Company at conversion price of $0.07161 (the “Conversion Price”). Subsequent to the effective date of the registration statement registering for resale the Conversions Shares and the Warrant Shares pursuant to the Purchase Agreement, if the closing sale price of the Common Stock averages less than the then Conversion Price over a period of 10 consecutive trading days, the Conversion Price shall reset to such average price. If the 10-day volume weighted average price of the Common Stock continues to be less than the Conversion Price, then the Conversion Price should reset to such 10-day average price with a maximum of a 20% discount from the initial Conversion Price.
At the Company’s option and upon 30 days’ notice to Yozma, 33% of the outstanding Principal and accrued and unpaid Interest of the Note (the “Repayment Amount”) may be redeemed at any time at an amount equal to 115% of the Repayment Amount. The foregoing notwithstanding, Yozma may convert any or all of the Note into shares of Common Stock at any time. Through March 31, 2021, the Company has not redeemed any of the outstanding principal amount and accrued interest, and Yozma has not converted any portion of the Note into shares.
TODOS MEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.)
At any time after Yozma becoming aware of an Event of Default as defined in the Securities Purchase Agreement, Yozma may require the Company to redeem (an “Event of Default Redemption”) all or any portion of the Note in cash by wire transfer of immediately available funds at a price equal to principal amount plus interest calculated from the Event of Default at the greater of the default interest at a rate of 18% per annum or the maximum rate permitted under applicable law (the “Event of Default Redemption Price”) together with liquidated damages of $250 plus an amount in cash equal to 1% of the Event of Default Redemption Price for each 30 day period during which redemptions fail to be made. No Event of Default has occurred through March 31, 2021.
In addition, the Company granted Yozma a warrant to purchase up to 16,956,929 ordinary shares for a period of 5 years with a fixed exercise price equal to $0.107415, subject to certain adjustments (the “Warrant”). If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to Yozma, then the Warrant may also be exercised, in whole or in part, at such time by means of a net shares settlement. Moreover, Yozma is entitled to an option to require the Company to purchase the Warrant for cash in an amount equal to their Black-Scholes Option Pricing Model value (the Black-Scholes Model), upon occurrence of fundamental transactions, as defined in the warrant agreement, occur.
Upon initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative fair value of the Note and the detachable warrants in total amount of $2,539 and $861, respectively. The amount allocated to the warrants was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock upon exercise for a fixed exercise price), net of any related issuance costs and as upon fundamental transaction the warrants holder shall be entitled to receive from the Company the same type of form of consideration such as holders of common stock.
Furthermore, it was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument. The embedded conversion feature was recognized in total amount of $2,116 upon initial recognition and in subsequent periods as derivative liability at fair value through profit and loss. The remaining amounted to $423 was allocated to the host loan instrument, which in subsequent periods it is accounted for using the effective interest method over the term of the loan, until its stated maturity.
The Company recorded an amount of $650 and $2,272 related to remeasurement of the embedded conversion feature of convertible bridge loan and the discount amortization of the host loan instrument, respectively, as part of the “Finance Expenses” line in operations in the accompanying consolidated statement of operations for the period of three months ended March 31, 2021.
In addition, on October 7, 2020, the Company entered into consulting agreement with Aslano Private Limited (“Aslano”) whereby Aslano will render non-exclusive advice and service to the Company concerning equity and/or debt financing with certain Potential Buyer or Investor or Financing Party as defined in the consulting agreement in exchange for success fee equal to 8% of the gross amount paid by the Potential Buyer or Investor or Financing Party. In consideration for Aslano’s non-exclusive services with respect to the aforesaid Securities Purchase Agreement, during the period of three months ended March 31, 2021, the Company incurred incremental and direct finder fee cost of $272 which was allocated to the identified components (i.e. convertible bridge loans, bifurcated embedded conversion feature and detachable Warrant) consistent with the allocation of the proceeds issuance expenses. Consequently, an amount of $34, $169 and $69 out of which was recorded as additional discount of the convertible bridge loans, immediate charge to finance expenses and as deduction of additional paid-in capital, respectively, at the outset of the transaction.
For more information in connection to additional funds raising and filing of registration statement on Form S-1 under the aforesaid Securities Purchase Agreement subsequent to the balance sheet date, see also Note 7A.
On March 1, 2021, the Company entered into settlement agreement with one of its lenders, under which the Company paid the lender an amount of approximately $182 as full settlement of the prepayment obligation. Such payment amount was recorded as part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations during the period of three months ended March 31, 2021.
TODOS MEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.)
In March 2021, the Company entered into First Amendment to Secured Convertible Equipment Loan Agreement (the “Amendment”) with one of its lenders, under which the parties agreed (i) on or before May 1, 2021, the Company shall repay to the lender the Aggregate Loan Principal Amount of $450 in cash, without interest, (ii) on or before May 1, 2021, the Company shall repay to the lender, or contribute to a charity designated by the lender, the original initial discount in the amount of $320, plus an additional $100 as compensation for the lender agreeing to postpone repayment of the Aggregate Principal Amount and (iii) upon the execution of the Amendment, the Company shall issue to the lender, or contribute to a charity designated by the lender, 2,000,000 restricted ordinary shares of the Company, nominal value NIS 0.0001 per share with fair value of $88, as additional compensation to the lender for its agreement to defer repayment of the Aggregate Loan Principal Amount.
The management has determined mainly based on the qualitative terms of the amendment that the terms of the amended instruments considered as substantially different. Consequently, the original convertible bridge loans were derecognized, the new loans were initially recorded at fair value as current financial liability and the shares were initially recorded at fair value as an increase of additional paid-in capital. The Company recorded an extinguishment amount of $6 as part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations for the period of three months ended March 31, 2021.
On March 3, 2021, the Company and one of its lenders entered into a Closing Agreement (the “Closing Agreement”), under which the lender exercised its right to invest an additional $884 into the Company in the form of July 2020 Convertible Notes (the “Tranche 2 Securities”). In addition, the Company covenanted and agreed to file a registration agreement with respect to the Tranche 2 Securities on or before the earlier to occur of (i) the date that the Company files a registration statement with respect to any other securities of the Company or (ii) April 1, 2021 (such date, the “Tranche 2 Filing Date”) and cause a registration statement to be declared effective under the Securities Act with respect to the Tranche 2 Securities on or before May 1, 2020. The Company acknowledges that failure to timely comply with the foregoing obligations will subject the Company to substantial liability under the Registration Agreement, including without limitation liquidated damages in the amount of $250, along with an amount of cash accruing each month equal to the value of 1% of the value of the Tranche 2 Securities.
Upon initial recognition, it was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument. The management by assistance of third-party appraiser measured the embedded conversion feature in total amount of $1,127 upon initial recognition and in subsequent periods as derivative liability at fair value through profit and loss. The excess of the fair value of identified instruments over net proceeds amounted to $243 was recorded as part of the “Finance Expenses” line in operations in the accompanying consolidated statement of operations for the period of three months ended March 31, 2021. In subsequent periods, the host loan instrument is accounted for using the effective interest method over the term of the loan, until its stated maturity.
The Company recorded expenses amounting to $27 and $2 related to remeasurement of the embedded conversion feature and the discount amortization of the host loan instrument as part of the “Finance Expenses” line in operations in the accompanying consolidated statement of operations for the period of three months ended March 31, 2021.
During the period of three months ended March 31, 2021, Corona Diagnostics (the “Assignor”) entered into Assignment of Receivable Agreements with Ascendant Partners, LLC (the “Assignee”) under which the Assignor assigned to the Assignee all of its right, title and interest in a portion of its trade receivable from customers related to invoices for certain purchase orders with a discount in a rate of 10%. The Assignor is obligated to repurchase the trade receivable in the event that payment is not received by the Assignee within 60-days period from the signing of the Assignment of Receivable Agreements. As a result, the Company is accounting for this arrangement as a financing transaction as the Assignee has recourse against the Assignor if the Assignee does not receive payment from the Assignor’s customer within the allotted number of days.
During the period of three months ended March 31, 2021, the Assignor received advances of $1,281 under the Assignment of Receivable Agreements and repaid $820. In addition, the Company incurred finance expenses with respect to the applicable discount interest under the Assignment of Receivable Agreements of $51. As of March 31, 2021, an amount of $512 has not been repaid and it is presented as part of the loans, net account in the accompanying balance sheet.
TODOS MEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.)
| 1. | ||
| 2. | Compensation package for the Company’s Chief Executive Officer that include |
| 3. | Compensation |
| 4. | Compensation |
| B. | Exchange of warrants |
On March 10, 2022 the Company and Leonite Capital LLC (the “Investor”) entered into an Agreement pursuant to which, the Company agreed to issue the Investor ordinary shares of the Company as full conversion of all Investor’s outstanding warrants. On March 17, 2022, the Company issued ordinary shares of the Company pursuant to the agreement. The above 2021 compensation package are subjectCompany accounted for the warrants within the equity.
| C. | Revolving Line of Credit Agreement |
On March 14, 2022, the Company and Testing 123, LLC (the “Lender”) signed a Revolving Line of Credit Agreement, pursuant to shareholder approval atwhich the Company’s Annual General MeetingLender will provide the Company with a credit facility of Shareholders which had notup to $1,250 bearing a monthly interest of 5% calculated for a minimum period of 60 days. The Company may draw funds under the agreement from the date of the agreement and until March 14, 2023. The Maturity date of each draw will be the earlier of (i) 60 days from the date of the loan, (ii) the occurrence of an event of default as defined in the agreement and (iii) with respect to funds received by Borrower through collections on receivables included in a Receivables Pool, as defined in the agreement, 3 days after such funds have been received throughby the escrow account agent or the Company.
In additional to the above the Company agreed to issue the Lender shares, a 10% ownership stake in Provista. In the event that additional shares of Provista are issued, the Company committed to issue the Lender additional shares such that his stake in Provista shall be maintained at 10%.
On April 7, 2022 the Company issued ordinary shares (with fair value of $25) as additional interest.
As of September 30, 2022, the Company utilized the full credit facility.
The Company has estimated the fair value of the % portion of shares of Provista on March 31, 2021.14, 2022 at $710. The carrying value sold to non-controlling interests as of March 14, 2022 was $635, accordingly $75 was recognized in additional paid in capital. The fair value of the 10% ownership in Provista which is the cost associated with obtaining the revolving line of credit, was amortized to interest expenses as the entire credit facility was utilized.
| F-15 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 4 - SHAREHOLDERS’ DEFICIT
The Ordinary Shares confer upon the holders thereof all rights accruing to a shareholder of the Company, as provided in these Articles, including, inter alia, the right to receive notices of, and to attend meetings of shareholders; for each share held, the right to one vote at all meetings of shareholders; and to share equally, on a per share basis, in such dividend and other distributions to shareholders of the Company as may be declared by the Board of Directors in accordance with these Articles and the Companies Law, and upon liquidation or dissolution of the Company, in the distribution of assets of the Company legally available for distribution to shareholders in accordance with the terms of applicable law and these Articles. All Ordinary Shares rank pari passu in all respects with each other.
| Issuance of Ordinary |
| 1. | ||
| 2. | On February 4, 2022 and March 10, 2022 the Company | |
| 3. | On March 17, 2022, the Company issued ordinary shares | |
| 4. | On April 8, 2022 the Company | |
| 5. | On April 7, 2022 the Company | |
| 6. | On April 7, 2022 the Company | |
| 7. | On April 7, 2022 the Company issued ordinary shares (with fair value of | |
| 8. | On August 8, 2022 the | |
| During the | ||
| E. | Settlement Agreement with Toledo Advisors LLC |
On April 7, 2022, the Company and Toledo Advisors LLC (“Toledo”) signed a Settlement Agreement pursuant to which upon execution of the agreement the Company shall pay Toledo $130 and shall issue to Toledo $200 worth of ordinary shares. Upon delivery of the cash payment and shares the parties shall file and discontinue the compliant file by Toledo on January 7, 2022 and Toledo irrevocably and unconditionally, release and discharge the Company from its June 19, 2020 Financing Agreement and the July 28, 2020 Royalty Agreement. The company recorded an income of $153 in the second quarter of 2022, as a result of the cancelation of prior agreements.
| F. | Former employee motion |
On September 4, 2022, a former employee of the Company filed a motion with the Tel Aviv District Court against the Company for unpaid severance pay, unpaid salary, various social benefits and relates claims totaling NIS 1,256 (approximately $360). In addition the former employee asserts that he is entitled to receive Company’s options. On October 26, 2022, the Company filed a response in which it denied substantially all of the allegations. Subsequently the Company and the Applicant have, through counsel, engaged in discussions with a view towards engaging in a formal mediation process. No mediator has been selected, and no date for a mediation has been scheduled. The Tel Aviv District Court set a hearing in connection with the motion for January 2023.
Although management cannot estimate the outcomes of such motion at this early stage it believes that the current accruals in the financial statement in respect of the former employee are adequate.
| F-16 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 4 - SHAREHOLDERS’ DEFICIT (Cont.)OTHER CURRENT LIABILITIES
SCHEDULE OF OTHER CURRENT LIABILITIES
| 2022 | 2021 | |||||||
As of September 30, | As of December 31, | |||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Accrued payroll and related taxes | $ | 184 | $ | 208 | ||||
| Provision for vacation | 60 | 67 | ||||||
| Management and directors | 2,007 | 1,752 | ||||||
| Accrued expenses and other accounts payables | 1,510 | 2,257 | ||||||
| Other current liabilities | $ | 3,761 | $ | 4,284 | ||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 5 - STOCK BASED COMPENSATION
Stock-based compensation expenses incurred for employees (and directors) and non-employees for the period of nine and three months ended September 30, 2022, amounted to $ and $, respectively.
A. STOCK OPTIONS
On January 11, 2016, the Company’s Board of Directors approved and adopted the Todos Medical Ltd. 2015 Israeli Share Option Plan (the “2015 Plan”), pursuant to which the Company’s Board of Directors may award stock options to purchase its ordinary shares to designated participants. Subject to the terms and conditions of the 2015 Plan, the Company’s Board of Directors has full authority in its discretion, from time to time and at any time, to determine (i) the designate participants; (ii) the terms and provisions of the respective Option Agreements, including, but not limited to, the number of Options to be granted to each Optionee, the number of Shares to be covered by each Option, provisions concerning the time and the extent to which the Options may be exercised and the nature and duration of restrictions as to the transferability or restrictions constituting substantial risk of forfeiture and to cancel or suspend awards, as necessary; (iii) determine the Fair Market Value of the Shares covered by each Option; (iv) make an election as to the type of Approved 102 Option under Israeli IRS law; (v) designate the type of Options; (vi) take any measures, and to take actions, as deemed necessary or advisable for the administration and implementation of the 2015 Plan; (vii) interpret the provisions of the 2015 Plan and to amend from time to time the terms of the 2015 Plan.
The 2015 Plan permits grant of up to options to purchase ordinary shares subject to adjustments set in the 2015 Plan. As of March 31, 2021,September 30, 2022, there were ordinary shares available for future issuance under the 2015 Plan.
SCHEDULE OF STOCK OPTION ACTIVITY
| Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding as of December 31, 2019 | 2,267,571 | 0.061 | ||||||
| Granted (A) | 2,523,427 | 0.095 | ||||||
| Forfeited or expired | (1,129,836 | ) | 0.120 | |||||
| Outstanding as of December 31, 2020 and March 31, 2021 | 3,661,162 | 0.066 | ||||||
| Exercisable as of December 31, 2020 | 877,122 | 0.016 | ||||||
| Exercisable as of March 31, 2021 | 1,004,376 | 0.026 | ||||||
Number of Options | Weighted Average Exercise Price | |||||||
| Unaudited | Unaudited | |||||||
| Outstanding as of January 1, 2022 | 16,295,083 | �� | 0.040 | |||||
| Granted | - | - | ||||||
| Forfeited or expired | - | - | ||||||
| Outstanding as of March 31, 2022 | 16,295,083 | 0.040 | ||||||
| Granted | - | - | ||||||
| Forfeited or expired | - | - | ||||||
| Outstanding as of June 30, 2022 | 16,295,083 | 0.040 | ||||||
| Granted | - | - | ||||||
| Forfeited or expired | - | - | ||||||
| Outstanding as of September 30, 2022 | 16,295,083 | 0.040 | ||||||
| Exercisable as of September 30, 2022 | 3,768,033 | 0.050 | ||||||
| Outstanding as of January 1, 2021 | 3,682,818 | 0.663 | ||||||
| Granted | - | - | ||||||
| Forfeited or expired | (1,137,735 | ) | 0.003 | |||||
| Outstanding as of March 31, 2021 | 2,545,083 | 0.095 | ||||||
| Granted | - | - | ||||||
| Forfeited or expired | - | - | ||||||
| Outstanding as of June 30, 2021 | 2,545,083 | 0.095 | ||||||
| Granted | 13,750,000 | 0.030 | ||||||
| Forfeited or expired | - | - | ||||||
| Outstanding as of September 30, 2021 | 16,295,083 | 0.040 | ||||||
TODOS MEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 5 - STOCK OPTIONS (Cont.)
As of March 31, 2021,September 30, 2022, the aggregate intrinsic value for the stock options outstanding and exercisable according to $0.053$ price per share is $58 and $38, respectively,$, with a weighted average remaining contractual life of 4.33 years.
Stock-based compensation expenses incurred for
| F-17 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
B. RESTRICTED STOCK UNITS
The Company issues restricted stock units (“RSU”) under the 2015 Plan to employees (and directors) and non-employeesnon-employees. The following table outlines the restricted stock awards activity for the periodCompany’s during the periods of threenine months ended March 31, 2021September 30, 2022 and 2020, amounted to $235 ($66 out2021:
| Number of RSU’s | ||||
| Unaudited | ||||
| Outstanding as of January 1, 2022 | 41,967,152 | |||
| Granted | 10,000,000 | |||
| Vested | (3,782,699 | ) | ||
| Forfeited or expired | - | |||
| Outstanding as of March 31, 2022 | 48,184,453 | |||
| Granted | - | |||
| Vested | (7,220,199 | ) | ||
| Outstanding as of June 30, 2022 | 40,964,254 | |||
| Granted | 14,000,000 | |||
| Vested | (8,845,199 | ) | ||
| Outstanding as of September 30, 2022 | 46,119,055 | |||
| Weighted average grant date fair value of restricted stock awards granted during the period | 0.022 | |||
| Outstanding as of January 1, 2021 | 9,687,500 | |||
| Granted | - | |||
| Vested | (1,562,500 | ) | ||
| Forfeited or expired | - | |||
| Outstanding as of March 31, 2021 | 8,125,000 | |||
| Granted | - | |||
| Vested | (1,562,500 | ) | ||
| Forfeited or expired | - | |||
| Outstanding as of June 30, 2021 | 6,562,500 | |||
| Granted | 31,034,483 | |||
| Vested | (1,562,500 | ) | ||
| Forfeited or expired | - | |||
| Outstanding as of June 30, 2021 | 36,034,483 | |||
Weighted average grant date fair value of which allocated to ordinary shares issued or to fixed number of ordinary shares to be issued) and $832, respectively.restricted stock awards granted during the nine months period ended September 30, 2022 was $.
| F-18 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 6 - FINANCING EXPENSES , NET
SCHEDULE OF FINANCING EXPENSES NET
Three months period ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Change in fair value of warrants liability and warrants expired | $ | (201 | ) | $ | 919 | |||
| Change in fair value of convertible bridge loans following the Maturity Date | 11,976 | 4,369 | ||||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (977 | ) | - | |||||
| Direct and incremental issuance costs allocated to conversion feature of convertible bridge loan | 169 | - | ||||||
| Amortization of discounts and accrued interest on straight loans | 861 | 212 | ||||||
| Amortization of discounts and accrued interest on convertible bridge loans (prior to Maturity Date) | 3,057 | - | ||||||
| Modification of terms relating to convertible bridge loans transactions | - | (3,428 | ) | |||||
| Modification of terms relating to straight loan transaction | (6 | ) | - | |||||
| Issuance of shares as call options to acquire potential acquiree | - | 1,000 | ||||||
| Change in liability to minimum royalties | 12 | 9 | ||||||
| Settlement in cash of prepayment obligation related to convertible bridge loan (see Note 3C) | 182 | - | ||||||
| Interest and related royalties under receivables financing facility | 238 | - | ||||||
| Amortization of prepaid expenses related to commitment shares in connection with receivables financing facility and equity line | 293 | - | ||||||
| Exchange rate differences and other finance expenses | 50 | 373 | ||||||
| $ | 15,654 | $ | 3,454 | |||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
Nine months period ended September 30, | Three months period ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||||
| Modification of terms relating to straight loan transaction | $ | - | $ | 88 | $ | - | $ | - | ||||||||
| Amortization of discounts and accrued interest on convertible bridge loans | 13,076 | 18,080 | 3,297 | 4,432 | ||||||||||||
| Amortization of discounts and accrued interest on straight loans | 633 | 2,290 | - | 1,637 | ||||||||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired | - | (299 | ) | - | (5 | ) | ||||||||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (3,651 | ) | (3,777 | ) | (37 | ) | 530 | |||||||||
| Settlement in cash of prepayment obligation related to convertible bridge loan | - | 182 | - | 182 | ||||||||||||
| Interest and related royalties under receivables financing facility | (153 | ) | 546 | - | 495 | |||||||||||
| Amortization of prepaid expenses related to revolving line of credit agreement | 1,036 | 293 | 314 | 293 | ||||||||||||
| Exchange rate differences and other finance expenses | 794 | (43 | ) | 285 | (689 | ) | ||||||||||
| Financing expenses, net | $ | 11,735 | $ | 17,360 | $ | 3,859 | $ | 6,875 | ||||||||
NOTE 7 - TAXES ON INCOME
| A. | Deferred income taxes reflect the net tax effects of net operating loss and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows: |
SCHEDULE OF DEFERRED TAX ASSETS
| 2022 | 2021 | |||||||
As of September 30, | ||||||||
| 2022 | 2021 | |||||||
| Composition of deferred tax assets: | Unaudited | Unaudited | ||||||
| Net operating loss carry-forward | $ | 8,817 | $ | 6,330 | ||||
| Research and development credits | - | 1,879 | ||||||
| Allowance for Bad Debt | - | 90 | ||||||
| Others | - | - | ||||||
| Net deferred tax asset before deferred tax liabilities and valuation allowance | 8,817 | 8,299 | ||||||
| Composition of deferred tax liabilities: | ||||||||
| Intangible assets upon acquisition of subsidiary | (315 | ) | (315 | ) | ||||
| Depreciation costs | (120 | ) | (128 | ) | ||||
| Net deferred tax asset before valuation allowance | 8,383 | 7,856 | ||||||
| Valuation allowance | (8,067 | ) | 7,541 | |||||
| Net deferred tax assets | (315 | ) | (315 | ) | ||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuation allowance as of September 30, 2022.
| B. | For the period of nine months ended September 30, 2022, the following table reconciles the statutory income tax rate to the effective income tax rate: |
SCHEDULE OF RECONCILE THE STATUTORY INCOME TAX RATE TO EFFECTIVE INCOME TAX RATE
| 2022 | 2021 | |||||||
| Nine months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | Unaudited | |||||||
| Tax rate | 23 | % | 23 | % | ||||
| Tax expense (benefit) at statutory rate | $ | (4,640 | ) | $ | (5,646 | ) | ||
| Tax rate differential | 53 | 31 | ||||||
| Permanent differences with respect to stock-based compensation | 630 | 146 | ||||||
| Permanent differences with respect to derivative warrants liabilities, bifurcated conversion feature and convertible loans | 1,334 | 3,605 | ||||||
| Loss carryforwards and others | 2,623 | 1,864 | ||||||
| Income tax expense (benefit) | $ | - | $ | - | ||||
| F-19 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 7 - SUBSEQUENT EVENTS8 – SEGMENT REPORTING
| A. | General information |
Commencing 2020, the operations of the Company are conducted through three different core activities: Breast Cancer Test (TM-B1, TM-B2), Alzheimer and COVID-19 testing, each of which are operating segments. These activities also represent the reportable segments of the Group.
The reportable segments are viewed and evaluated separately by Company evaluated subsequent eventsmanagement, since the marketing strategies, processes and transactions that occurred afterexpected long term financial performances of the balance sheet date up tosegments are different.
| B. | Information about reported segment profit or loss and assets |
SCHEDULE OF INFORMATION ABOUT REPORTED SEGMENT PROFIT OR LOSS AND ASSETS
| COVID-19 | ||||||||||||||||||||
| Breast Cancer Test | Alzheimer | Testing and related products | Un-allocated | Total | ||||||||||||||||
| Unaudited | ||||||||||||||||||||
| Nine months ended September 30, 2022 | ||||||||||||||||||||
| Revenues | - | - | 6,292 | - | 6,292 | |||||||||||||||
| Operating gain (loss) | (1,352 | ) | - | 1,061 | (7,639 | ) | (7,930 | ) | ||||||||||||
| Unallocated amounts: | ||||||||||||||||||||
| Financing expenses, net | (11,735 | ) | (11,735 | ) | ||||||||||||||||
| Other losses | (396 | ) | (396 | ) | ||||||||||||||||
| Share in losses of affiliated companies accounted for under equity method, net | 60 | 60 | ||||||||||||||||||
| Net loss | (1,352 | ) | - | 1,061 | (19,710 | ) | (20,001 | ) | ||||||||||||
| COVID-19 | ||||||||||||||||||||
| Breast Cancer Test | Alzheimer | Testing and related products | Un-allocated | Total | ||||||||||||||||
| Unaudited | ||||||||||||||||||||
| Nine months ended September 30, 2021 | ||||||||||||||||||||
| Revenues | - | - | 7,773 | - | 7,773 | |||||||||||||||
| Operating gain (loss) | (4,685 | ) | - | (1,003 | ) | - | (5,688 | ) | ||||||||||||
| Unallocated amounts: | ||||||||||||||||||||
| Financing expenses, net | (17,360 | ) | (17,360 | ) | ||||||||||||||||
| Share in losses of affiliated companies accounted for under equity method, net | (1,499 | ) | (1,499 | ) | ||||||||||||||||
| Net loss | (4,685 | ) | - | (1,003 | ) | (18,859 | ) | (24,547 | ) | |||||||||||
The evaluation of performance is based on the date thatoperating income of each of the three reportable segments.
Accounting policies of the segments are the same as those described in the accounting policies applied in the consolidated financial statementsstatements.
Due to the reportable segments’ nature, there have been no inter-segment sales or transfers during the reported periods.
Financing expenses, net and the share of the Company in losses of affiliated companies were availablenot allocated to the reportable segments, since these items are carried and evaluated on the enterprise level.
Management has determined that none of the equity method investees is eligible to be issued (June 22, 2021). Based upon this review,considered as reportable segment as they do not meet the Companycriteria in ASC Topic 280-10-50 (or they did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed belowcommence their operations).
The Company has agreed to file a registration statement on Form S-1 with the Securities and Exchange Commission registering for resale the Conversion Shares and the Warrant Shares (the “Registration Statement) under the above two transactions. Subsequent to the effective date of such registration statement, if the closing sale price of the Common Stock averages less than the then Conversion Price over a period of 10 consecutive trading days, the Conversion Price shall reset to such average price. If the 10-days volume weighted average price of the Common Stock continues to be less than the Conversion Price then the Conversion Price should reset to such 10-day average price with a maximum of a 20% discount from the initial Conversion Price.
On May 13, 2021, the Company filed a registration statement on Form S-1 with respect to up to 240,591,462 ordinary shares to be issued pursuant to Securities Purchase Agreement with Family Office and Yozma (first and second Tranches) which was declared effective by May 18, 2021. As the Company complied with the registration statement filing requirements, as of March 31, 2021, no accrual has been recorded for liquidated damages since the amount to be paid was not probable and reasonably estimate as of March 31, 2021, under ASC 450 "Contingencies".
| F-20 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 7 - SUBSEQUENT EVENTS (Cont.)
| Revenues by geographic region are as follows: |
SUMMARY OF REVENUES BY GEOGRAPHIC REGION
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
Nine months period ended September 30, | Three months period ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Israel | $ | - | $ | - | $ | - | $ | - | ||||||||
| United States | 6,292 | 7,773 | 1,914 | 1,010 | ||||||||||||
| Total | $ | 6,292 | $ | 7,773 | $ | 1,914 | $ | 1,010 | ||||||||
On April 19, 2021, the Company entered into Share Purchase Agreement (“SPA”) Provista Diagnostics, Inc. (the “Agreement to Purchase”) with Strategic Investment Holdings, LLC, Ascenda BioSciences LLC (“SIH”, “Ascenda” and together referring as “Sellers”, respectively) and Provista Diagnostics, Inc. (“Provista”). Ascenda was the sole owner of the outstanding securities of Provista and SIH is the sole owner of all the outstanding securities of Ascenda. Provista is a medical diagnostics company based in Alpharetta, Georgia that owns the intellectual property rights to the proprietary breast cancer blood test, Videssa®, and has a diagnostic testing laboratory currently performing COVID-19 PCR testing, primarily for the medical and entertainment industries.
Subject to the terms and conditions of the SPA, the Company shall purchase from the Sellers 3,599 shares of Preferred Stock and 1,581 shares of Ordinary Stock (collectively the “Provista Shares”) representing 100% of Provista’ s securities outstanding, for an aggregate purchase price of $7,500 subject to the following terms:
NOTE 8 – SEGMENT REPORTING (continue)
| D. | ||
| 2022 | 2021 | |||||||
As of September 30, | As of December 31, | |||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Israel | $ | 25 | $ | 34 | ||||
| United States | 1,573 | 2,011 | ||||||
| Property and equipment, net | $ | 1,598 | $ | 2,045 | ||||
| E. | Major customers |
SCHEDULE OF MAJOR CUSTOMER
| 2022 | 2021 | |||||||
| As of September 30, | ||||||||
| 2022 | 2021 | |||||||
| Client A | - | 54.3 | % | |||||
| Client B | 11.5 | % | 7.3 | % | ||||
| Client C | 1.2 | % | 11.4 | % | ||||
| Client D | 8.0 | % | 0.2 | % | ||||
| Total | 20.7 | % | 81.9 | % | ||||
| F-21 |
TODOS MEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 7 - SUBSEQUENT EVENTS (Cont.)
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this quarterly report on Form 10-Q. This discussion and other parts of this quarterly report on Form 10-Q contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this quarterly report on Form 10-Q. We report financial information under US GAAP and our financial statements were prepared in accordance with generally accepted accounting principles in the United States.
Overview
| ● | Todos Medical Ltd. (“Todos Medical,” the “Company,” “we,” “our,” “us”), is an in vitro diagnostics company focused on distributing comprehensive solutions for screening and diagnosis of COVID-19, urinary tract infections, sexually transmitted diseases and Monkeypox. We are also developing blood tests for the early detection of cancer and Alzheimer’s disease. | |
| ● | In December 2020, Todos announced the commercial launch of its proprietary 3CL protease inhibitor dietary supplement Tollovid™ at The Alchemist’s Kitchen in SoHo district in Manhattan, New York. Tollovid, a mix of botanical extracts, is being targeted to support healthy immune function against circulating coronaviruses. Tollovid’s mechanism of action is to inhibit the activity of the 3CL protease, a key protease required for the intracellular replication of coronaviruses. Tollovid was granted a Certificate of Free Sale by the US Food & Drug Administration in August 2020, allowing its commercial sale anywhere in the United States. | |
| ● | On March 11, 2022, the Company entered into a Share Purchase Agreement (the “SPA”) with 3CL Sciences Ltd. (“3CL”), an Israeli corporation, and NLC Pharma Ltd. (“NLC”), an Israeli corporation, pursuant to which (a) 3CL Sciences will purchase all therapeutic, diagnostic, dietary supplement and pharmaceutical assets from NLC that relate to 3CL protease biology (which is used in the development, manufacture, sale and distribution of Tollovid™ and Tollovir™) from NLC in exchange for a 100% equity interest in 3CL, (b) 3CL will allot 30.5% of its shares to the Company in exchange for the Company making a total cash commitment of $8 million to 3CL, (c) NLC will sell 7.54% of 3CL’s issued and outstanding shares to the Company in exchange for the Company making a total cash commitment of $2 million to NLC, and (d) NLC will exchange 14.31% of 3CL’s issued and outstanding shares for shares of the Company having a market value of $3,800,000 on the day prior to the Closing, such that the Company will own 52% of 3CL’s issued and outstanding share capital and NLC will own 48% of 3CL’s issued and outstanding share capital. The Company and NLC have agreed to identify a seasoned biopharmaceutical CEO to manage 3CL going forward. The board of directors of 3CL Sciences will be made up of five (5) individuals: three (3) appointed by the Company and two (2) appointed by NLC. As of the date of this quarterly report on Form 10-Q, the closing of the SPA has not yet occurred. | |
On September 7, 2022 (“Effective Date”), the Company entered into a supplement (“Extension Agreement”), to the SPA. As a consequence, NLC Pharma has assigned ownership of all relevant intellectual property to 3CL Pharma Ltd. The assignment includes the patent applications for dual mechanism (3CL protease inhibitor and CCR5 antagonist) Phase 2 therapeutic drug candidate Tollovir™, commercial-stage 3CL protease inhibitor immune support supplement Tollovid™ and 3CL protease biomarker test TolloTest™ for SARS-CoV-2 infectivity monitoring and PASC/Long COVID viral persistence assessment (the “IP”). 3CL Pharma Ltd. is now preparing to launch a crowdfunding campaign to fund the necessary requirements for an Emergency Use Authorization (EUA) submission to the US FDA for Tollovir in the treatment of hospitalized (severe/critical) COVID-19 patients, the clinical development of Tollovir, Tollovid and TolloTest in Long COVID, as well as a national marketing campaign for Tollovid to support US sales. Completion of the crowdfunding will fulfill Todos’ obligations under the SPA. |
Todos Medical Ltd., is a medical diagnostics company engaged in the development and commercialization of blood tests for the detection of immune-related diseases, beginning with cancer, and the provider of turnkey COVID-19 automated testing solutions for laboratories, including the distribution of testing supplies.
Our core proprietary diagnostics technology centers on testing blood cells using an FTIR spectrometer to turn biological information into data, and then using our patented Total Biochemical Infrared Analysis (TBIA) deep learning data analytics platform to mine the data in order to develop algorithms that are indicative of the presence of cancer, and the tissue of origin in the body where the cancer is located. Our ultimate vision is to develop a single, simple and cost-effective blood test that can identify any cancer at its earliest stages of formation, and then use emerging methods such as liquid biopsy to monitor patient responses to treatment.
The TBIA detection method is based on cancer’s influence on the immune system that triggers biochemical changes in peripheral blood. The primary advantages of the TBIA platform are the high accuracy (sensitivity and specificity) and low COGS due to the biological information being captured using spectroscopy versus biological antibody capture methods that require the manufacture of multiple antibodies to capture a biological signature. TBIA is based upon technology originally invented by the researchers at BGU and Soroka, whose intellectual property has been licensed to us. We have received a CE Mark in the European Union authorizing the commercial use of the TBIA platform in the diagnosis of breast cancer and colon cancer. We have been issued patents in the United States, Europe and other international jurisdictions covering the use of TBIA to detect solid tumors. Our academic partners at BGU have also published research suggesting FTIR has the potential to be used to identify the presence of viral and bacterial infections, and the Company is currently evaluating how best to pursue its technology in these areas in light of increased commercial interest for viral detection methods in light of the outbreak of novel Coronavirus (SARS-CoV-2, or COVID-19) worldwide.
Because of the novelty and highly disruptive nature of TBIA analysis using FTIR to diagnose disease, we believe the best path forward to bring Todos’ core technology to market in the United States is to demonstrate comparability with blood tests that are built on technology platforms that are in widespread use. Due to the relative scarcity of commercial blood tests in areas such as cancer and Alzheimer’s disease, we have pursued a strategy of acquiring proprietary blood tests in those therapeutic indications in order to gain a foothold in the marketplace and fine tune our FTIR platform while fully commercializing these more advanced tests in the United States.
Toward that end, we chose to expand into Alzheimer’s disease because we view Alzheimer’s as cancer of neuronal cells that are incapable of completing cell division due to their post-mitotic nature. Through an acquisition in 2019, we acquired exclusive worldwide rights to the Alzheimer’s blood test called the Lymphocyte Proliferation Test (LymPro Test™). Taken together with our core TBIA FTIR-based platform, we believe Todos is positioned to become the worldwide leader in the field of immune-based diagnostics. The Company formed the subsidiary Todos Medical Singapore Ltd. for the purpose of advancing clinical trials of the Company’s core technology for breast cancer in Southeast Asia. Additionally, in 2020 our Board of Directors and shareholders approved our planned acquisition of Provista Laboratories. We closed on this acquisition in April 2021. The Provista acquisition will enable us to gain exclusive worldwide rights to the commercial-stage breast cancer test Videssa ™, further broadening our position in cancer blood testing and creating additional opportunities for our TBIA FTIR-based platform.
In view of our status as a leader in the field of immune-based diagnostics, we made the strategic corporate decision to enter the field of COVID-19 testing services in the first half of 2020. Similar to our strategy in cancer and Alzheimer’s where we felt more traditional, advanced technologies would serve as the basis for market entry before bringing our proprietary FTIR-based TBIA platform forward, we decided to enter the COVID-19 space by gaining rights to existing technologies developed by other companies. The Company believes that by identifying key areas of inefficiency in the COVID-19 testing space, and addressing those bottlenecks, whether they be scientific, technical or logistical, we can capture market share in a new and rapidly growing medical testing industry. To forward this business, we entered into distribution agreements with multiple companies to gain rights to rapid IgM/IgG COVID-19 antibody test kits, RNA extraction machines, RNA extraction reagents, qPCR reagents and digital PCR reagents so as to be able to offer a comprehensive suite of solutions to laboratories worldwide. We began marketing a turnkey automation services solution to laboratories seeking to expand their COVID-19 testing capabilities and began generating revenue from the distribution of products to support laboratory COVID testing through automated machinery we provided. We intend to continue the expansion of this business, including the utilization of our automation services for other diagnostic testing where we can distribute additional supplies and leverage the use of our equipment.
On September 22, 2022, Todos Botanicals, Inc., a wholly owned subsidiary of Todos, entered into a distributor agreement (the “Agreement”) to supply its proprietary 3CL protease inhibitor immune support dietary supplement Tollovid™ and botanical ‘0% THC’ CBD products in pill, tincture, gummy, candy and cream finished products to Nerd Hemp, Inc., an automated retail (AI Retail) machine company focused on the distribution of CBD products. AI Retail machines are similar to vending machines; however, they use artificial intelligence to monitor product supply to optimize the re-ordering and stocking process. The new Tollovid and CBD products for the AI Retail machines will be manufactured in different adult and pediatric formulations in Todos’ newly leased Cleburne, Texas-based facility. Nerd Hemp has already been contracted to install 5500 AI Retail machines across the United States in retail outlets including airports, shopping centers, universities, sporting venues, fitness centers, bars, and grocery outlets. These AI Retail machines are located in high traffic and secure locations very similar to the Redbox model. The first deliveries are expected to take place in December 2022 in grocery outlets like Lowes Markets, a privately held grocer with over 140 locations in the southwestern United States. Todos anticipates $6.0 million in revenue in the first quarter of 2023 from this contract as Nerd Hemp commences its nationwide rollout. | ||
| ● | Todos has entered into distribution agreements with companies to distribute certain novel coronavirus (COVID-19) test kits. The agreements cover multiple international suppliers of PCR testing kits and related materials and supplies, as well as antibody testing kits from multiple manufacturers after completing validation of said testing kits and supplies in its partner CLIA/CAP certified laboratory in the United States. Todos has combined the PCR testing kits with automated lab equipment to create lab workflows capable of performing up to 40,000 PCR tests per day. Todos has entered into supply agreements with CLIA/CAP certified laboratories in the United States to deploy these PCR workflows. Todos has formed strategic partnerships with Meridian Health and other strategic partners to deploy COVID-19 antigen and antibody testing in the United States. Additionally, the Company is developing a lab-based COVID-19 3CL protease test to determine whether a COVID-19 positive patient remains contagious after quarantine is complete and is further developing point-of-care-based embodiments of the lab test for use in screening programs worldwide. | |
| On August 3, 2022, we announced that our CLIA/CAP-certified laboratory Provista Diagnostics has initiated a validation plan for PCR-based MonkeyPox testing. Under the plan, the Company is validating multiple PCR assays for MonkeyPox and will launch the most sensitive for lesion-based and saliva-based sample collections. While lesion-based testing is the current standard of care according to CDC guidelines, saliva-based sample collection is currently undergoing intense research that could open up the potential for testing of asymptomatic or very early-stage patients at high risk of severe disease (such as immunocompromised patients) that could result in earlier diagnosis and early intervention with therapeutic drugs such as Tecovirimat (TPOXX). TPOXX is an investigational drug candidate, and currently only available under an expanded access Investigational New Drug (EA-IND) protocol. The MonkeyPox tests are being developed as Laboratory Developed Tests (LDTs). A recent peer-reviewed article describing strong correlation of the sensitivity of lesion and saliva-based PCR testing was recently published in the journal Eurosurveillance. | ||
On August 30, 2022, Todos Medical USA, Inc., a wholly owned subsidiary of Todos Medical Ltd.. entered into a lease agreement (the “Lease”) with Industrial Property, LLC to lease approximately 15,200 rentable square feet and land of 5.9 acres located at 112 E. Industrial Boulevard, Cleburne, TX 76031 (the “Premises”) for botanical manufacturing facility in order to establish direct manufacturing capabilities for the Company’s newly formed manufacturing subsidiary Todos Botanicals, LLC. The Lease provides for full building access. The actual commencement dates are subject to timely completion of the Building and premises. The term of the lease commences on September 1, 2022, and runs 124 months on a month-to-month basis. | ||
| ● | Additionally, the Company’s patented Todos Biochemical Infrared Analyses (TBIA) is a cancer-screening technology using peripheral blood analysis that deploys deep examination into cancer’s influence on the immune system, looking for biochemical changes in blood mononuclear cells and plasma. Todos’ two internally developed cancer-screening tests, TMB-1 and TMB-2 have received a CE mark in Europe. | |
| ● | In the second quarter of 2021, Todos purchased rights to Provista Diagnostics, Inc.’s Alpharetta, Georgia-based CLIA/CAP certified lab and Provista’s proprietary commercial-stage Videssa® breast cancer blood test. | |
| ● | Todos also owns a patent for the use of a blood test for the early detection of neurodegenerative disorders, such as Alzheimer’s disease. | |
| ● | In July 2020, Todos completed the acquisition of Breakthrough Diagnostics, Inc., the owner of the LymPro Test intellectual property, from Amarantus Bioscience Holdings, Inc. |
| 23 |
Additionally, the Company has entered into a joint venture with NLC Pharma to bring to market a unique development-stage viral protease-based saliva point of care cell phone enabled diagnostic device that allows for the rapid detection of the presence of SARS-CoV-2 full length RNA in saliva which has the unique benefit of also indicating when viral replication has slowed or ceased. This technology will potentially have a significant impact for the development of virus targeting therapeutic development strategies, as well as clearance for return to life activities post-infection. We believe this strategy has the potential to help accelerate our commercial distribution channels as we begin to commercialize our core technology, and the technologies we have acquired via the Provista transaction. We also secured the rights to distribute AditxtScore™ for COVID-19 to monitor immunity against SARS-CoV-2. Blood samples will be collected by Todos and/or its network of partners and sent to Aditxt’s CLIA accredited AditxtScore™ Center for processing.Products
| ● | 3CL Sciences Ltd. (“3CL”), is developing the antiviral, Tollovir™, a potent 3CL protease inhibitor for the treatment of hospitalized COVID-19 patients, which is currently undergoing a Phase 2 clinical trial in Israel with plans to expand the clinical development program to India. We believe that government recognition of the need for antivirals to treat COVID-19 will provide a significant tailwind for the development of the Tollovir™ anti-viral that is currently undergoing a Phase 2 clinical trial in Israel with plans progressing rapidly to expand the clinical development program to India. As part of the ongoing scientific effort to further elucidate the mechanisms that have enabled Tollovir to achieve its very positive early clinical results, NLC Pharma identified an anti-inflammatory mechanism of action of Tollovir to complement its 3CL protease inhibiting mechanism. This dual mechanism of action helps explain the significant reduction in symptoms and the biomarker C Reactive Protein (CRP) that was documented in the earliest clinical COVID-19 data sets produced in Israel, which could not be explained by a reduction in viral load alone likely caused by Tollovir’s 3CL protease inhibiting mechanism. | |
| ● | The Company’s 3CL protease inhibitor botanical product, Tollovid, is a dietary supplement that helps to support and maintain healthy immune function. This technology will potentially have a significant impact for the development of virus targeting therapeutic development strategies, as well as clearance for return to life activities post-infection. We are very pleased that the Company’s dietary supplement Tollovid, which provides immune support as a protease inhibitor, received FDA authorization for a new 5-day dosing regimen in April 2021. We believe this authorization underscores the emerging need in the marketplace for immune support supplements supported by strong scientific and safety data, as well as provides international regulatory authorities with a high degree of comfort of Tollovid’s safety profile. | |
| ● | In October 2021, we announced positive clinical validation data for the 3CL protease biomarker assay TolloTest™ in a clinical study evaluating its sensitivity compared with PCR in hospitalized COVID-19 patients, patients hospitalized for conditions other than COVID-19 and individuals exposed to confirmed COVID-19 subjects in the community outpatient setting and healthy controls. The results clinically validated the sensitivity of the 3CL protease biomarker compared with SARS-CoV-2 PCR, confirmed positive results in both the hospital and outpatient setting, and provided key insights on the potential role the 3CL protease biomarker could play in assessing the COVID infectivity status of infected patients being released from quarantine and opening the diagnostic window to include earlier diagnosis of individuals from time of time known exposure. The Company sees multiple use cases for the 3CL protease biomarker as an adjunct to both PCR testing and antigen testing for SARS-CoV-2. | |
| ● | Our two most advanced blood tests under development are for the screening and diagnosis of breast cancer. TM-B1 is our breast cancer test for the screening and diagnosis of breast cancer in all women, and TM-B2 is our breast cancer test for the screening and diagnosis of breast cancer in women who have ‘dense breasts.’ Dense breasts, medically categorized as BI-RADS 3 and BI-RADS 4, make mammograms largely ineffective because the biophysical structure of the breast does not allow high enough resolution on the mammogram X-ray to determine whether or not a tumor is present, leading to potentially unnecessary additional imaging tests and breast biopsies in women who have dense breasts. | |
| ● | Additionally, we are developing our TMC blood test is for the screening and diagnosis of colon cancer. | |
| ● | The Lymphocyte Proliferation Test (LymPro Test™) is a diagnostic blood test that determines the ability of peripheral blood lymphocytes (PBLs) and monocytes to withstand an exogenous mitogenic stimulation that induces them to enter the cell cycle. It is believed that certain diseases, most notably Alzheimer’s disease, are the result of compromised cellular machinery that leads to aberrant cell cycle re-entry by neurons, which then leads to apoptosis. LymPro is novel in the use of peripheral blood lymphocytes as a surrogate for neuronal cell function, suggesting a common relationship between PBLs and neurons in the brain. |
| 24 |
We believe that as we continue to grow our automation services business, we are creating a natural distribution base for Provista’s Videssa, as well as for the eventual commercialization of our proprietary TBIA platform tests and diagnostics developed with NCL Pharma. We intend to seek out additional opportunities to leverage our expanding base of laboratory partners in the coming years.
Operating Results
Revenues
Todos has acquired exclusive distribution rights toDuring the dietary supplement Tollovid™️, a proprietary blend of botanical extracts with active ingredient inhibiting the 3CL Protease, a critical protease required for certain viruses to replicate. A Certificate of Free Sale was granted by the FDA in August 2020 for low dose Tollovid,nine and a Certificate of Free Sale was granted by the FDA in April 2021 for high dose Tollovid. Tollovid is the only known commercial product to directly impact the 3CL protease mechanism based on in vitro studies in multiple labs.
Operating Results
Revenues
During the three months ended March 31, 2021,September 30, 2022, we have generated revenues of $5,031,097$6,291,653 and $1,913,518, respectively, compared to revenues of $7,772,881 and $1,009,662, respectively, in revenues during the nine and three months ended September 30, 2021. Such revenues were generated by the Company and through our U.S. subsidiary,subsidiaries, Corona Diagnostics LLC.and LLC, Provista Diagnostics, Inc.
Operating Expenses
Our current operating expenses consist of four components - cost of revenues, research and development expenses, marketing expenses and general and administrative expenses.
Cost of revenues
Our cost of revenues consists primarily of materials, depreciation and other related cost of revenues expenses.
The following table discloses the breakdown of cost of revenues (in the first three months of 2020, we had no revenues):revenues:
Three Months Ended March 31 | Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| U.S. dollars | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Salaries and related expenses | $ | 618,585 | $ | 254,506 | $ | 244,752 | $ | 189,960 | ||||||||||||||||
| Materials and other costs | $ | 3,086,314 | $ | - | 2,484,462 | 4,454,242 | 860,070 | 681,267 | ||||||||||||||||
| Depreciation | 148,815 | - | 511,751 | 482,017 | 169,110 | 171,861 | ||||||||||||||||||
| Total | $ | 3,235,129 | $ | - | $ | 3,614,798 | $ | 5,190,765 | $ | 1,273,932 | $ | 1,043,088 | ||||||||||||
Research and Development Expenses
Our research and development expenses consist primarily of salaries and related personnel expenses, subcontracted work and consulting liabilities for royalties and other related research and development expenses.
The following table discloses the breakdown of research and development expenses:
Three Months Ended March 31 | Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| $ | - | - | ||||||||||||||||||||||
| U.S. dollars | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Stock-based compensation | - | 36,191 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
| Professional fees | 100,234 | - | 161,047 | 15,043 | 88,125 | 15,375 | ||||||||||||||||||
| Laboratory and materials | 602,567 | 61,026 | 425,855 | 645,567 | 52,838 | 143,829 | ||||||||||||||||||
| Depreciation | 7,425 | 6,524 | 9,668 | 21,865 | 2,961 | 7,032 | ||||||||||||||||||
| Insurance and other expenses | 2,380 | 3,341 | 2,216 | 1,192 | - | |||||||||||||||||||
| Total | $ | 712,606 | 103,741 | $ | 600,272 | $ | 684,691 | $ | 145,116 | $ | 166,236 | |||||||||||||
We expect that our research and development expenses will materially increase as we plan to rapidly recruit more employees in order to accelerate our research and development efforts.
Sales and Marketing expenses
Sales and marketing expenses consist primarily of salaries and share-based compensation expense.
The following table discloses the breakdown of sales and marketing expenses:
Three Months Ended March 31 | Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| U.S. dollars | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Salaries and related expenses | $ | 344,954 | $ | 495,856 | $ | 130,495 | $ | 243,161 | ||||||||||||||||
| Share Based Compensation | $ | 44,771 | 750,000 | - | 44,771 | - | - | |||||||||||||||||
| Professional Fees | 1,313,466 | - | 2,022,841 | 1,846,139 | 409,004 | 185,541 | ||||||||||||||||||
| Total | $ | 1,358,237 | 750,000 | $ | 2,367,795 | $ | 2,386,766 | $ | 539,499 | $ | 428,702 | |||||||||||||
General and administrative
General and administrative expenses consist primarily of salaries, share-based compensation expense, professional service fees (for accounting, legal, bookkeeping, intellectual property and facilities), directors fee and insurance and other general and administrative expenses.
The following table discloses the breakdown of general and administrative expenses:
Three Months Ended March 31 | Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||
| U.S. dollars | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Salaries and related expenses | $ | 40,066 | 37,189 | $ | 1,269,047 | $ | 126,931 | $ | 175,157 | $ | 43,037 | |||||||||||||
| Share-based compensation | 200,539 | 45,333 | 2,462,081 | 512,831 | 274,824 | 147,902 | ||||||||||||||||||
| Rent and maintenance expenses | 468,346 | 80,426 | 155,528 | 31,263 | ||||||||||||||||||||
| Communication and investor relations | - | 243,649 | 42,719 | 97,370 | 14,239 | |||||||||||||||||||
| Doubtful debts | 984,130 | 391,681 | 66,307 | 10,000 | ||||||||||||||||||||
| Depreciation | 62,894 | 39,427 | 21,969 | 7,969 | ||||||||||||||||||||
| Professional fees | 989,742 | 222,777 | 2,061,192 | 3,687,642 | 965,683 | 1,552,487 | ||||||||||||||||||
| Insurance and other expenses | 329,830 | 25,000 | 87,545 | 316,778 | - | 61,753 | ||||||||||||||||||
| - | ||||||||||||||||||||||||
| Total | $ | 1,562,177 | 330,229 | $ | 7,638,884 | $ | 5,198,435 | $ | 1,756,838 | $ | 1,868,650 | |||||||||||||
Comparison of the threenine months ended March 31, 2021,September 30, 2022, to the threenine months ended March 31, 2020:September 30, 2021:
Results of Operations
Revenues. Our revenues for the threenine months ended March 31, 2021,September 30, 2022, were $5,031,097,$6,291,653, compared to no$7,772,881 revenues during the threenine months ended March 31, 2020.September 30, 2021, representing a net decrease of $1,481,228, or 19%. The increasedecrease in our revenues is a result of the reduction in sales of our COVID-19 testing products through our U.S. subsidiary, Corona Diagnostics, LLC.LLC which was somewhat offset by sales of Tollovid™, which commenced in the fourth quarter of 2021.
Cost of revenues. Our cost of revenues for the threenine months ended March 31, 2021,September 30, 2022, were $2,235,129,$3,614,798, compared to no revenues$5,190,765 during the threenine months ended March 31, 2020.September 30, 2021, representing a net decrease of $1,575,967, or 30%. The increasedecrease in our cost of revenues is related to the decrease in sales of our COVID-19 testing products.
Research and Development Expenses. Our research and development expenses for the threenine months ended March 31, 2021,September 30, 2022, were $712,606$600,272 compared to $103,741$684,691 for the threenine months ended March 31, 2020,September 30, 2021, representing a net increasedecrease of $608,865,$84,419, or 587%12%. The increasedecrease is primarily due to an increasea decrease in professional fees and other research and development costs in connection with providing Covid testing services, offset bythe development of our new products.
Sales and Marketing Expenses. Our sales and marketing expenses decreased from $2,367,795 in the nine months ended September 30, 2022, to $2,386,766 in the nine months ended September 30, 2021, a decrease of $18,971 or 1%. The decrease is primarily due to a decrease in salaries and related expenses and stock-based compensation used for continued development of our products.
Sales and Marketing Expenses. Our sales and marketing expenses increased from $750,000 in the three months ended March 31, 2020, to $1,358,237 in the three months ended March 31, 2021, providingoffset by an increase of $608,237 or 81%. This increase was principally due to increase in marketing efforts related to our anticipated uplisting offset by decrease in stock-based compensation.professional fees.
General and Administrative Expenses. Our general and administrative expenses for the threenine months ended March 31, 2021,September 30, 2022, were $1,562,177,$7,638,884, compared to $330,229$5,198,435 for the threenine months ended March 31, 2020,September 30, 2021, providing an increase of $1,231,948$2,440,449 or 373%47%. The increase is primarily due to thean increase in stock-based compensation, salaries and related expenses, including for new employees, and doubtful debts partially offset by a decrease in professional services which consists mainly of legal and other fees relating to our anticipated uplisting.services.
Finance (Income) Expenses, Net. Our net finance expenses for the threenine months ended March 31, 2021September 30, 2022 was $15,655,635$11,735,124 compared to net finance expenses of $3,454,022$17,360,000 for the threenine months ended March 31, 2020,September 30, 2021, providing an increasea decrease of $1,220,613$5,624,876 or 353%32%. The increasedecrease is primarily due to changechanges in the fair value of warrants liability loss from extinguishment of loans from shareholders and amortization of discounts and accrued interest on convertible bridge loans.
Share in losses of affiliated company is accounted for under the equity method. Our share in losses of affiliated company accounted for under the equity method amounted to $65,469$1,498,453 in the threenine months ended March 31, 2021.September 30, 2021 ($0 in the nine months ended September 30, 2022).
Other losses. Our other losses amounted to $396,000 in the nine months ended September 30, 2022 ($0 in the nine months ended September 30, 2021).
Net Loss.loss attributable to non-controlling interests. Our net loss attributable to non-controlling interests amounted to $59,651 in the nine months ended September 30, 2022 ($0 in the nine months ended September 30, 2021).
Net Loss attributable to the Company’s stockholders’ equity. Our net loss attributable to the Company’s stockholders’ equity for the threenine months ended March 31, 2021September 30, 2022 was $17,557,484,$20,001,569, compared to $4,638,062$24,546,677 for the threenine months ended March 31, 2020,September 30, 2021, providing an increasea decrease of $12,920,422$4,545,108 or 279%19%. The increasedecrease is primarily due to thean increase in general and administrative expenses offset by a decrease in finance expenses, net as well as other changes as mentioned above.
Comparison of the three months ended September 30, 2022, to the three months ended September 30, 2021:
Results of Operations
Revenues. Our revenues for the three months ended September 30, 2022, were $1,913,518, compared to $1,009,662 revenues during the three months ended September 30, 2021, representing a net increase of $903,856, or 89%. The increase in our revenues is a result of the increase in sales of our sales of Tollovid™, which commenced in the fourth quarter of 2021 offset by decrease in sales of our COVID-19 related products and testing through our U.S. subsidies, Corona Diagnostics, LLC and Provista diagnostics, Inc.
Cost of revenues. Our cost of revenues for the three months ended September 30, 2022, were $1,273,932, compared to $1,043,088 during the three months ended September 30, 2021, representing a net increase of $230,844, or 22%. The increase in our cost of revenues is related to the increase in materials and other costs associated with our sales.
Research and Development Expenses. Our research and development expenses for the three months ended September 30, 2022, were $145,116 compared to $166,000 for the three months ended September 30, 2021, representing a net decrease of $20,884, or 13%. The decrease is primarily due to a decrease in research and development costs in connection with the development of our new products.
Sales and Marketing Expenses. Our sales and marketing expenses for the three months ended September 30, 2022, were $539,499 compared to $428,702 in the three months ended September 30, 2021, representing a net increase of $110,797 or 26%. The increase in our sales and marketing expenses is related to an increase in professional fees.
General and Administrative Expenses. Our general and administrative expenses for the three months ended September 30, 2022, were $1,756,838, compared to $1,868,886 for the three months ended September 30, 2021, providing a decrease of $112,048 or 6%. The decrease is primarily due to a decrease in professional services partially offset by an increase in stock-based compensation, salaries and related expenses, including for new employees, and doubtful debts .
Finance (Income) Expenses, Net. Our net finance expenses for the three months ended September 30, 2022 was $3,858,765 compared to net finance expenses of $6,875,000 for the three months ended September 30, 2021, providing a decrease of $3,016,235 or 44%. The decrease is primarily due to changes in the fair value of warrants liability and amortization of discounts and accrued interest on convertible bridge loans.
Share in losses of affiliated company is accounted for under the equity method. Our share in losses of affiliated company accounted for under the equity method amounted to $0 in the three months ended September 30, 2022 ($1,007,000 in the three months ended September 30, 2021).
Net loss attributable to non-controlling interests. Our net loss attributable to non-controlling interests amounted to $30,478 in the three months ended September 30, 2022 ($0 in the three months ended September 30, 2021).
Net income (Loss) attributable to the Company’s stockholders’ equity. Our net loss attributable to the Company’s stockholders’ equity for the three months ended September 30, 2022 was $5,660,633, compared to net income of $10,378,847 for the three months ended September 30, 2021, providing a decrease of $4,718,214. The decrease is primarily due to a decrease in net finance expenses, as well as other changes as mentioned above.
| 28 |
We prepare our financial statements in accordance with US GAAP. At the time of the preparation of the financial statements, our management is required to use estimates, evaluations, and assumptions which affect the application of the accounting policy and the amounts reported for assets, obligations, revenues and expenses. Any estimates and assumptions are continually reviewed. The changes to the accounting estimates are credited during the period in which the change to the estimate is made.
Until December 31, 2021, we were an “emerging growth company” under the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we elected to rely on othercertain exemptions, including without limitation, (i) providing an auditor’s attestation report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). These exemptions will applyapplied until on or before the last day of the 2021 fiscal year (the fifth anniversary of the dateend of the fiscal year in which the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act)Act occurred).
Going Concern Uncertainty
Until 2020, we devoted substantially all of our efforts to research and development and raising capital. In 2020, we raised significant capital, but we also generated revenues for the first time as a result of our activities related to Covid-19. There is no certainty as to the continuance of our revenues related to Covid-19. The development and commercialization of our other products, which are necessary for our long term financial health, are expected to require substantial further expenditures. We remain dependent upon external sources for financing our operations. Since inception, we have incurred substantial accumulated losses, negative working capital, and negative operating cash flow, and have a significant shareholders’ deficit. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. We plan to finance our operations through the sale of equity and, to the extent available, short term and long-term loans. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations.
Liquidity and Capital Resources
Overview
To date, we have funded our operations primarily with convertible bridge loans, grants from the IIA, and issuing Ordinary Shares and stock warrants (including warrants’ exercise).
The table below presents our cash flows:
STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Nine months period ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | Unaudited | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (20,061 | ) | $ | (24,547 | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 584 | 556 | ||||||
| Impairment of investment in a subsidiary | 396 | - | ||||||
| Interest on short term loans and revolving credit line | 786 | - | ||||||
| Sale of subsidiary shares to non-controlling interests | 710 | - | ||||||
| Liability for minimum royalties | 131 | 53 | ||||||
| Stock-based compensation | 2,752 | 633 | ||||||
| Modification of terms relating to straight loan transaction | - | 88 | ||||||
| Share in losses of affiliated company | - | 1,499 | ||||||
| Change in fair value, amortization of discounts and accrued interest on convertible bridge loans | 13,076 | 18,080 | ||||||
| Amortization of discounts and accrued interest on straight loans | - | 2,290 | ||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired | - | (299 | ) | |||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (3,651 | ) | (3,777 | ) | ||||
| Decrease (increase) in trade receivables | 1,850 | (1,629 | ) | |||||
| Decrease (increase) in inventories | 283 | (806 | ) | |||||
| Decrease in other current assets | 64 | 705 | ||||||
| Increase (decrease) in accounts payable | 1,844 | (961 | ) | |||||
| Decrease in deferred revenues | - | (857 | ) | |||||
| Increase (decrease) in other current liabilities | (559 | ) | (326) | |||||
| Operating lease liability | (77 | ) | - | |||||
| Net cash used in operating activities | (1,872 | ) | (9,299 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (74 | ) | (965 | ) | ||||
Increase in other long term assets | (1,733 | ) | - | |||||
| Cash used in purchased of subsidiary | - | (1,176 | ) | |||||
| Investment in other companies | - | (1,024 | ) | |||||
| Net cash used in investing activities | (1,807 | ) | (3,165 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from straight loans and revolving credit line | 6,291 | 2,496 | ||||||
| Repayment of Receivables financing facility | - | (1,249 | ) | |||||
| Repayment of straight loans | (3,244 | ) | (1,329 | ) | ||||
| Repayment of convertible bridge loans | - | (2,165 | ) | |||||
| Proceeds from issuance of units consisting of convertible bridge loans, stock warrants and shares, net | 500 | 13,687 | ||||||
| Proceeds from issuance of ordinary shares through equity line | - | 255 | ||||||
| Net cash provided by financing activities | 3,547 | 11,695 | ||||||
| Change in cash, cash equivalents | (132 | ) | (769 | ) | ||||
| Cash, cash equivalents at beginning of period | 189 | 935 | ||||||
| Cash, cash equivalents at end of period | $ | 57 | $ | 166 | ||||
Three months period ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (17,557 | ) | $ | (4,638 | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 156 | 7 | ||||||
| Liability for minimum royalties | 12 | 9 | ||||||
| Stock-based compensation | 235 | 832 | ||||||
| Expiration of call options to acquire potential acquiree (See Note 6) | - | 1,000 | ||||||
| Share in losses of affiliated company | 66 | - | ||||||
| Modification of terms relating to straight loan transaction | (6 | ) | - | |||||
| Modification of terms relating to convertible bridge loans transactions | - | (3,463 | ) | |||||
| Direct and incremental issuance costs allocated to conversion feature of convertible bridge loan | 169 | - | ||||||
| Exchange differences relating to loans from shareholders | - | (9 | ) | |||||
| Change in fair value of convertible bridge loans | 11,976 | 4,369 | ||||||
| Amortization of discounts and accrued interest on convertible bridge loans | 3,057 | - | ||||||
| Amortization of discounts and accrued interest on straight loans | 861 | 292 | ||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired | (201 | ) | 919 | |||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (977 | ) | - | |||||
| Increase in trade receivables | (41 | ) | - | |||||
| Increase in inventories | (1,054 | ) | - | |||||
| Decrease (increase) in other current assets | 670 | (47 | ) | |||||
| Increase (decrease) in accounts payable | (389 | ) | 100 | |||||
| Decrease in deferred revenues | (844 | ) | - | |||||
| Increase (decrease) in other current liabilities | �� | 687 | (46 | ) | ||||
| Net cash used in operating activities | (3,180 | ) | (675 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (658 | ) | - | |||||
| Investment in other company | (231 | ) | - | |||||
| Net cash used in investing activities | (889 | ) | - | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from straight loans, net | 1,677 | 697 | ||||||
| Repayment of Receivables financing facility | (1,056 | ) | - | |||||
| Repayment of straight loans | (941 | ) | - | |||||
| Repayment of convertible bridge loans | (677 | ) | - | |||||
| Proceeds from issuance of units consisting of convertible bridge loans and stock warrants, net | 4,012 | - | ||||||
| Proceeds from issuance of units consisting of ordinary shares and stock warrants | - | 30 | ||||||
| Proceeds from issuance of ordinary shares through equity line | 255 | - | ||||||
| Net cash provided by financing activities | 3,270 | 727 | ||||||
| Change in cash, cash equivalents | (799 | ) | 52 | |||||
| Cash, cash equivalents at beginning of period | 935 | 17 | ||||||
| Cash, cash equivalents at end of period | $ | 136 | $ | 69 | ||||
Operating Activities
Net cash used in operating activities for the threenine months ended March 31, 2021September 30, 2022 was $3,180,000$1,872,000 compared to $675,000$9,299,000 in the three months ended March 31, 2020.September 30, 2021. The increasedecrease in the cash flow used in operating activities in 20212022 compared to 20202021 is primarily due to an increase from operating loss less stock-based compensation, changea decrease in fair value of convertible bridge loans,our net losses, amortization of discounts and accrued interest on convertible bridge loans and changes inincrease other current assets, plus change in fair value of derivative warrants liabilityliabilities, share based compensation and fair value of warrants expired, change in fair value of liability related to conversion feature of convertible bridge loans, increase in inventory and decrease in deferred revenues..trade receivables.
Investing Activities
Net cash used in investing activities for the for the threenine months ended March 31, 2021September 30, 2022 was $889,000,$1,807,000, compared to nonewith $3,165,000 in the threenine months ended March 31, 2020.September 30, 2021. The primary reason for the increasedecrease in investing activities was due to a decrease in the purchase onof laboratory and other equipment by our U.S. subsidiary,subsidiaries, Corona Diagnostics, LLC and Provista Diagnostics, Inc and amounts paid in the nine months ended September 30, 2021 to purchase our subsidiary, Provista Diagnostics, Inc. and investments in other laboratories.companies partially offset by increase in payments on account of long term assets.
Financing Activities
Net cash provided by financing activities for the threenine months ended March 31, 2021September 30, 2022 was $3,270,000,$3,547,000, compared to net cash provided by financing activities for the threenine months ended March 31, 2020September 30, 2021 of $727,000.$11,695,000. This increasedecrease is primarily due to a cash received from proceeds from straight loans,decrease in proceeds from issuance of units consisting of straightconvertible bridge loans, and stock warrants and shares, net partially offset by Repaymentdecrease in repayment of Receivables financing facility Repayment of straight loans and Repaymentrepayment of convertible bridge loans.
Current Outlook
We cannot assure that our cancer detection kits will be commercialized, work as indicated, or that they will receive regulatory approval and that we will earn revenues sufficient to support our operations or that we will ever be profitable. Furthermore, since we have no committed source of financing, we cannot assure that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to curtail, or even to cease, our operations.
We have limited experience with IVD. As such, these budget estimates may not be accurate. In addition, the actual work to be performed is not known at this time, other than a broad outline, as is normal with any scientific work. As further work is performed, additional work may become necessary or change in plans or workload may occur. Such changes may have an adverse impact on our estimated budget. Such changes may also have an adverse impact on our projected timeline of drug development.
We are currently conducting Corona testing through our Provista Laboratories and distributing COVID-19 testing kits as a means of funding our operations.
If we are unable to raise additional funds, we will need to do one or more of the following:
| ● | delay, scale-back or eliminate some or all of our research and product development programs; | |
| ● | provide licenses to third parties to develop and commercialize products or technologies that we would otherwise seek to develop and commercialize ourselves; | |
| ● | seek strategic alliances or business combinations; | |
| ● | attempt to sell our Company; | |
| ● | cease operations; or | |
| ● | declare bankruptcy. |
Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to secure additional debt or equity financing in a timely manner, or at all, which could require us to scale back our business plan and operations.
The above conditions raise substantial doubt about our ability to continue as a going concern. The financial statements included elsewhere herein were prepared under the assumption that we would continue our operations as a going concern. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. Without additional funds from debt or equity financing, sales of our intellectual property or technologies, or from a business combination or a similar transaction, we will soon exhaust our resources and will be unable to continue operations. If we cannot continue as a viable entity, our shareholders may lose some or all of their investment in us.
Our management intends to attempt to secure additional required funding primarily through additional equity or debt financings. We may also seek to secure required funding through sales or out-licensing of intellectual property assets, seeking partnerships with other pharmaceutical companies or third parties to co-develop and fund research and development efforts, or similar transactions. However, there can be no assurance that we will be able to obtain required funding. If we are unsuccessful in securing funding from any of these sources, we will defer, reduce or eliminate certain planned expenditures in our research protocols. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our shareholders losing some or all of their investment in us.
Recent Developments
3CL Acquisition
On March 11, 2022, the Company entered into a Share Purchase Agreement (the “SPA”) with 3CL Sciences Ltd. (“3CL”), an Israeli corporation, and NLC Pharma Ltd. (“NLC”), an Israeli corporation, pursuant to which (a) 3CL Sciences will purchase all therapeutic, diagnostic, dietary supplement and pharmaceutical assets from NLC that relate to 3CL protease biology (which is used in the development, manufacture, sale and distribution of Tollovid™ and Tollovir™) from NLC in exchange for a 100% equity interest in 3CL, (b) 3CL will allot 30.5% of its shares to the Company in exchange for the Company making a total cash commitment of $8 million to 3CL, (c) NLC will sell 7.54% of 3CL’s issued and outstanding shares to the Company in exchange for the Company making a total cash commitment of $2 million to NLC, and (d) NLC will exchange 14.31% of 3CL’s issued and outstanding shares for shares of the Company having a market value of $3,800,000 on the day prior to the Closing, such that the Company will own 52% of 3CL’s issued and outstanding share capital and NLC will own 48% of 3CL’s issued and outstanding share capital. The Company and NLC have agreed to identify a seasoned biopharmaceutical CEO to manage 3CL going forward. The board of directors of 3CL Sciences will be made up of five (5) individuals: three (3) appointed by the Company and two (2) appointed by NLC. As of the date of this quarterly report on Form 10-Q, the closing of the SPA has not yet occurred.
On September 7, 2022 (“Effective Date”), the Company entered into a supplement (“Extension Agreement”), to the SPA. As a consequence, NLC Pharma has assigned ownership of all relevant intellectual property to 3CL Pharma Ltd. The assignment includes the patent applications for dual mechanism (3CL protease inhibitor and CCR5 antagonist) Phase 2 therapeutic drug candidate Tollovir™, commercial-stage 3CL protease inhibitor immune support supplement Tollovid™ and 3CL protease biomarker test TolloTest™ for SARS-CoV-2 infectivity monitoring and PASC/Long COVID viral persistence assessment (the “IP”). 3CL Pharma Ltd. is now preparing to launch a crowdfunding campaign to fund the necessary requirements for an Emergency Use Authorization (EUA) submission to the US FDA for Tollovir in the treatment of hospitalized (severe/critical) COVID-19 patients, the clinical development of Tollovir, Tollovid and TolloTest in Long COVID, as well as a national marketing campaign for Tollovid to support US sales. Completion of the crowdfunding will fulfill Todos’ obligations under the SPA.
Nerd Hemp Distributor Agreement
On September 22, 2022, Todos Botanicals, Inc., a wholly owned subsidiary of Todos, entered into a distributor agreement (the “Agreement”) to supply its proprietary 3CL protease inhibitor immune support dietary supplement Tollovid™ and botanical ‘0% THC’ CBD products in pill, tincture, gummy, candy and cream finished products to Nerd Hemp, Inc., an automated retail (AI Retail) machine company focused on the distribution of CBD products. AI Retail machines are similar to vending machines; however, they use artificial intelligence to monitor product supply to optimize the re-ordering and stocking process. The new Tollovid and CBD products for the AI Retail machines will be manufactured in different adult and pediatric formulations in Todos’ newly leased Cleburne, Texas-based facility. Nerd Hemp has already been contracted to install 5500 AI Retail machines across the United States in retail outlets including airports, shopping centers, universities, sporting venues, fitness centers, bars, and grocery outlets. These AI Retail machines are located in high traffic and secure locations very similar to the Redbox model. The first deliveries are expected to take place in December 2022 in grocery outlets like Lowes Markets, a privately held grocer with over 140 locations in the southwestern United States. Todos anticipates $6.0 million in revenue in the first quarter of 2023 from this contract as Nerd Hemp commences its nationwide rollout.
Recent Developments
Provista Acquisition
On April 19, 2021, the Company entered into an Agreement to Purchase Provista Diagnostics, Inc. (“Agreement to Purchase”) with Strategic Investment Holdings, LLC (“SIH”), Ascenda BioSciences LLC (“Ascenda”) and Provista Diagnostics, Inc. (“Provista”). Ascenda was the sole owner of the outstanding securities of Provista and SIH is the sole owner of all the outstanding securities of Ascenda.
Pursuant to the Agreement to Purchase, the Company acquired Provista from Ascenda and SIH for an aggregate purchase price of $7.5 million consisting of an initial cash payment of $1.25 million, the issuance of $1.5 million in Ordinary Shares priced at $0.0512 per share, the issuance to SIH of a $3.5 million convertible promissory note dated April 19, 2021 (the “Note”) and the payment on for before July 1, 2021 of $1.25 million in cash (the “July Payment”), which payment the Company had the right to, and did, extend to July 15, 2021. The Provista shares acquired by the Company remained in an escrow account until the July Payment was made.
The Note has a maturity date of April 8, 2025, and is convertible into Ordinary Shares of the Company at a conversion price equal to the lesser of $0.05 or the volume weighted average price of the last 20 trading days for the Ordinary Shares prior to the date of conversion. In the event SIH delivers a Notice of Conversion to the Company at a per share price less than $0.05 ($0.05), the Company has the right to immediately notify SIH of its intention to pay the conversion amount in cash within three (3) business days of receipt of the Notice of Conversion (i.e., before SIH would take possession of shares converted under the Notice of Conversion).
In the event that the Company lists its Ordinary Shares on a national securities exchange, the Note shall automatically be exchanged into ordinary shares with a conversion price equal to the lesser of (a) $0.05, (b) the opening price on the day of the uplisting provides there is no transaction associated with the uplisting or (c) the deal price of an uplisting transaction.
On February 4, 2022 and on March 10, 2022, the Company issued a total of 49,620,690 ordinary shares upon conversion of $1,804,000 of principal and accrued interest, out of a convertible note in the principal amount of $3,500,000 issued in the acquisition of Provista.
Products
On July 22, 2021, the US Food & Drug Administration (FDA) granted a new Certificate of Free Sale for Tollovid Daily™, the newest member of the Company’s Tollovid™ dietary supplement product line.
The Certificate of Free Sale is for a twice-daily dosing regimen and, critically, a 3CL protease inhibitor claim. Each 60-pill bottle of Tollovid Daily can help support and maintain healthy immune function for 30 days. The Company intends to establish a monthly subscription model as part of its marketing launch campaign for Tollovid Daily immune system support. Tollovid™ and Tollovid Daily are both 3CL protease inhibitor products developed under a joint venture with NLC Pharma.
On April 8, 2021, we received a notice of allowance (‘Letter of Intent to Grant a Patent’) from the European Patent Office covering the use of the Company’s proprietary Total Biochemical Infrared Analysis (‘TBIA’) method that uses blood (plasma and/or peripheral blood mononuclear cells ‘PBMCs’) to distinguish between patients with benign tumors vs. malignant tumors vs. no tumors (healthy controls).
The patent application specifically covers methods for capturing consistent data from infrared spectroscopy readers, as well as the application of various artificial intelligence algorithm development methods to the data. The ability of TBIA to make a diagnosis of cancer has first been applied to the detection of breast and colon cancers, where Todos has received CE Marks in Europe paving the way for commercialization initially focused on TMB-2 (dense breast / inconclusive mammogram secondary screening) and TMB-1 (general breast cancer screening) cancer detection tests.
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Financing and Fundraising Other Than Crossover Notes
Toledo
On June 19, 2020, the Company and its subsidiaries, Todos Medical USA and Corona Diagnostics, LLC (“Corona”) entered into a Receivables Financing Agreement with Toledo Advisors, LLC (“Toledo”) for up to $25,000,000 in a revolving receivables financing facility (the “Facility”). The availability of the Facility shall terminate on the earlier of June 19, 2025 and the date on which more than $25,000,000 has been advanced. The financing is secured by all of the assets of the Company’s wholly-owned subsidiary Todos Medical USA, Inc. In addition, Todos Medical USA pledged all of the outstanding equity of Corona to the Lender. The initial draw under the Facility was on June 19, 2020 for $165,000 which was due on the earlier to occur of (i) ninety days following the date the draw was made by the Lender and (ii) the date the receivable, for which the draw was made, is paid. The Facility has since been repaid.
In November 2020, the parties agreed to amend the Facility to reduce the cost of funding to Todos Medical USA, and to make the relationship between Corona and Toledo nonexclusive in exchange for Toledo being granted a percentage of Corona’s revenues from diagnostic testing.
On January 7, 2022, Toledo filed a complaint against Corona, Todos Medical USA, and the Company (the “Todos Defendants”), seeking unspecified damages for breach of the aforesaid agreements and claiming that at least $139,000 is due under the royalty agreement. The Todos Defendants filed an answer and counterclaim on February 9, 2022, wherein various affirmative defenses were asserted, the allegations of the complaint were denied, and the Company asserted counterclaims for breach of contract and other relief.
On April 7, 2022, the Company and Toledo signed a Settlement Agreement pursuant to which upon execution of the agreement the Company paid Toledo $130,000 and issued to Toledo $200,000 worth of ordinary shares. The parties agreed that upon delivery of the cash payment and shares, the parties would discontinue the complaint filed by Toledo on January 7, 2022, and that Toledo irrevocably and unconditionally releases and discharges the Company from its June 19, 2020 financing agreement and July 28, 2020 Royalty Agreement.
Leviston
The Company and Leviston Resources LLC, a Delaware limited liability company (“Leviston”) are parties to that certain Securities Purchase Agreement, dated as of July 9, 2020, pursuant to which Leviston purchased an aggregate principal amount of $850,000 of convertible notes from the Company. On March 3, 2021, the Company and Leviston entered into a Closing Agreement pursuant to which Leviston exercised its right to invest an additional $847,570 into the Company of convertible notes.
The Company and Leviston are parties to that certain Secured Convertible Loan Agreement, dated as of May 20, 2022, pursuant to which Leviston purchased an aggregate principal amount of $1,672,502 of convertible notes from the Company (with net proceeds of $1,003,000) (collectively, the “Note”). The Note is secured by the same collateral that secures the July 9, 2020 convertible notes. The conversion price for the Note is equal to the lowest trading price during and including the 10 days prior to the Conversion Date.
The initial closing date of the Note was March 31, 2022. The maturity date for amounts received under the note is 180 days from the date of receipt. According to the Secured Convertible Note Agreement, the Initial Closing amount was One Million Dollars ($1,000,000) which was paid in separate installments as follows: 1) $292,700.77 on January 5th, 2022, 2) $400,000 on January 18th 2022 and 3) and $325,800 on January 19th, 2022, (total of $1,003,500 net of the original issue discount). Each such amount was due to be repaid 180 days after it was paid.
On March 15, 2022, the Company repaid $324,000, thus the principal amount outstanding under the Note is currently $1,348,501 (including the original issue discount). Under the terms of the Secured Convertible Note Agreement, in the event that the Company does not timely repay all amounts due under the Note, Leviston has the right to convert Two Hundred Percent (200%) of the Aggregate Loan Principal Amount, less any amount that has been repaid, at the conversion price described above. As of the date of this report on Form 10-Q, Leviston has not issued a conversion notice.
Lincoln Park
On August 4, 2020, we entered into a purchase agreement (the “LPC Purchase Agreement”) with Lincoln Park Capital, LLC (“Lincoln Park”), pursuant to which Lincoln Park agreed to purchase from us up to an aggregate of $10,275,000 of our ordinary shares (subject to certain limitations) from time to time over the term of the LPC Purchase Agreement. Also on August 4, 2020, we entered into a registration rights agreement with Lincoln Park, pursuant to which on August 11, 2020, we filed with the Securities and Exchange Commission, or the SEC, a registration statement (the “LPC Registration Statement”) to register for resale under the Securities Act of 1933, as amended, or the Securities Act, the ordinary shares that have been or may be issued to Lincoln Park under the LPC Purchase Agreement. That registration statement became effective on August 18, 2020.
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The LPC Registration Statement covers the resale by Lincoln Park of up to 50,000,000 ordinary shares, comprised of: (i) 5,812,500 ordinary shares that we issued to Lincoln Park as a fee for making its irrevocable commitment to purchase our ordinary shares under the LPC Purchase Agreement, which we refer to in this registration statement on Form S-1 as the Commitment Shares, (ii) 3,437,500 ordinary shares that we sold to Lincoln Park on August 5, 2020 for a total purchase price of $275,000 in an initial purchase under the LPC Purchase Agreement the (“Initial Purchase Shares”), and (iii) up to an additional 40,750,000 ordinary shares that we have reserved for sale to Lincoln Park under the LPC Purchase Agreement from time to time after the date of the LPC Registration Statement, if and when we determine to sell additional ordinary shares to Lincoln Park under the LPC Purchase Agreement. Since August 18, 2020, Lincoln Park has purchased 37,977,388 of our ordinary shares under the LPC Purchase Agreement, at prices ranging from $ 0.038 per share to $ 0.115 per share. The Company does not currently expect to sell any more shares to Lincoln Park under the LPC Purchase Agreement.
The LPC Purchase Agreement prohibits us from directing Lincoln Park to purchase any ordinary shares if those ordinary shares, when aggregated with all other ordinary shares then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park having beneficial ownership, at any single point in time, of more than 4.99% of the then total outstanding ordinary shares, as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 13d-3 thereunder, which limitation we refer to as the Beneficial Ownership Cap.
Issuances of our ordinary shares to Lincoln Park under the LPC Purchase Agreement will not affect the rights or privileges of our existing shareholders, except that the economic and voting interests of each of our existing shareholders will be diluted as a result of any such issuance. Although the number of ordinary shares that our existing shareholders own will not decrease, the ordinary shares owned by our existing shareholders will represent a smaller percentage of our total outstanding ordinary shares after any such issuance of ordinary shares to Lincoln Park under the LPC Purchase Agreement.
Yeshiva Orot Hateshuva
On November 4, 2020, we entered into a Secured Convertible Equipment Loan Agreement with Friends of Yeshiva Orot Hateshuva Inc. (“Friends”), pursuant to which Friends lent us $450,000 to purchase two liquid handler machines. Under the terms of the agreement, the note was issued with 41.4% Original Issue Discount, with Friends receiving a royalty of 12.5% of all amounts resulting from any diagnostic tests performed by the two liquid handler machines. During the initial payback period and up until the earlier of either (a) the Maturity Date, or (b) the aggregate loan amount is paid in full, all Royalty payments made to Investor will be counted towards their loan balance. Thereafter, the royalties continue so long as the machines are in use. The Maturity Date was March 4, 2021. On March 4, 2021, the Company and Friends agreed to extend the maturity date of the note to May 1, 2021, in exchange for a payment of $100,000 and the issuance of 2,000,000 ordinary shares, in each case to a charity designated by Friends. As of November 14, 2022, the Company has not made any royalty payments to Friends. The note has been repaid.
On July 19, 2021, we entered into a Secured Promissory Note and a Secured Loan Agreement with Friends, pursuant to which Friends lent us an aggregate principal amount of $1,666,666 (with net proceeds to us of $1,000,000), with a maturity date of January 19, 2022. On January 27, 2022, Friends agreed to extend the due date of the Original Note from January 19, 2022 to April 19, 2022 in exchange for increasing the balance due to $1,833,333 (the “Extension Agreement), inclusive of a 10% ($166,666) cash fee (the “Extension Cash Fee”) and a 13% equity fee (the “Extension Equity Fee”) valued at $216,666 that was issued as of January 31st, 2022 at the conversion price of $0.0575 per Ordinary share of Todos. On February 18, 2022, Todos and Friends agreed to further amend the understanding between the Parties as it relates to the Original Note and the Extension Agreement to allow for a partial repayment of the Original Note and allow for that Original Note to become convertible into Ordinary Shares of the Lender. If the note to Friends was not repaid by April 30, 2022, Friends had the right to convert One Hundred Percent (100%) of Loan Principal, less any amount that has been repaid, at a default conversion price equal to the lowest closing price of the Company’s Ordinary Shares in the ten (10) days prior to the conversion. The note was not repaid by April 30, 2022, and as of the date of this report on Form 10-Q, Friends has not converted the note.
Harper Advance
On December 31, 2020, we entered into a Secured Convertible Equipment Loan Agreement with Harper Advance LLC (“Harper”), pursuant to which Harper lent us $450,000 to purchase two liquid handler machines. Under the terms of the agreement, the note was issued with 40% Original Issue Discount, with Harper receiving a royalty of 12.5% of all amounts resulting from any diagnostic tests performed by the two liquid handler machines. During the initial payback period and up until the earlier of either (a) the Maturity Date, or (b) the aggregate loan amount is paid in full, all Royalty payments made to Investor will be counted towards their loan balance. Thereafter, the royalties continue so long as the machines are in use. The Maturity Date was April 30, 2021. As of November __, 2022, the Company has not made any royalty payments to Harper. Harper’s note was purchased by another investor and converted into ordinary shares of the Company.
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T-Cell Protect Hellas S.A.
On November 22, 2021, the Company entered into a Securities Purchase Agreement with T-Cell Protect Hellas S.A. (“T-Cell”) pursuant to which the Company agreed to issue a convertible promissory note (the “Note”) to T-Cell Protect in the principal amount of €1,000,000. To date, T-Cell has not fulfilled its obligation to pay for the Note, and therefore the Company has not yet issued the Note. The proceeds from this Transaction were intended to be used for the clinical development of Tollovir, the Company’s therapeutic candidate for hospitalized COVID-19 patients. On November 11, 2022, the Company terminated the agreement with T-Cell.
Testing 123, LLC
On March 14, 2022, the Company and Testing 123, LLC (the “Lender”) signed a Revolving Line of Credit Agreement, pursuant to which the Lender will provide the Company with a credit facility of up to $1,250,000 bearing a monthly interest of 5% calculated for a minimum period of 60 days. The Company may request advances under the agreement from the date of the agreement and until March 14, 2023. The Maturity Date of each draw will be the earlier of (i) 60 days from the date of the loan, (ii) the occurrence of an event of default as defined in the agreement and (iii) with respect to funds received by the Company through collections on receivables included in a Receivables Pool, as defined in the agreement, 3 days after such funds have been received by the escrow account agent or the Company. Additionally, under the terms of the Revolving Line of Credit Agreement, the Company agreed to issue to Testing 123, LLC, shares equal to a 10% ownership stake in Provista, which interest is protected against dilution. The Company has estimated the carrying value of the 10% shares of Provista at $635,000 and recorded $635,000 as interest expenses.
On September 6, 2022, the Company and the Lender entered into an amendment to the Revolving Line of Credit Agreement, which amendment (i) increased the credit facility to $2.5 million and (b) in exchange, the Company has promised to issue to the Lender 100,000 of the Company’s ordinary shares.
As of September 30, 2022, the Company utilized the entire credit facility. The Company has estimated the portion of the 10% shares of Provista at $740,000 which were recorded as interest expenses.
Crossover Notes
Yozma
On January 22, 2021, we entered into a Securities Purchase Agreement with Yozma Group Korea Ltd. (the “First Yozma Purchaser”) pursuant to which on January 29, 2021, the Company issued a convertible promissory note to the Purchaser in the principal amount of $4,857,142.86 for proceeds of $3,400,000 (the “Transaction”). The note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. In addition, the First Yozma Purchaser received a warrant to purchase up to 16,956,929 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. In the event that the Company effectuates a reverse split of its ordinary shares for a ratio in excess of 1:20, the resulting adjusted warrant shares and exercise price are limited to a 1:20 ratio.
The note is convertible into Ordinary Shares of the Company at a conversion price of $0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, the First Yozma Purchaser, upon request of the Company, will be obligated to exchange its note for Preferred A Shares that convert, solely at the discretion of the Company’s Board of Directors, into Ordinary Shares at a conversion rate of 1,000 Ordinary Shares per Preferred A Share. As of July 22, 2022, there are 50,000 Preferred A Shares authorized which equals a total possible issuance of 50 million Ordinary Shares pursuant to the conversion of the Preferred A Shares.
On April 27, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Yozma Global Genomic Fund (the “Second Yozma Purchaser” and together with the First Yozma Purchaser, the “Yozma Purchasers”) pursuant to which on April 28, 2021, the Company issued a convertible promissory note to the Purchaser in the principal amount of $4,714,285.71 for proceeds of $3,300,000. The note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The note is convertible into Ordinary Shares of the Company at a conversion price of $0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, the Second Yozma Purchaser, upon request of the Company, will be obligated to exchange its note for Preferred A Shares that convert, solely at the discretion of the Company’s Board of Directors, into Ordinary Shares at a conversion rate of 1,000 Ordinary Shares per Preferred A Share.
The notes issued to the Yozma Purchasers are currently past due, and the Company is negotiating an extension of the maturity dates with Yozma.
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Kips Bay
On April 8, 2021, the Company entered into a Securities Purchase Agreement with Kips Bay Select LP (the “Purchaser”) pursuant to which the Company we issuedagreed to issue a convertible promissory convertible note (the “Note”“First Kips Bay Note”) to the Purchaser in the principal amount of $4,857,142.86$4,285,714.29 for proceeds of $3,400,000 (the “Transaction”).$3,000,000. The closing is scheduled for January 29,occurred on April 12, 2021. The First Kips Bay Note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. In addition, the Purchaser received a warrant to purchase up to 16,000,000 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. In the event that the Company effectuates a reverse split of its Ordinary Shares for a ratio in excess of 1:20, the resulting adjusted warrant shares and exercise price are limited to a 1:20 ratio. The Company used the net proceeds from the First Kips Bay Note to initiate the Phase 2 for Tollovir™ clinical trial in COVID-19 patients, complete the acquisition of Provista Diagnostics, Inc. and for general corporate purposes.
The First Kips Bay Note is convertible into Ordinary Shares at a conversion price of $0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, the Purchaser, upon request of the Company, will be obligated to exchange the Original Issue Discount portion of the First Kips Bay Note for Preferred A Shares, while the Purchaser may elect to convert the remaining principal amount of its notes.
The First Kips Bay Note is currently past due and the Company is negotiating an extension of the maturity date with the Purchaser.
Until May 5, 2022, the Purchaser had the option to purchase an additional note in the principal amount of $5,285,714.20 for proceeds of $3,700,000 and an additional warrant to purchase 16,000,000 Ordinary Shares. The purchaser did not exercise the option.
On July 7, 2021, the Company entered into a Securities Purchase Agreement with the Purchaser pursuant to which the Company agreed to issue a convertible promissory note (the “Second Kips Bay Note”) to the Purchaser in the principal amount of $1,535,714 for proceeds of $1,075,000. The closing occurred on July 7, 2021. In addition, the Purchaser received a warrant to purchase up to 3,440,000 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. The Second Kips Bay Note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The Second Kips Bay Note is convertible into Ordinary Shares of the Company (the “Conversion Shares”) at a conversion price of $0.0599$0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, the Purchaser, upon request of the Company, will be obligated to exchange the Original Issue Discount portion of the Second Kips Bay Note for Preferred A Shares, while the Purchaser may elect to convert the remaining principal amount of its notes. The Company used the net proceeds for general corporate purposes.
The Second Kips Bay Note is currently past due and the Company is negotiating an extension of the maturity date with the Purchaser.
On October 21, 2021, Todos Medical Ltd. (the “Conversion Price).“Company”) entered into a Securities Purchase Agreement with the Purchaser pursuant to which the Company agreed to issue a convertible promissory note (the “Third Kips Bay Note”) to the Purchaser in the principal amount of $1,428,571.43 for proceeds of $1,000,000. The closing occurred on October 22, 2021. In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 16,956,9293,440,000 shares of Common Stock (the “Warrant Shares”) of the Company with an exercise price equal to $0.107415 per share. The Warrantwarrant is exercisable for 5 years from the date of issuance. The Third Kips Bay Note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The Third Kips Bay Note is convertible into shares of Common Stock at a conversion price of $0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, the Purchaser, upon request of the Company, will be obligated to exchange the Original Issue Discount portion of its Third Kips Bay Note for Preferred A Shares, while the Purchaser may elect to convert the remaining principal amount of its notes. The Company intends to use the net proceeds from this Third Kips Bay Note to continue funding the ongoing Phase 2 clinical trial of Tollovir® in hospitalized COVID-19 patients, beginning the initial marketing campaign for the cPass neutralizing antibody test launch at Provista Diagnostics and general corporate purposes.
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Merkakein
On July 6, 2021, the Company entered into a Securities Purchase Agreement with S.B. Nihul Merkakein pursuant to which the Company issued a convertible promissory note to Merkakein in the principal amount of $285,714 for proceeds of $200,000. The closing occurred on July 6, 2021. In addition, Merkakein received a warrant to purchase up to 997,466 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. The Company used the net proceeds for general corporate purposes. The note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The note is convertible into Ordinary Shares at a conversion price of $0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, Merkakein, upon request of the Company, will be obligated to exchange its note for Preferred A Shares that convert, solely at the discretion of the Company’s Board of Directors, into Ordinary Shares at a conversion rate of 1,000 Ordinary Shares per Preferred A Share.
The Note is currently past due and the Company is negotiating an extension of the maturity date with Merkakein.
Mercer Street
On September 23, 2021, the Company completed the conditions precedent required to enter into a Securities Purchase Agreement with Mercer Street Global Opportunity Fund, LLC pursuant to which the Company issued a convertible promissory note to Mercer Street in the principal amount of $2,285,142.86 for proceeds of $2,000,000. In addition, the Purchaser received a warrant to purchase up to 11,924,636 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. The Company intends to use the net proceeds from the conversion shares and the warrant shares to initiate Phase 2/3 trials for Tollovir™ COVID-19 patients, initiate digital marketing for its dietary supplement Tollovid®, increase sales & marketing for Provista Diagnostics, and for general corporate purposes. The note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The note is convertible into Ordinary Shares of the Company at a conversion price of $0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, Mercer Street, upon request of the Company, will be obligated to exchange the Original Issue Discount portion of its note for Preferred A Shares, while Mercer Street may elect to convert the remaining principal amount of its notes. On April 11, 2022, Mercer Street converted $748,750 of principal and accrued interest into 15,625,000 ordinary shares.
Quick Capital
On August 9, 2021, the Company entered into a Securities Purchase Agreement with Quick Capital, LLC pursuant to which the Company issued a convertible promissory note to Quick Capital in the principal amount of $142,857 for proceeds of $100,000. The closing occurred on August 9, 2021 . In addition, Quick Capital received a warrant to purchase up to 498,733 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. The Company used the net proceeds for general corporate purposes. The note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The note is convertible into Ordinary Shares at a conversion price of $0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, Quick Capital, upon request of the Company, will be obligated to exchange its note for Preferred A Shares that convert, solely at the discretion of the Company’s Board of Directors, into Ordinary Shares at a conversion rate of 1,000 Ordinary Shares per Preferred A Share.
On December 14, 2021, the Company entered into a Securities Purchase Agreement with Quick Capital pursuant to which the Company issued a convertible promissory note to Quick Capital in the principal amount of $142,857 for proceeds of $100,000. The note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The note is convertible into Ordinary Shares at a conversion price of $0.0599. In addition, Quick Capital received a warrant to purchase up to 5,613,334 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. The Company intends to use the net proceeds for general corporate purposes. In the event that the Company lists its Ordinary Shares on a national securities exchange, Quick Capital, upon request of the Company, will be obligated to exchange its note for Preferred A Shares that convert, solely at the discretion of the Company’s Board of Directors, into Ordinary Shares at a conversion rate of 1,000 Ordinary Shares per Preferred A Share.
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Greentree
On October 11, 2021, the Company entered into a Securities Purchase Agreement with Greentree Financial Group pursuant to which the Company issued a convertible promissory note to the Purchaser in the principal amount of $428,571 for proceeds of $300,000. In addition, Greentree received a warrant to purchase up to 1,252,087 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. The Company used the net proceeds for general corporate purposes. The note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The note is convertible into Ordinary Shares at a conversion price of $0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, Greentree, upon request of the Company, will be obligated to exchange the Original Issue Discount portion of its note for Preferred A Shares, while Greentree may elect to convert the remaining principal amount of its notes.
Leonite
On November 2, and November 24, 2021, the Company entered into a Securities Purchase and other related documents with Leonite Fund I, LP pursuant to which the Company issued a convertible promissory note to Leonite in the principal amount of $1,432,142 for proceeds of $1,002,500. The closing occurred on November 2, 2021. The note has a maturity date of one year from the date of a issuance and pays interest at a rate of 4% per annum. The note is convertible into Ordinary Shares at a conversion price of $0.0599.
In addition, the Purchaser received a warrant to purchase up to 5,613,334 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. The Company intends to use the net proceeds for general corporate purposes.
In the event that the Company lists its Ordinary Shares on a national securities exchange, Leonite, upon request of the Company, will be obligated to exchange the Original Issue Discount portion of its note for Preferred A Shares, while Leonite may elect to convert the remaining principal amount of its notes.
Ascendant
On December 21, 2021, the Company entered into a Securities Purchase Agreement with Ascendant, LLC pursuant to which the Company issued a convertible promissory note to Ascendant in the principal amount of $300,000 for proceeds of $210,000. The closing occurred on December 21, 2021. In addition, Ascendant received a warrant to purchase up to 1,252,087 Ordinary Shares of the Company with an exercise price equal to $0.107415 per share. The warrant is exercisable for 5 years from the date of issuance. The Company used the net proceeds for general corporate purposes. The note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The note is convertible into Ordinary Shares at a conversion price of $0.0599. In the event that the Company lists its Ordinary Shares on a national securities exchange, Ascendant, upon request of the Company, will be obligated to exchange the Original Issue Discount portion of its note for Preferred A Shares, while Ascendant may elect to convert the remaining principal amount of its notes.
Crossover Notes Registration Statement
On May 13, 2021, the Company filed a registration statement with the Securities and Exchange Commissionon Form S-1, registering for resale all of the Conversion Sharesconversion shares and the Warrant Shares, but such registration statement has not yet become effective.warrant shares described above under the headings of Kips Bay, Merkakein, Mercer Street, Quick Capital, Greentree, Leonite, and Ascendant (the “Registration Statement), except for the conversion shares issuable to Yozma Purchasers and the conversion shares issuable under the First Kips Bay Note, all of which were already saleable under Rule 144. The Registration Statement was subsequently amended in January 2022 and February 2022 and was declared effective on February 4, 2022. Subsequent to the effective date of such registration statement,the Registration Statement, if the closing sale price of the Common StockOrdinary Shares averages less than the then Conversion Priceconversion price over a period of ten (10) consecutive trading days, the Conversion Priceconversion price shall reset to such average price. If the 10 day volume weighted average price of the Common StockOrdinary Shares continues to be less than the Conversion Price,conversion price then the Conversion Priceconversion price should reset to such 10-day average price with a maximum of a 20% discount from the initial Conversion Price.
The foregoing descriptions of the SPA, the Note and the Warrant do not purport to be complete and are qualified in their entirety by reference to the full text of the SPA, Note and Warrant, forms of which are attached as Exhibit 10.1, 10.2 and 10.3, respectively, to the Company’s Current Report on Form 8-K dated January 26, 2021, and are incorporated herein by reference.
The Company and a family office (the “Purchaser”) are parties to that certain Securities Purchase Agreement, dated as of July 9, 2020 (the “Purchase Agreement”), pursuant to which Purchaser purchased aggregate principal amount of $850,000 of convertible notes (the “July 2020 Convertible Notes”) from the Company. On March 3, 2021, the Company and the Purchaser entered into a Closing Agreement (the “Closing Agreement”) pursuant to which the Purchaser exercised its right to invest an additional $847,570 into the Company of July 2020 Convertible Notes (the “Tranche 2 Securities”).
The Company filed a registration agreement with respect to the ordinary shares underlying the Tranche 2 Securities, but such registration statement has not yet become effective.
The foregoing description of the Closing Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Closing Agreement, a form of which is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 10, 2021, which is incorporated herein by reference.
During the first quarter of 2021, the Company’s contractual agreement to supply Covid-19 testing kits to a significant customer expired. At the customer’s request, the Company continued to supply Covid-19 testing kits until such time as the customer requested that the Company stop doing so. The customer has not yet paid for some of the Covid-19 testing kits so supplied, and has not yet renewed its agreement with the Company. The Company believes that ultimately the customer will pay for the Covid-19 testing kits so supplied and will renew its agreement to purchase Covid-19 testing kits from the Company. Should the customer not renew its agreement to purchase Covid-19 testing kits from the Company, it could have a material adverse effect on the Company’s revenues from the sale of Covid-19 testing kits.
Contractual Obligations
Reverse Split
At an extraordinary general meeting of our shareholders to be held on September 28, 2022, our shareholders approved a reverse share split of the Company’s ordinary shares within a range of 1:2 to 1:500, to be effective at the ratio and on a date to be determined by the Board of Directors of the Company (the “Reverse Split”). All per share amounts and calculations in this quarterly report on Form 10-Q and the accompanying financial statements do not reflect the effects of the Reverse Split.
SARS-nCoV-2 Related Business
With the onset of COVID-19, Todos sought to apply its expertise in developing blood tests for the early detection of cancer and Alzheimer’s disease to distributing and then developing screening tests for the pandemic.
On March 23, 2021, we announced that we have entered into an automation and reagent supply agreement with MAJL Diagnostics (“MAJL”). Under the terms of the agreement, Todos will implement its automation solution, including Tecan™ liquid handlers, automated RNA extraction machines, as well as a 384-well PCR machine capable of conducting COVID, cancer genetics and pharmacogenomics testing, in order to become the provider of all COVID-19 PCR testing reagents and supplies.
On March 29, 2021, we announced the successful installation of automated lab equipment and completion of training for a lab client in Brooklyn, NY. The following table summarizesimplementation of the Todos automation solution has expanded the lab’s processing capacity to 6,000 PCR tests per day from 500 PCR tests per day, with the potential to quickly expand to up to 12,000 PCR tests per day. The lab will be implementing EUA approved PCR testing for COVID-19 testing, as well as COVID + influenza A & B PCR testing upon request for select clients. Additionally, through the future implementation of pooling, the lab could potentially increase processing capacity to in excess of 40,000 PCR tests per day at a 4:1 ratio.
On March 30, 2021, we announced that we have entered into a distribution partnership with Osang Healthcare (OHC) of South Korea, to distribute the GeneFinder™ COVID-19 Plus RealAMP Kit in the United States. Todos intends to make GeneFinder Plus the primary kit used for distribution in its fully integrated and automated COVID-19 PCR testing lab solutions. GeneFinder Plus has been granted Emergency Use Authorization (EUA) by the US FDA.
We market our contractual obligationsCOVID-19 test kits directly to clinical laboratories throughout the U.S. as well as through our distributors, who include Meridian, Dynamic Distributors, LLC, and others.
On March 11, 2022, the Company entered into a Share Purchase Agreement (the “SPA”) with 3CL Sciences Ltd. (“3CL”), an Israeli corporation, and NLC Pharma Ltd. (“NLC”), an Israeli corporation, pursuant to which (a) 3CL Sciences will purchase all therapeutic, diagnostic, dietary supplement and pharmaceutical assets from NLC that relate to 3CL protease biology (which is used in the development, manufacture, sale and distribution of March 31, 2021:
| Payments due by period | ||||||||||||||||||||
| (US$) | Less than 1 | More than | ||||||||||||||||||
| Total | year | 1-3 years | 3-5 years | 5 years | ||||||||||||||||
| Convertible bridge loans, net | 12,713,412 | 12,713,412 | - | - | - | |||||||||||||||
| Other loans, net | 2,175,214 | 2,175,214 | ||||||||||||||||||
| Royalties to BGU (1) | 488,000 | 293,000 | 90,000 | 51,000 | 54,000 | |||||||||||||||
| Total (2) | 15,376,626 | 15,181,626 | 90,000 | 51,000 | 54,000 | |||||||||||||||
(1) This balance was measured basedTollovid™ and Tollovir™) from NLC in exchange for a 100% equity interest in 3CL, (b) 3CL will allot 30.5% of its shares to the Company in exchange for the Company making a total cash commitment of $8 million to 3CL, (c) NLC will sell 7.54% of 3CL’s issued and outstanding shares to the Company in exchange for the Company making a total cash commitment of $2 million to NLC, and (d) NLC will exchange 14.31% of 3CL’s issued and outstanding shares for shares of the Company having a market value of $3,800,000 on the futureday prior to the Closing, such that the Company will own 52% of 3CL’s issued and outstanding share capital and NLC will own 48% of 3CL’s issued and outstanding share capital. The Company and NLC have agreed to identify a seasoned biopharmaceutical CEO to manage 3CL going forward. The board of directors of 3CL Sciences will be made up of five (5) individuals: three (3) appointed by the Company and two (2) appointed by NLC. As of the date of this quarterly report on Form 10-Q, the closing of the SPA has not yet occurred.
On September 7, 2022 (“Effective Date”), the Company entered into a supplement (“Extension Agreement”), to the SPA. As a consequence, NLC Pharma has assigned ownership of all relevant intellectual property to 3CL Pharma Ltd. The assignment includes the patent applications for dual mechanism (3CL protease inhibitor and CCR5 antagonist) Phase 2 therapeutic drug candidate Tollovir™, commercial-stage 3CL protease inhibitor immune support supplement Tollovid™ and 3CL protease biomarker test TolloTest™ for SARS-CoV-2 infectivity monitoring and PASC/Long COVID viral persistence assessment (the “IP”). 3CL Pharma Ltd. is now preparing to launch a crowdfunding campaign to fund the necessary requirements for an Emergency Use Authorization (EUA) submission to the US FDA for Tollovir in the treatment of hospitalized (severe/critical) COVID-19 patients, the clinical development of Tollovir, Tollovid and TolloTest in Long COVID, as well as a national marketing campaign for Tollovid to support US sales. Completion of the crowdfunding will fulfill Todos’ obligations under the SPA.
Nerd Hemp Distributor Agreement
On September 22, 2022, Todos Botanicals, Inc., a wholly owned subsidiary of Todos, entered into a distributor agreement (the “Agreement”) to supply its proprietary 3CL protease inhibitor immune support dietary supplement Tollovid™ and botanical ‘0% THC’ CBD products in pill, tincture, gummy, candy and cream finished products to Nerd Hemp, Inc., an automated retail (AI Retail) machine company focused on the distribution of CBD products. AI Retail machines are similar to vending machines; however, they use artificial intelligence to monitor product supply to optimize the re-ordering and stocking process. The new Tollovid and CBD products for the AI Retail machines will be manufactured in different adult and pediatric formulations in Todos’ newly leased Cleburne, Texas-based facility. Nerd Hemp has already been contracted to install 5500 AI Retail machines across the United States in retail outlets including airports, shopping centers, universities, sporting venues, fitness centers, bars, and grocery outlets. These AI Retail machines are located in high traffic and secure locations very similar to the Redbox model. The first deliveries are expected to take place in December 2022 in grocery outlets like Lowes Markets, a privately held grocer with over 140 locations in the southwestern United States. Todos anticipates $6.0 million in revenue in the first quarter of 2023 from this contract as Nerd Hemp commences its nationwide rollout.
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Provista Acquisition
On April 19, 2021, the Company entered into an Agreement to Purchase Provista Diagnostics, Inc. (“Agreement to Purchase”) with Strategic Investment Holdings, LLC (“SIH”), Ascenda BioSciences LLC (“Ascenda”) and Provista Diagnostics, Inc. (“Provista”). Ascenda was the sole owner of the outstanding securities of Provista and SIH is the sole owner of all the outstanding securities of Ascenda.
Pursuant to the Agreement to Purchase, the Company acquired Provista from Ascenda and SIH for an aggregate purchase price of $7.5 million consisting of an initial cash payments discounted using an interest ratepayment of 21%$1.25 million, the issuance of $1.5 million in Ordinary Shares priced at $0.0512 per share, the issuance to SIH of a $3.5 million convertible promissory note dated April 19, 2021 (the “Note”) and the payment on for before July 1, 2021 of $1.25 million in cash (the “July Payment”), which represents, accordingpayment the Company had the right to, management’s estimate,and did, extend to July 15, 2021. The Provista shares acquired by the applicable rateCompany remained in an escrow account until the July Payment was made.
The Note has a maturity date of riskApril 8, 2025, and is convertible into Ordinary Shares of the Company at a conversion price equal to the lesser of $0.05 or the volume weighted average price of the last 20 trading days for us.the Ordinary Shares prior to the date of conversion. In the event SIH delivers a Notice of Conversion to the Company at a per share price less than $0.05 ($0.05), the Company has the right to immediately notify SIH of its intention to pay the conversion amount in cash within three (3) business days of receipt of the Notice of Conversion (i.e., before SIH would take possession of shares converted under the Notice of Conversion).
(2) This does not includeIn the repaymentevent that the Company lists its Ordinary Shares on a national securities exchange, the Note shall automatically be exchanged into ordinary shares with a conversion price equal to the lesser of approximately $272,000(a) $0.05, (b) the opening price on the day of grants we received from the IIAuplisting provides there is no transaction associated with the uplisting or (c) the deal price of an uplisting transaction.
On February 4, 2022 and on March 10, 2022, the Company issued a total of 49,620,690 ordinary shares upon conversion of $1,804,000 of principal and accrued interest, thereon, which shall be repaid as royalties uponout of a convertible note in the commercializationprincipal amount of our products.$3,500,000 issued in the acquisition of Provista.
Employees and Consultants
During the nine months ended September 30, 2022 and the year ended December 31, 2021, the Company hired 5 and 23 new employees, respectively, including management and staffing of laboratory, sales and marketing and general administrative staffing.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our market risk during the firstsecond quarter of 2021.2022. For a discussion of our exposure to market risk, please see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 20202021 Form 10-K.
TODOS MEDICAL LTD.
ITEM 4. CONTROLS AND PROCEDURES
| (a) | Disclosure Controls and Procedures. |
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2021,September 30, 2022, or the Evaluation Date. Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are ineffective in recording, processing, summarizing and reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is not accumulated and communicated to management, including our principal executive and financial officers, in a manner sufficient to allow timely decisions regarding required disclosure, due to lack of sufficient internal accounting personnel, segregation of duties, lack of sufficient internal controls (including IT general controls) that encompass the Company as a whole with respect to entity and transactions level controls in order to ensure complete documentation of complex and non-routine transactions and adequate financial reporting.
Management has identified corrective actions to remediate such material weaknesses, and subject to fundraising, which includes hiring additional employees,employees. Management intends to implement procedures to remediate such material weaknesses during the fiscal year 2021;2022; however, the implementation of these initiatives may not fully address any material weakness or other deficiencies that we may have in our disclosure controls and procedures.
| (b) | Changes in Internal Control over Financial Reporting. |
During the quarter ended March 31, 2021,September 30, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
There have been no material changes to our legal proceedings as described in “Part I, Item 3. Legal Proceedings” of our 2021 Form 10-K, except for the following:
On April 7, 2022, the Company and Toledo Advisors LLC (“Toledo”) signed a Settlement Agreement pursuant to which upon execution of the agreement the Company paid Toledo $130,000 and issued to Toledo $200,000 worth of ordinary shares. The parties agreed that upon delivery of the cash payment and shares, the parties would discontinue the complaint filed by Toledo on January 7, 2022, and that Toledo irrevocably and unconditionally releases and discharges the Company from its June 19, 2020 Form 10-K.financing agreement and July 28, 2020 Royalty Agreement.
A lawsuit has been commenced by Todos against Biodiagnostic Labs, Inc. in the Supreme Court of New York. Todos claims that Biodiagnostics owes approximately $550,000 arising out of unpaid invoices for testing kits sold and delivered. Todos is also seeking repossession of medical equipment valued at approximately $500,000 over which there is presently no dispute that Todos retains sole ownership. Todos terminated its relationship with Biodiagnostics and demanded return of the medical equipment in November of 2021. Efforts to settle the dispute amicably were unsuccessful. Demand was made for return of the equipment. Biodiagnostics failed to comply with that demand. A complaint was filed on February 25, 2022. This dispute is only in its initial legal stages. No discovery has been conducted, and thus the nature or extent of any potential counterclaims/setoffs is unknown. However, at this early stage, it does not appear that Todos faces any material exposure, and it would appear that Biodiagnostics will ultimately be liable to Todos on both the monetary and repossession claims if the case were to be litigated. In addition to vigorous pursuit of the lawsuit, Todos is also considering making a pre-judgment motion authorizing the sheriff to seize the equipment.
Through counsel, Todos made several demands upon MOTOPARA Foundation for the return of medical equipment owned by Todos. Initial demand was made to Chief Executive Officer Eric S. Canonico, and follow up demand to attorney Donald J. Hodson. To date, Motopara has ignored those demands. No legal action has been commenced to date. Todos intends to commence legal action and is currently exploring doing so in conjunction with Integrated Health LLC, which has claims arising out of the same series of transactions and events which give rise to the repossession claim. This dispute is only in its initial legal stages. No discovery has been conducted, and thus the nature or extent of any potential counterclaims/setoffs is unknown. However, at this early stage, there is no known dispute to Todos’ ownership or immediate right of possession, and it does not appear that Todos faces negative exposure.
On September 4, 2022, Rami Zigdon, the Company’s former Chief Business Officer (the “Applicant”) filed a motion (the “Motion”) with the Tel Aviv District Court asserting purported claims relating to his employment with the Company (which ended in early April 2022). The Applicant asserts (inter alia) claims for severance pay, unpaid salary, various social benefits, and related claims, totaling NIS 1,255,684. In addition, the Applicant asserts that he is entitled to receive Company stock options.
Prior to the filing of the Application, Israeli counsel for the Company had been in written communication with the Israeli counsel of the Applicant in an effort to obtain documentation that allegedly demonstrates entitlement of the Applicant to receive securities of the Company. Such documentation was not provided to the Company or to its counsel.
On October 26, 2022, the Company filed with the Tel Aviv Court its response (opposition) to the Motion (the “Response”). In the Response, the Company denied substantially all of the allegations set forth in the Motion.
It is expected that counsel for the Applicant will file a reply to the Response by early November. The court has set a hearing in connection with the Motion for January 15, 2023.
The Company believes that its exposure from the Motion is not material.
There have been no material changes to our risk factors from those disclosed in “Part I, Item 1A. Risk Factors” of our 20202021 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There are no transactions that have not been previously included in a Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
4 NTD: Updates?
TODOS MEDICAL LTD.
Not applicable.
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* Furnished herewith.Filed herewith
** Previously filed
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.
| Todos Medical Ltd. | ||
| Date: | By: | /s/ Gerald Commissiong |
| Gerald Commissiong | ||
| Chief Executive Officer | ||
| Date: | By: | /s/ Daniel Hirsch |
| Daniel Hirsch | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||