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 June 30,March 31, 20212022
| ☐ | 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
| (I.R.S. Employer
|
121 Derech Menachem Begin, 30th Floor, Tel Aviv, 6701203 Israel
(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 ☒ 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 ☒ 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. ☒
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 ☒
As of September 8, 2021,May 13, 2022, the registrant had ordinary shares outstanding.
TODOS MEDICAL LTD.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2021MARCH 31, 2022
TABLE OF CONTENTS
| 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, and 3CL Sciences Ltd., an Israeli 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 quarterlyannual report on Form 10-Q, on July 26, 2021, Todos’ shareholders approved a reverse split of its shares based upon a ratio to be determined by Todos’ management.management, and at their next annual meeting, Todos’ shareholders will be asked to approve an extension of the deadline for the reverse split.
| 3 |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2021MARCH 31, 2022
| F-1 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2021MARCH 31, 2022
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| F-2 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands except share and per share amounts)
| June 30, 2021 | December 31, 2020 | |||||||||||||||
| As of | As of | As of March 31, | As of December 31, | |||||||||||||
| June 30, 2021 | December 31, 2020 | 2022 | 2021 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 308 | $ | 935 | $ | 74 | $ | 189 | ||||||||
| Trade receivables | 1,792 | 378 | ||||||||||||||
| Trade receivables, net | 1,485 | 2,520 | ||||||||||||||
| Inventories | 1,704 | 536 | 1,642 | 1,603 | ||||||||||||
| Other current assets | 123 | 601 | 841 | 404 | ||||||||||||
| Total current assets | 3,927 | 2,450 | 4,042 | 4,716 | ||||||||||||
| Non-current assets: | ||||||||||||||||
| Investment in affiliated companies accounted for under equity method, net | 658 | 745 | ||||||||||||||
| Investment in affiliated companies, net | 40 | 40 | ||||||||||||||
| Investment in other company | 455 | 224 | 455 | 455 | ||||||||||||
| Property and equipment, net | 2,596 | 1,999 | 2,113 | 2,045 | ||||||||||||
| Prepaid expenses | 361 | 591 | ||||||||||||||
| Right of use asset arising from operating lease | 123 | 143 | ||||||||||||||
| Goodwill | 7,761 | - | 5,594 | 6,216 | ||||||||||||
| Intangible assets | 1,500 | - | 1,350 | 1,500 | ||||||||||||
| Total non-current assets | 13,331 | 3,559 | 9,675 | 10,399 | ||||||||||||
| Total assets | $ | 17,258 | $ | 6,009 | $ | 13,717 | $ | 15,115 | ||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Receivables financing facility, net | $ | - | $ | 1,306 | $ | 895 | $ | - | ||||||||
| Loans, net | 2,756 | 1,672 | 2,708 | 2,023 | ||||||||||||
| Accounts payable | 1,087 | 1,640 | 3,299 | 2,276 | ||||||||||||
| Deferred revenues | 13 | 844 | ||||||||||||||
| Other current liabilities | 3,941 | 2,316 | 3,501 | 4,284 | ||||||||||||
| Liability for minimum royalties | 296 | 291 | 417 | 377 | ||||||||||||
| Total current liabilities | 8,093 | 8,069 | 10,820 | 8,960 | ||||||||||||
| Non-current liabilities: | ||||||||||||||||
| Convertible bridge loans, net | 15,560 | 5,965 | 27,028 | 25,406 | ||||||||||||
| Derivative warrants liability, net | 7 | 301 | ||||||||||||||
| Fair value of bifurcated convertible feature of convertible bridge loans | 2,077 | 2,500 | 187 | 4,182 | ||||||||||||
| Operating lease liability | 118 | 141 | ||||||||||||||
| Deferred taxes | 315 | - | 284 | 315 | ||||||||||||
| Liability for minimum royalties | 205 | 185 | 196 | 183 | ||||||||||||
| Other non-current liabilities | 245 | 140 | ||||||||||||||
| Total non-current liabilities | 18,164 | 8,951 | 28,058 | 30,367 | ||||||||||||
| Shareholders’ deficit: | ||||||||||||||||
| Ordinary Shares of NIS 0.01 par value each: | ||||||||||||||||
| Authorized: 1,000,000,000 shares at June 30, 2021 and December 31, 2020; Issued and outstanding: 607,760,492 shares and 376,335,802 shares at June 30, 2021 and December 31, 2020, respectively | 1,765 | 1,059 | ||||||||||||||
| Ordinary Shares of NIS par value each: Authorized: shares at June 30, 2021 and December 31, 2020; Issued and outstanding: shares and shares at June 30, 2021 and December 31, 2020, respectively | 1,765 | 1,059 | ||||||||||||||
| Authorized: shares at March 31, 2022 and December 31, 2021; Issued and outstanding: shares and shares at March 31, 2022 and December 31, 2021, respectively | 3,423 | 2,913 | ||||||||||||||
| Additional paid-in capital | 50,684 | 35,211 | 69,599 | 63,470 | ||||||||||||
| Accumulated deficit | (61,448 | ) | (47,281 | ) | (98,183 | ) | (90,595 | ) | ||||||||
| Total shareholders’ deficit | (8,999 | ) | (11,011 | ) | (25,161 | ) | (24,212 | ) | ||||||||
| Total liabilities and shareholders’ deficit | $ | 17,258 | $ | 6,009 | $ | 13,717 | $ | 15,115 | ||||||||
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)
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Six months period ended June 30, | Three months period ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Revenues | $ | 6,763 | $ | 32 | $ | 1,732 | $ | 32 | ||||||||
| Cost of revenues | (4,148 | ) | (11 | ) | (913 | ) | (11 | ) | ||||||||
| Gross profit | 2,615 | 21 | 819 | 21 | ||||||||||||
| Research and development expenses | (643 | ) | (569 | ) | (239 | ) | (465 | ) | ||||||||
| Sales and marketing expenses | (1,958 | ) | (1,430 | ) | (599 | ) | (680 | ) | ||||||||
| General and administrative expenses | (3,204 | ) | (925 | ) | (1,643 | ) | (595 | ) | ||||||||
| Operating loss | (3,190 | ) | (2,903 | ) | (1,662 | ) | (1,719 | ) | ||||||||
| Financing income (expenses), net | (10,485 | ) | (4,320 | ) | 5,171 | (866 | ) | |||||||||
| Share in losses of affiliated companies accounted for under equity method, net | (492 | ) | - | (119 | ) | - | ||||||||||
| Net income (loss) | $ | (14,167 | ) | $ | (7,223 | ) | $ | 3,390 | $ | (2,585 | ) | |||||
| Basic and diluted net income (loss) per share | $ | (0.02 | ) | $ | (0.04 | ) | $ | 0.01 | $ | (0.01 | ) | |||||
| Weighted average number of ordinary shares outstanding attributable to ordinary shareholders used in computation of basic and diluted net income (loss) per share | 585,225,006 | 164,423,927 | 575,898,572 | 189,945,607 | ||||||||||||
Three months period ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Revenues | $ | 2,199 | $ | 5,031 | ||||
| Cost of revenues | (1,317 | ) | (3,235 | ) | ||||
| Gross profit | 882 | 1,796 | ||||||
| Research and development expenses | (442 | ) | (713 | ) | ||||
| Sales and marketing expenses | (1,081 | ) | (1,358 | ) | ||||
| General and administrative expenses | (3,476 | ) | (1,562 | ) | ||||
| Operating loss | (4,117 | ) | (1,837 | ) | ||||
| Financing expenses, net | (3,471 | ) | (15,654 | ) | ||||
| Share in losses of affiliated companies accounted for under equity method, net | - | (66 | ) | |||||
| Net loss | $ | (7,588 | ) | $ | (17,557 | ) | ||
| Basic net loss per share | $ | (0.01 | ) | $ | (0.04 | ) | ||
| Diluted net loss per share | $ | (0.01 | ) | $ | (0.04 | ) | ||
| Weighted average number of ordinary shares outstanding attributable to ordinary shareholders used in computation of basic net loss per share | 1,036,898,212 | 462,650,478 | ||||||
| Weighted average number of ordinary shares outstanding attributable to ordinary shareholders used in computation of diluted net loss per share | 1,036,898,212 | 464,214,552 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-4 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(U.S. dollars in thousands except share and per share amounts)
| Shares | Amount | Additional paid-in capital | Accumulated deficit | Total Shareholders’ deficit | ||||||||||||||||
| 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 unit consisting of ordinary shares and stock warrants | ||||||||||||||||||||
| Issuance of unit consisting of ordinary shares and stock warrants, shares | ||||||||||||||||||||
| Issuance of ordinary shares as partial settlement of financial liability | ||||||||||||||||||||
| Issuance of ordinary shares as partial settlement of financial liability, shares | ||||||||||||||||||||
| Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions | 350,000 | 1 | 376 | - | 377 | |||||||||||||||
| Commitment to issue units consisting of ordinary shares and stock warrants | - | - | 30 | - | 30 | |||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | - | 466 | - | 466 | |||||||||||||||
| Issuance of ordinary shares as settlement of previous commitments | ||||||||||||||||||||
| Issuance of ordinary shares as settlement of previous commitments, shares | ||||||||||||||||||||
| 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 stock warrants to lenders upon convertible bridge loans transactions | ||||||||||||||||||||
| Issuance of stock warrants to lenders upon convertible bridge loans transactions, 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 | ||||||||||||||||||||
| Issuance of ordinary shares or commitment for issuance of fixed number of ordinary shares to service providers | ||||||||||||||||||||
| Issuance of ordinary shares or commitment for issuance of fixed number of ordinary shares to service providers, shares | ||||||||||||||||||||
| Issuance of ordinary shares to service providers | 5,718,588 | 17 | 815 | - | 832 | |||||||||||||||
| Stock-based compensation to service providers | ||||||||||||||||||||
| Commitment to issue shares in acquisition of subsidiary | ||||||||||||||||||||
| Stock-based compensation to employees and directors | ||||||||||||||||||||
| 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 | ) | |||||||||||||
| Changes during the three months period ended June 30, 2020: | ||||||||||||||||||||
| Issuance of ordinary shares for call option to acquire potential acquiree | 13,008,976 | 37 | 963 | - | 1,000 | |||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | 13,015,711 | 36 | 866 | - | 902 | |||||||||||||||
| Classification of derivative warrants liability into equity as result of partial conversion of convertible bridge loans into ordinary shares | - | - | 193 | - | 193 | |||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | - | 126 | - | 126 | |||||||||||||||
| Issuance of ordinary shares as partial settlement of financial liability | 13,750,000 | 39 | 910 | - | 949 | |||||||||||||||
| Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions | 720,000 | 2 | 39 | - | 41 | |||||||||||||||
| Issuance of ordinary shares to service providers | 7,309,915 | 21 | 966 | - | 987 | |||||||||||||||
| Net loss for the period | - | - | - | (2,585 | ) | (2,585 | ) | |||||||||||||
| Balance as of June 30, 2020 (unaudited) | 201,874,142 | $ | 560 | $ | 19,521 | $ | (24,731 | ) | $ | (4,650 | ) | |||||||||
| Ordinary shares | Additional paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | capital | deficit | deficit | ||||||||||||||||
| Balance as of December 31, 2021 | 975,644,432 | $ | 2,913 | $ | 63,470 | $ | (90,595 | ) | $ | (24,212 | ) | |||||||||
| Changes during the three months period ended March 31, 2022: | ||||||||||||||||||||
| Partial conversion of convertible loans into ordinary shares | 49,620,690 | 152 | 1,652 | - | 1,804 | |||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | 97,611,464 | 305 | 2,962 | - | 3,267 | |||||||||||||||
| Conversion of warrants into ordinary shares | 16,000,000 | 49 | (49 | ) | - | - | ||||||||||||||
| Stock-based compensation to employees and directors | - | - | 857 | - | 857 | |||||||||||||||
| Issuance of ordinary shares to service providers | 1,500,000 | 4 | 707 | - | 711 | |||||||||||||||
| Net loss for the period | - | - | - | (7,588 | ) | (7,588 | ) | |||||||||||||
| Balance as of March 31, 2022 (unaudited) | 1,140,376,586 | 3,423 | 69,599 | (98,183 | ) | (25,161 | ) | |||||||||||||
| 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 | ) | |||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-5 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICITCASH FLOWS
(U.S. dollars in thousands except share and per share amounts)thousands)
| 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 | ) | |||||||||
Three months period ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | Unaudited | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (7,588 | ) | $ | (17,557 | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 197 | 156 | ||||||
| Interest on revolving credit line | 597 | - | ||||||
| Liability for minimum royalties | 54 | 12 | ||||||
| Stock-based compensation | 1,568 | 235 | ||||||
| Modification of terms relating to straight loan transaction | - | (6 | ) | |||||
| Share in losses of affiliated company | - | 66 | ||||||
| Direct and incremental issuance costs allocated to conversion feature of convertible bridge loan | - | 169 | ||||||
| Change in fair value, amortization of discounts and accrued interest on convertible bridge loans | 6,127 | 15,033 | ||||||
| Amortization of discounts and accrued interest on straight loans | 164 | 861 | ||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired | - | (201 | ) | |||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (3,431 | ) | (977 | ) | ||||
| Decrease (increase) in trade receivables | 1,035 | (41 | ) | |||||
| Increase in inventories | (38 | ) | (1,054 | ) | ||||
| Decrease (increase) in other current assets | (294 | ) | 670 | |||||
| Increase (decrease) in accounts payable | 1,024 | (389 | ) | |||||
| Decrease in deferred revenues | - | (844 | ) | |||||
| Increase (decrease) in other current liabilities | (678 | ) | 687 | |||||
| Net cash used in operating activities | (1,263 | ) | (3,180 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (244 | ) | (658 | ) | ||||
| Investment in other companies | - | (231 | ) | |||||
| Net cash used in investing activities | (244 | ) | (889 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from straight loans, net | 725 | 1,677 | ||||||
| Proceeds (repayment) of Receivables financing facility | 879 | (1,056 | ) | |||||
| Repayment of straight loans | (189 | ) | (941 | ) | ||||
| Repayment of convertible bridge loans | - | (677 | ) | |||||
| Proceeds from issuance of units consisting of convertible bridge loans, stock warrants and shares, net | - | 4,012 | ||||||
| Repayments of right of use asset arising from operating leases | (23 | ) | - | |||||
| Proceeds from issuance of ordinary shares through equity line | - | 255 | ||||||
| Net cash provided by financing activities | 1,392 | 3,270 | ||||||
| Change in cash, cash equivalents | (115 | ) | (799 | ) | ||||
| Cash, cash equivalents at beginning of period | 189 | 935 | ||||||
| Cash, cash equivalents at end of period | $ | 74 | $ | 136 | ||||
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)
| 2021 | 2020 | |||||||
Six months period ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (14,167 | ) | $ | (7,223 | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 356 | 13 | ||||||
| Liability for minimum royalties | 24 | 19 | ||||||
| Stock-based compensation | 399 | 1,818 | ||||||
| Expiration of call options to acquire potential acquiree | - | 2,000 | ||||||
| Share in losses of affiliated company | 492 | - | ||||||
| Modification of terms relating to straight loan transaction | 88 | - | ||||||
| Modification of terms relating to convertible bridge loans transactions | - | 3,839 | ||||||
| Exchange differences relating to loans from shareholders | - | 83 | ||||||
| Issuance of shares as a settlement in excess of the carrying amount of financial liabilities | - | 499 | ||||||
| Amortization of discounts and accrued interest on convertible bridge loans | 13,648 | (2,503 | ) | |||||
| Amortization of discounts and accrued interest on straight loans | 653 | 80 | ||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired | (294 | ) | - | |||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (4,307 | ) | (120 | ) | ||||
| Increase in trade receivables | (1,168 | ) | - | |||||
| Increase in inventories | (1,348 | ) | (164 | ) | ||||
| Decrease (increase) in other current assets | 712 | (45 | ) | |||||
| Increase (decrease) in accounts payables | (481 | ) | 131 | |||||
| Decrease in deferred revenues | (857 | ) | - | |||||
| Increase in other current liabilities | 260 | 78 | ||||||
| Net cash used in operating activities | (5,990 | ) | (1,495 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (770 | ) | (25 | ) | ||||
| Restricted cash | - | 5 | ||||||
| Cash used in purchased of subsidiary | (1,176 | ) | - | |||||
| Investment in other companies | (635 | ) | (4 | ) | ||||
| Net cash used in investing activities | (2,581 | ) | (24 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from straight loans, net | 1,850 | 147 | ||||||
| Repayment of Receivables financing facility | (1,249 | ) | - | |||||
| Repayment of straight loans | (1,058 | ) | - | |||||
| Repayment of convertible bridge loans | (2,166 | ) | - | |||||
| Proceeds from issuance of units consisting of convertible bridge loans, stock warrants and shares, net | 10,312 | 1,562 | ||||||
| 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 | 7,944 | 1,739 | ||||||
| Change in cash, cash equivalents | (627 | ) | 220 | |||||
| Cash, cash equivalents at beginning of period | 935 | 12 | ||||||
| Cash, cash equivalents at end of period | $ | 308 | $ | 232 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)
(U.S. dollars in thousands)
Six months period ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Supplemental disclosure of non-cash activities: | ||||||||
| Issuance of warrants as part of bridge loan transactions | 3,430 | 633 | ||||||
| Partial conversion of convertible bridge loans and liability related to conversion feature of convertible bridge loans into ordinary shares | (8,646 | ) | (2,488 | ) | ||||
| Issuance of stock warrants as part of convertible bridge loan received | (870 | ) | - | |||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction | 792 | - | ||||||
| Issuance of shares as settlement of financial liabilities | - | (450 | ) | |||||
| Classification of warrants from liability into equity upon partial conversion of convertible bridge loans into ordinary shares | - | (526 | ) | |||||
| Conversion of loan from shareholder into ordinary shares | - | 39 | ||||||
| Cash used in purchased of subsidiary: | ||||||||
| 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 instalment 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 | 1,176 | |||||||
Three months period ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | Unaudited | |||||||
| 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 | - | 870 | ||||||
| Partial conversion of convertible bridge loans and liability related to conversion feature of convertible bridge loans into ordinary shares | 5,070 | 6,870 | ||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | 792 | ||||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction | - | 88 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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, we entered into a Share Purchase Agreement with 3CL Sciences Ltd. (“3CL”) and NLC Pharma Ltd. (“NLC”), pursuant to which we will acquire % of the periodissued and outstanding shares of six months ended June 30, 2021,3CL and NLC will acquire % of the issued and outstanding shares of 3CL (the “Share Purchase Agreement”). Immediately prior to entering into the Share Purchase Agreement, NLC conveyed 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 being issued to us, we undertook to raise $for 3CL and committed to issue to NLC $3,800 worth of our 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 Sciences will be made up of five (5) individuals: three (3) appointed by the Company and two (2) appointed by NLC. We anticipate that the Share Purchase Agreement will close during the second quarter of 2022, subsequent to the date on which these unaudited condensed consolidated financial statements were issued.
Revenues of the year ended March 31, 2022, resulted from sales of COVID-19 related products.products, testing kits and dietary supplement, Tollovid™ .. Through June 30, 2021,March 31, 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-8 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except shares amounts)
| B. |
| 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 advancing clinical trials of the Company’s core technology for breast cancer in Southeast Asia. As of March 31, 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 July 28, 2020, the Company completed the purchase of 100% of the issued and outstanding common stock of Breakthrough Diagnostics, Inc. (“Breakthrough”) 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 April 19, 2021, the Company entered into Sharean Agreement to Purchase Agreement (“SPA”) Provista Diagnostics, Inc. (the “Agreement(“Agreement to Purchase”) with Strategic Investment Holdings, LLC (“SIH”), Ascenda BioSciences LLC (“SIH”, “Ascenda” and together referring as “Sellers”, respectively)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. 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.
SubjectPursuant to the terms and conditions of the SPA,Agreement to Purchase, the Company shall purchaseacquired Provista from the Sellers shares of Preferred StockAscenda and shares of Ordinary Stock (collectively the “Provista Shares”) representing 100% of Provista’ s securities outstanding,SIH for an aggregate purchase price of $consisting of an initial cash payment of $, the issuance of $ subjectin Ordinary Shares priced at $per share, the issuance to the following terms:SIH of a $3,500 convertible promissory note dated April 19, 2021 (the “Note”) and an additional cash payment of $in July 2021.
The Note has a maturity date of April 8, 2025, and is convertible beginning on October 20, 2021, into Ordinary Shares of the Company at a conversion price equal to the lesser of $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 $, 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. If, at any time between October 20, 2021 and April 20, 2022, the average of the lowest bid and closing sale price is below $, the Company has the option to buy out all or any portion of the Note (the “Buyback Option”). In the event the Company exercises the Buyback Option for an amount equal to or greater than $1,170, SIH may not submit any conversions below $0.05 for ninety (90) days from receipt of the Buyback Amount.
| F-9 |
TODOS MEDICAL LTD.
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)thousands except shares amounts)
In the event that the Company uplists its Ordinary Shares to a national securities exchange, the Note shall automatically be exchanged into Series B preferred stock 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.
As of the date of this quarterly report on Form 10-Q, SIH has not submitted a Conversion Notice.
On March 14, 2022, the Company entered into a Revolving Line of Credit Agreement with Testing 123, LLC (see Note ). Under the terms of the Revolving Line of Credit Agreement, the Company agreed to issue Testing 123, LLC shares, equal to 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 not be below 10%.
| 6. | ||
The consummation of the transactions contemplated by the SPA have been taken place as of April 19, 2021.
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
The Optional / Maturity Conversion (scenario 1) was estimated by the appraiser using the Monte Carlo Simulation Model based on the following parameters:
SCHEDULE OF PURCHASES PRICE ALLOCATION OF CONVERSION
| April 19, 2021 | ||||
| Risk-free interest rate | 0.54 | % | ||
| Expected term (years) | 3.94 | |||
| Volatility | 164.02 | % | ||
| Share price | ||||
| Conversion price | * | |||
| Fair value | $ | 5,101 | ||
The Mandatory Conversion (scenario 2) was estimated by the appraiser using the Monte Carlo Simulation Model based on the following parameters:
SCHEDULE OF PURCHASES PRICE ALLOCATION OF CONVERSION
| April 19, 2021 | ||||
| Risk-free interest rate | 0.54 | % | ||
| Expected term (years) | 0.04 | |||
| Volatility | 112.1 | % | ||
| Share price | ||||
| Conversion price | * | |||
| Fair value | $ | 4,976 | ||
The fair value of the convertible component was estimated by the third-party appraiser after giving effect to the weighted average of the two possible scenarios as of issuance dates was $4,989.
The following table summarizes the total purchase price and purchase price allocation:
SCHEDULE OF PURCHASE PRICE ALLOCATION
Unaudited pro forma results of operations for the six months ended June 30, 2021 and for the year ended December 31, 2020 are included below as if the acquisition of the Provista’s business occurred on January 1, 2020. This summary of the unaudited pro forma results of operations is not necessarily indicative of what the Company’s results of operations would have been had the Provista Business been acquired at the beginning of 2020, nor does it purport to represent results of operations for any future periods.
SCHEDULE OF UNAUDITED PRO FORMA RESULTS OF OPERATION
| 2021 | 2020 | |||||||
| Six months ended June 30, | Year ended December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited, except per share amounts) | ||||||||
| Revenues | $ | 6,896 | $ | 5,164 | ||||
| Net loss | (14,172 | ) | (17,603 | ) | ||||
| Basic and diluted net loss per share | (0.02 | ) | (0.04 | ) | ||||
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
| A. | In June 2020, the Company entered into | ||
| See also note 1 regarding the Share Purchase Agreement with 3CL Sciences Ltd. Signed on March 11, 2022. | |||
| B. | In August 2020, the Company entered into an agreement with Care GB Plus Ltd, under which Bio Imagery Ltd. (“Bio Imagery”) has been incorporated for the purpose of developing, marketing and commercializing the Products and all the Intellectual Property of the Company (“Todos Cancer Assets”) | ||
The Company and its entities herein considered as the “Group”.
See note 1B and 1C above.
The Company and its entities herein considered as the “Group”.
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 1 - GENERAL
| 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 June 30, 2021,March 31, 2022, the Company has incurred accumulated losses of $61,44898,183. As of June 30, 2021,March 31, 2022, the Company’s current liabilities exceed its current assets by $4,1666,778, and there is a shareholders’ deficit of $8,99925,161. The Company has generated negative operating cash flow for all periods. As of May 15, 2022 (date of approval of these financial statements), the total cash and cash equivalent balance is approximately $28. 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 termshort-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 $10,685 through receivables financing facility, straight loans, private placement transactions (including equity line), and convertible bridge loans transactions. During the period of six months ended June 30, 2021, the Company raised net amounts of $10,312, through straight loans, convertible bridge loans transactions and private placement transaction.
| Risk factors |
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
| COVID-19 |
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 $5,0312,199 and $6,7635,031 during the year ended December 31, 2020 and the period of sixthree months ended June 30,March 31, 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. 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 disclosed in the Company’s consolidated financial statements.
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in 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 six and three months ended June 30, 2021March 31, 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 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.
D.Cash and cash equivalents
Cash equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date 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.
E. Goodwill and intangible assets
Goodwill 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 present. Intangible assets with finite lives are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up. During the three months ended March 31, 2022 the Company recorded $0, of impairment losses (See also Note 3B). | ||
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 three months ended March 31, 2022 and 2021 the total weighted average number of ordinary shares related to outstanding stock options, stock warrants and convertible bridge loans excluded from the calculation of the diluted loss per share was and , respectively.
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
SCHEDULE OF WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
| 2021 | 2020 | |||||||
| Six month period ended | ||||||||
| 2021 | 2020 | |||||||
| Numerator: | ||||||||
| Net loss attributable to common shareholders | $ | 14,167 | $ | 7,223 | ||||
| Revaluation of liability related to warrants to purchase shares of common stock | - | - | ||||||
| Net loss attributable to common shareholders | $ | 14,167 | $ | 7,223 | ||||
| Denominator: | ||||||||
| Shares of common stock used in computing basic net loss per share | 585,225,006 | 164,423,927 | ||||||
| Incremental shares from assumed exercise of warrants to purchase shares of common stock | - | - | ||||||
| Shares of common stock used in computing diluted net loss per share | 585,225,006 | 164,423,927 | ||||||
| Net loss per share of common stock, basic and diluted | $ | 0.02 | $ | 0.04 | ||||
During the period of six months ended June 30, 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 and , respectively.
| Three month period ended | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | Unaudited | |||||||
| Numerator: | ||||||||
| Net loss attributable to common shareholders | $ | 7,588 | $ | 17,557 | ||||
| Revaluation of liability related to warrants to purchase shares of common Stock | - | 168 | ||||||
| Net loss attributable to common shareholders | $ | 7,588 | $ | 17,725 | ||||
| Denominator: | ||||||||
| Shares of common stock used in computing basic net loss per share | 1,036,898,212 | 462,650,478 | ||||||
| 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 | 1,036,898,212 | 464,214,552 | ||||||
| Net loss per share of common stock, basic and diluted | $ | 0.01 | $ | 0.04 | ||||
G.E. 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 generall4y 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.this new standard did not have a material impact on our consolidated financial statements.
The Company is currently assessingOther new pronouncements issued but not effective as of March 31, 2022 are not expected to have a material impact on the impact the guidance will have on itsCompany’s consolidated financial statements.
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”),March 10, 2022 the Company and Leonite Capital LLC (the “Investor”) entered into Secured Convertible Equipment Loanan 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 June 30, 2021, the Aggregate Loan Principal Amount is amounting to $750, which representing discount amortization expenses of $354, was recorded as part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations for the period of six and three months ended June 30, 2021. As of June 30, 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 upCompany agreed 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 uponissue the maturity date, which isInvestor , 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 intoordinary shares of the Company atas full conversion price of $0.07161 (the “Conversion Price”). Subsequent toall Investor’s outstanding warrants. On March 17, 2022, the effective dateCompany issued ordinary shares of the registration statement registering for resale the Conversions Shares and the Warrant SharesCompany 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 June 30, 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.
agreementTODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.).
| B. |
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 June 30, 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 income of $1,829 and expense of $766 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 six months ended June 30, 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 six months ended June 30, 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 see also Note 3F(2).
TODOS MEDICAL LTD.
NOTES TO CONDENSED 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, restricted ordinary shares of the Company, nominal value NIS 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. As of June 30, 2021 the loan was repaid in full.
On March 3, 2021,14, 2022, the Company and oneTesting 123, LLC (the “Lender”) signed a Revolving Line of its lenders entered into a ClosingCredit Agreement, (the “Closing Agreement”), underpursuant to which the lender exercised its right to invest an additional $884 intoLender will provide the Company with a credit facility of up to $1,250 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 form of July 2020 Convertible Notes (the “Tranche 2 Securities”). In addition, the Company covenantedagreement and agreed to file a registration agreement(iii) with respect to the Tranche 2 Securitiesfunds received by Borrower through collections on or before the earlier to occur of (i) the date that the Company filesreceivables included in 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 damagesReceivables Pool, as defined in the amount of $250, along with an amount of cash accruing each month equal toagreement, 3 days after such funds have been received by the value of 1% ofescrow account agent or the value of the Tranche 2 Securities.Company.
Upon initial recognition, it was determinedIn additional to the above the Company agreed to issue the Lender shares, equal to a 10% ownership stake in Provista. In the event that additional shares of Provista are issued, the embedded conversion feature is requiredCompany committed to issue the Lender additional shares such that his stake in Provista shall not 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 below 10%upon initial recognition and in subsequent periods as derivative liability at fair value through profit and loss. The excess.
As of March 31, 2022, the Company utilized $999out of the fair value of identified instruments over net proceeds upon initial recognition amounted to $243 was recorded as part of the “Finance Expenses” line in operations in the accompanying consolidated statement of operations. 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.credit facility.
The Company recorded expenses amounting to $102 related tohas estimated the discount amortizationportion of the host loan instrument % shares of Provista at $740 and income ofrecorded $34598 related to remeasurement of the embedded conversion feature, which were recorded as part of the “Finance Expenses” line in operations in the accompanying consolidated statement of operations for the period of six months ended June 30, 2021.interest expenses, and $142 as prepaid interest expenses under Other Current Assets.
During the period of six months ended June 30, 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 portion of receivable related to invoices for certain purchase orders with a discount in a rate of 10%. The Assignor is obligated to repurchase the PO in the event that payment is not received by the Assignee within 60-days period from the singing of the Assignment of Receivable Agreements.
During the period of six months ended June 30, 2021, the Assignor received an amount of $1,467 under the Assignment of Receivable Agreements and repaid $1,017. In addition, the Company incurred finance expenses with respect to the applicable discount Interest under the Assignment of Receivable Agreements amounted to $50. As of June 30, 2021, an amount of $500 has not been repaid and it is presented as part of the loans, net account.
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.)
| 1. | On | |
| ||
| ||
| ||
| ||
| ||
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 ordinary shares to be issued pursuant to Securities Purchase Agreements with Family Office and Yozma (first and second Tranches), but such registration statement has not yet become effective. As the Company complied with the registration statement filing requirements, as of June 30, 2021, no accrual has been recorded for liquidated damages since the amount to be paid was not probable and reasonably estimate under ASC 450 “Contingencies”.
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
| 2. | ||
| 3. | On February 4, 2022 and March 10, |
The above 2021 compensation package are subject to shareholder approval at the Company’s Annual General Meeting of Shareholders which had not been received through June 30, 2021 (see also note 8).
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.
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, shall release and discharge the Company from its June 19, 2020 financing agreement and July 28, 2020 Royalty Agreement. The financial statements as of March 31, 2022, includes an income of $153 as a result of the cancelation of prior agreements. Stock-based compensation expenses incurred for employees (and directors) and non-employees for the period of three months ended March 31, 2022, amounted to $ | ||
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
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.
| F-14 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
The 2015 Plan permits grant of up to options to purchase ordinary shares subject to adjustments set in the 2015 Plan. As of June 30, 2021,March 31, 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,B) | 2,545,083 | 0.095 | ||||||
| Forfeited or expired | (1,129,836 | ) | 0.120 | |||||
| Outstanding as of December 31, 2020 | 3,682,818 | 0.663 | ||||||
| Granted | - | - | ||||||
| Forfeited or expired | (1,137,735 | ) | 0.003 | |||||
| Outstanding as of June 30, 2021 | 2,545,083 | 0.095 | ||||||
| Exercisable as of June 30, 2021 | 381,762 | 0.095 | ||||||
| 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 | ||||||
| Exercisable as of March 31, 2022 | 2,138,525 | 0.053 | ||||||
| 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 | ||||||
| Exercisable as of March 31, 2021 | 254,508 | 0.095 | ||||||
As of June 30, 2021,March 31, 2022, the aggregate intrinsic value for the stock options outstanding and exercisable according to $price per share is $and $, respectively, with a weighted average remaining contractual life of years.
Stock-based compensation expenses incurred for employees (and directors) and non-employees for the period of six months ended June 30, 2021, amounted to $.B. RESTRICTED STOCK UNITS
NOTE 6 - FINANCING EXPENSES, NETThe Company issues restricted stock units (“RSU”) under the 2015 Plan to employees and non-employees. The following table outlines the restricted stock awards activity for the Company’s during the periods of three months ended March 31, 2022 and 2021:
| 2021 | 2020 | |||||||
Six months period ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Modification of terms relating to straight loan transaction | $ | 88 | $ | - | ||||
| Modification of terms relating to convertible bridge loans transactions | - | 3,839 | ||||||
| Exchange differences relating to loans from shareholders | - | 83 | ||||||
| Issuance of shares as a settlement in excess of the carrying amount of financial liabilities | - | 499 | ||||||
| Amortization of discounts and accrued interest on convertible bridge loans | 13,648 | (2,503 | ) | |||||
| Amortization of discounts and accrued interest on straight loans | 653 | 80 | ||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired | (294 | ) | - | |||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (4,307 | ) | (120 | ) | ||||
| Issuance of shares as call options to acquire potential acquire | - | 2,000 | ||||||
| Settlement in cash of prepayment obligation related to convertible bridge loan | 182 | - | ||||||
| Interest and related royalties under receivables financing facility | 311 | - | ||||||
| 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 | (89 | ) | 442 | |||||
| Financing (income) expenses, net | $ | 10,485 | $ | 4,320 | ||||
| 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 | |||
| Weighted average grant date fair value of restricted stock awards granted during the period | 0.029 | |||
| 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 | |||
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 5 – FINANCING EXPENSES, NET
SCHEDULE OF FINANCING EXPENSES
Three months period ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | Unaudited | |||||||
| Modification of terms relating to straight loan transaction | $ | - | $ | (6 | ) | |||
| Amortization of discounts and accrued interest on convertible bridge loans | 6,127 | 15,033 | ||||||
| Amortization of discounts and accrued interest on straight loans | 164 | 861 | ||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired | - | (201 | ) | |||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (3,431 | ) | (977 | ) | ||||
| Direct and incremental issuance costs allocated to conversion feature of convertible bridge loan | - | 169 | ||||||
| Settlement in cash of prepayment obligation related to convertible bridge loan | - | 182 | ||||||
| Interest and related royalties under receivables financing facility | (153 | ) | 238 | |||||
| Amortization of prepaid expenses related to commitment shares in connection with receivables financing facility and equity line | 567 | 293 | ||||||
| Exchange rate differences and other finance expenses | 197 | 62 | ||||||
| Financing (income) expenses, net | $ | 3,471 | $ | 15,654 | ||||
NOTE 6 – 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
As of March 31, | ||||
| 2022 | ||||
| Unaudited | ||||
| Composition of deferred tax assets: | ||||
| Net operating loss carry-forward | $ | 6,747 | ||
| Research and development credits | - | |||
| Allowance for Bad Debt | ||||
| Others | - | |||
| Net deferred tax asset before deferred tax liabilities and valuation allowance | 6,747 | |||
| Composition of deferred tax liabilities: | ||||
| Intangible assets upon acquisition of subsidiary | 284 | |||
| Depreciation costs | 197 | |||
| Net deferred tax asset before valuation allowance | 6,266 | |||
| Valuation allowance | (6,550 | ) | ||
| Net deferred tax liability | (284 | ) | ||
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 March 31, 2022.
| F-16 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
| B. | For the period of three months ended March 31, 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
| Three months ended March 31, | ||||
| 2022 | ||||
| Unaudited | ||||
| Tax rate | 23 | % | ||
| Tax expense (benefit) at statutory rate | $ | (1,579 | ) | |
| Tax rate differential | 25 | |||
| Permanent differences with respect to stock-based compensation | 359 | |||
| Permanent differences with respect to derivative warrants liabilities, bifurcated conversion feature and convertible loans | 613 | |||
| Others | ||||
| Loss carryforwards and others | 582 | |||
| Income tax expense (benefit) | $ | - | ||
| F-17 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 7 – 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, (commencing the fourth quarter of 2020), 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 management, since the marketing strategies, processes and expected long term financial performances of the segments 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 | ||||||||||||||||||||
| Three months ended March 31, 2022 | ||||||||||||||||||||
| Revenues | - | - | 2,199 | - | 2,199 | |||||||||||||||
| Operating loss | (1,107 | ) | - | (1,303 | ) | (1,707 | ) | (4,117 | ) | |||||||||||
| Unallocated amounts: | ||||||||||||||||||||
| Financing expenses, net | (3,471 | ) | (3,471 | ) | ||||||||||||||||
| Share in losses of affiliated companies accounted for under equity method, net | - | - | ||||||||||||||||||
| Net loss | (1,107 | ) | - | (1,303 | ) | (5,178 | ) | (7,588 | ) | |||||||||||
| Breast | COVID-19 | |||||||||||||||
| Cancer Test | Alzheimer | Testing | Total | |||||||||||||
| Six months ended June 30, 2021 | ||||||||||||||||
| Revenues | - | - | 6,763 | 6,763 | ||||||||||||
| Operating loss | (2,977 | ) | - | (213 | ) | (3,190 | ) | |||||||||
| Unallocated amounts: | ||||||||||||||||
| Financing expenses, net | (10,485 | ) | ||||||||||||||
| Share in losses of affiliated companies accounted for under equity method, net | (492 | ) | ||||||||||||||
| Net loss | (14,167 | ) | ||||||||||||||
| Total Assets | 11,029 | - | 6,229 | 17,258 | ||||||||||||
| Other significant items: | ||||||||||||||||
| Total expenditures for assets of reportable segment | - | - | 770 | 770 | ||||||||||||
| Total depreciation for reportable segment | (15 | ) | - | (341 | ) | (356 | ) | |||||||||
The evaluation of performance is based on the operating income of each of the three3 reportable segments.
Accounting policies of the segments are the same as those described in the accounting policies applied in the consolidated financial statements.
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 not 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 considered as reportable segment as they do not meet the criteria in ASC Topic 280-10-50 (or they did not commence their operations)..
| C. | Revenues by geographic region are as follows: |
SUMMARY OF REVENUES BY GEOGRAPHIC REGION
Three months period ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Israel | $ | - | $ | - | ||||
| United States | 2,199 | 5,031 | ||||||
| Total | 2,199 | 5,031 | ||||||
Six months June 30, | Three months June 30, | Year ended | ||||||||||
| 2021 | 2021 | 2020 | ||||||||||
| Unaudited | ||||||||||||
| Israel | $ | - | $ | - | - | |||||||
| United States | 6,763 | 1,732 | - | |||||||||
| 6,763 | 1,732 | - | ||||||||||
| F-18 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
| D. | Property and equipment, net, by geographic areas: |
SUMMARY OF PROPERTY AND EQUIPMENT, NET, BY GEOGRAPHIC AREA
| As of March 31, | As of December 31, | |||||||||||||||
As of | As of December 31, | 2022 | 2021 | |||||||||||||
| 2021 | 2020 | Unaudited | ||||||||||||||
| Israel | $ | 47 | $ | 61 | $ | 31 | $ | 34 | ||||||||
| United States | 2,549 | 1,938 | 2,082 | 2,011 | ||||||||||||
| $ | 2,596 | $ | 1,999 | |||||||||||||
| Property and equipment, net | $ | 2,113 | $ | 2,045 | ||||||||||||
| E. | Major customers |
SCHEDULE OF MAJOR CUSTOMER
| As of March 31, | ||||||||
| 2022 | 2021 | |||||||
| Client A | - | 85.3 | % | |||||
| Client B | 27.2 | % | - | |||||
| Client D | 11.2 | % | - | |||||
| Total | 38.4 | % | 85.3 | % | ||||
During the year ended December 31, 2020, the Company had one costumer which represents 56.64% of the Company’s total sales. During the Six months ended June 30, 2021, the Company had one costumer which represents 63.43% of the Company’s total sales with which Company’s contractual agreement to supply Covid-19 testing kits to a significant customer expired.
NOTE 8 – - EVENTS SUBSEQUENT EVENTSTO THE BALANCE SHEET DATE
The Company evaluated subsequentall events and transactions that occurred aftersubsequent to the balance sheet date upand prior to the date that theon which these unaudited condensed consolidated financial statements were available to be issued, (September 23, 2021). Based upon this review, the Company did not identify any other subsequentand determined that no events that would have required adjustment or disclosure in the financial statements, except as disclosed below.disclosure.
On July 7, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with an institutional investor (the “Purchaser”) pursuant to which the Company has agreed to issue a promissory convertible note (the “Note”) to the Purchaser in the principal amount of $1,535,714 for proceeds of $1,075,000 (the “Transaction”). The closing occurred on July 7, 2021 (the “Closing Date”). 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 shares of Common Stock (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 3,440,000 shares of Common Stock (the “Warrant 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. From the Closing Date until 180 days thereafter, the Company shall be restricted from issuing or entering into any agreement to issue any shares of Common Stock, except under certain circumstances. This provision shall no longer be in effect if the closing sale price of the Common Stock exceeds $. The Company intends to use the net proceeds for general corporate purposes.
The Company has agreed to file a registration statement with the Securities and Exchange Commission registering for resale of the Conversion Shares and the Warrant Shares (the “Registration Statement). 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 ten (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.
On July 26, 2021 the Annual General Meeting of the Company approved:
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. is a developer and distributor of medical diagnostics addressing cancers, Alzheimer’s Disease and viruses, as well as a provider of Covid-19 testing supplies and automation solutions, and a developer and distributor of immune support products and antivirals that target the inhibition of 3CL protease for the treatment of Covid-19.
Diagnostics
| ● | Todos Medical Ltd. (“Todos Medical,” the “Company,” “we,” “our,” “us”), is an in vitro diagnostics company focused on distributing comprehensive solutions for COVID-19 screening and diagnosis and developing blood tests for the early detection of cancer and Alzheimer’s disease. | |
| ● | 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. | |
| ● | 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, we entered into a Share Purchase Agreement with 3CL Sciences Ltd. (“3CL”) and NLC Pharma Ltd. (“NLC”), pursuant to which we will acquire 52% of the issued and outstanding shares of 3CL and NLC will acquire 48% of the issued and outstanding shares of 3CL (the “Share Purchase Agreement”). Immediately prior to entering into the Share Purchase Agreement, NLC conveyed to 3CL all of the 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™). | |
| ● | 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 is also developing blood tests 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. |
Our medical diagnostics business is primarily engaged in the development and commercialization of blood tests for the early detection of primary breast cancer and recurrences, the diagnosis and management of SARS-COV-2 infections and immunity in response to vaccinations and natural or breakthrough infections, and the early detection of Alzheimer’s Disease.
Videssa Breast
Current methods of breast cancer detection have known limitations, particularly in women with abnormal imaging findings. Our proprietary breast cancer test, Videssa Breast, is the first blood test of its kind to detect the presence or absence of breast cancer in women with abnormal or difficult-to interpret imaging findings. Videssa Breast provides biochemical evidence to complement the anatomical view of imaging for improved breast cancer detection. The test was developed to provide physicians with actionable information regarding breast cancer risk in women following an inconclusive mammogram result (BI-RADS III or IV), which primarily occurs in women with dense breasts. The data provided from the test, which has demonstrated specificity of ~99% in both women over and under 50 years of age, arms physicians with a powerful tool to help guide decisions of whether to continue to monitor a low-risk patient intermittently, or whether to advance an at-risk patient immediately into a more expensive and invasive diagnostic assessment that likely includes a breast biopsy. With Videssa as the proprietary centerpiece of our cancer diagnostic strategy, we will be looking to offer highly advanced, comprehensive cancer testing solutions to OB-GYNs, general practitioners and other stakeholders in the medical community who will ultimately be managing patients likely to be strong candidates for Videssa. This test is not only important for ruling out cancer in false positive mammograms, but for monitoring the appearance of cancer and the need for imaging on younger women that are at risk and are not offered mammograms. This test could potentially represent a new standard of care in certain areas for breast cancer screening, a marketplace that remains dramatically undeserved both domestically in the US as well as internationally, and for which we believe Todos Medical is well positioned to disrupt.
LymPro Test™
The Lymphocyte Proliferation (LymPro) Test™ measures markers of immune cells present in the blood as a surrogate for loss of nerve cell function and the toxic accumulation of beta-amyloid plaques in the brain, which is a hallmark of Alzheimer’s disease. Based on differences observed in the response of cells from patients with Alzheimer’s disease as compared with age-matched controls and patients with other dementias, it appears that the test has high potential as an adjunctive diagnostic for Alzheimer’s disease. LymPro exploits the fact that abnormalities in replication (or the cell cycle) seem to extend to immune cells in the blood. The test specifically measures the alterations in cell cycle activity in blood lymphocytes (a type of immune cell) as a biomarker of neuronal damage, for the early identification and screening of Alzheimer’s. Areas for deployment include initial IUO testing followed by full diagnostic testing for patients with MCI and dementia for differential diagnosis.
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Provista Diagnostics LaboratoryProducts
Our Provista Diagnostics Laboratory serves as a hub for our diagnostic development programs, including our flagship Videssa blood test, as well as support for our automation solutions customers. We have focused our COVID-19 diagnostic testing efforts at Provista to prioritize delivering diagnostic services, including PCR and neutralizing antibody testing, becoming a direct provider to healthcare professionals. We have partnered with Fosun Pharma to offer the first neutralizing antibody test, cPass™ SARS-CoV-2 Neutralizing Antibody Detection Kit, which has received Emergency Use Authorization (“EUA”) from the US FDA for the detection of SARS-CoV-2 receptor binding domain (“RBD” or “neutralizing”) antibodies. We believe this test can serve as a key marker for physicians, businesses and schools to access Covid-19 immunity risk among their populations. This expansion into testing services allows us to diversify our business into higher margin revenue in the COVID-19 space, as well as help us to expand our business development opportunities with the labs we work with by providing reference lab testing services as we increase Provista’s automated testing capabilities. The Company intends to build Provista into a highly automated lab capable of running multiple platforms in parallel in order to offer clients comprehensive testing solutions that meet their needs, especially in cancer, infectious disease, immune monitoring and Alzheimer’s disease. Todos intends to focus on ways of leveraging its existing testing business and its client base to deliver actionable high value testing that will improve outcomes while lowering cost of care. We believe that our establishment of a strong commercial infrastructure is the key to unlocking the value of our intellectual property portfolio.
|
| ● | Through 3CL Sciences Ltd. (“3CL”), we are in the development phase of our own 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 our 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
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 our 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 for cancer 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, 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. |
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We believe that as we continue to grow our automation services business, we are creating a natural distribution base for the Videssa test, as well as for the eventual commercialization of our proprietary TBIA platform tests and diagnostics developed with NLC Pharma. We intend to seek out additional opportunities to leverage our expanding base of laboratory partners in the coming years.
Operating Results
Revenues
During the six and three months ended June 30, 2021,March 31, 2022, we have generated revenues of $6,763,000$2,199,456, compared to $5,031,097 in revenues during the three months ended March 31, 2021. Such revenues were generated by the Company and $1,732,000, respectively, through our U.S. subsidiary,subsidiaries, Corona Diagnostics, LLC.LLC and 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:
| Six Months Ended June 30, | Three Months Ended June 30, | Three Months Ended March 31 | ||||||||||||||||||||||
| U.S. dollars | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Salaries and related expenses | $ | 65,000 | $ | 11,000 | $ | 65,000 | $ | 11,000 | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||
| Materials and other costs | 3,773,000 | - | 687,000 | - | $ | 1,144,337 | $ | 3,086,314 | ||||||||||||||||
| Depreciation | 310,000 | - | 161,000 | - | 172,778 | 148,815 | ||||||||||||||||||
| Total | $ | 4,148,000 | $ | 11,000 | $ | 913,000 | $ | 11,000 | $ | 1,317,115 | $ | 3,235,129 | ||||||||||||
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.
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The following table discloses the breakdown of research and development expenses:
| Six Months Ended June 30, | Three Months Ended June 30, | Three Months Ended March 31 | ||||||||||||||||||||||
| U.S. dollars | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Stock-based compensation | $ | - | $ | 97,000 | $ | - | $ | 61,000 | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||
| Professional fees | 125,000 | 398,000 | 25,000 | 398,000 | $ | 71,332 | $ | 100,234 | ||||||||||||||||
| Laboratory and materials | 501,000 | 61,228 | 207,000 | - | 366,217 | 602,567 | ||||||||||||||||||
| Depreciation | 15,000 | 13,187 | 7,000 | 7,000 | 3,589 | 7,425 | ||||||||||||||||||
| Insurance and other expenses | 2,000 | - | - | - | 1,117 | 2,380 | ||||||||||||||||||
| Total | $ | 643,000 | $ | 569,000 | $ | 239,000 | $ | 465,000 | $ | 442,255 | $ | 712,606 | ||||||||||||
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:
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| U.S. dollars | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Salaries and related expenses | $ | 253,000 | $ | 22,000 | $ | 252,000 | $ | 22,000 | ||||||||
| Share Based Compensation | 45,000 | 1,408,000 | - | 658,000 | ||||||||||||
| Professional Fees | 1,660,598 | - | 347,000 | - | ||||||||||||
| Total | $ | 1,958,000 | $ | 1,430,000 | $ | 599,000 | $ | 680,000 | ||||||||
| Three Months Ended March 31 | ||||||||
| 2022 | 2021 | |||||||
| Share based compensation | $ | - | $ | 44,771 | ||||
| professional fees, salaries and other expenses | 1,080,474 | 1,313,466 | ||||||
| Total | $ | 1,080,474 | $ | 1,358,237 | ||||
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:
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| U.S. dollars | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Salaries and related expenses | $ | 84,000 | $ | 79,000 | $ | 44,000 | $ | 42,000 | ||||||||
| Share-based compensation | 365,000 | 313,000 | 164,000 | 268,000 | ||||||||||||
| Professional fees | 2,114,000 | 485,000 | 1,125,000 | 262,000 | ||||||||||||
| Insurance and other expenses | 641,000 | 48,000 | 312,000 | 23,000 | ||||||||||||
| Total | $ | 3,204,000 | $ | 925,000 | $ | 1,643,000 | $ | 595,000 | ||||||||
| Three Months Ended March 31 | ||||||||
| 2022 | 2021 | |||||||
| Salaries and related expenses | $ | 642,834 | 42,066 | |||||
| Share-based compensation | 1,179,938 | 200,539 | ||||||
| Rent and maintenance expenses | 149,421 | 4,513 | ||||||
| Communication and investor relations | 46,800 | 22,500 | ||||||
| doubtful debts | 736,441 | 311,274 | ||||||
| Depreciation | 20,462 | - | ||||||
| Professional fees | 627,977 | 956,963 | ||||||
| Insurance and other expenses | 72,114 | 24,322 | ||||||
| Total | $ | 3,475,987 | 1,562,177 | |||||
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Comparison of the Three and Six Months Ended June 30, 2021 and June 30, 2020:three months ended March 31, 2022, to the three months ended March 31, 2021:
Results of Operations
Revenues. Our revenues for the three months ended June 30, 2021,March 31, 2022, were $1,732,000,$2,199,456, compared to $32,0005,031,097 revenues during the three months ended June 30, 2020.
Our revenues for the six months ended June 30,March 31, 2021, were $6,763,000, compared to $32,000 during the six months ended June 30, 2020.
representing a net decrease of $2,831,641, or 56%. 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. Revenues forLLC which was somewhat offset by sales of Tollovid™, which commenced in the six and three months ended June 30, 2021 include $4,290,000fourth quarter of revenues to our significant customer with which Company’s contractual agreement to supply Covid-19 testing kits to a significant customer expired – see Recent Development below2021.
Cost of revenues. Our cost of revenues for the three months ended June 30, 2021,March 31, 2022, were $913,000,$1,317,115, compared to $11,000$3,235,129 during the three months ended June 30, 2020, and $4,148,000 during the six months ended June 30,March 31, 2021, compared to $11,000 during the six months ended June 30, 2020.representing a net decrease of $1,918,014, or 59%. 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 three months ended June 30, 2021,March 31, 2022, were $239,000$442,255 compared to $465,000$712,606 for the three months ended June 30, 2020,March 31, 2021, representing a net decrease of $226,000,$270,351, or 49%, and $643,000 for the six months ended June 30, 2021, compared to $569,000 during the six months ended June 30, 2020, an increase of $74,000, or 13%38%. The increase in the six months ended June 30, 2021decrease is primarily due to an increasea decrease in Laboratory and materialsprofessional fees and other research and development costs in connection with providing Covid testing services mainly through our wholly-owned subsidiary Corona Diagnostics, LLC and our new acquired subsidiary, Provista Diagnostics Inc, offset by a decrease in professional fees and stock-based compensation used for continued development of our products.services.
Sales and Marketing Expenses. Our sales and marketing expenses decreased from $680,000$1,358,237 in the three months ended June 30, 2020,March 31, 2021, to $599,000$1,080,474 in the three months ended June 30, 2021, providingMarch 31, 2022, a decrease of $81,000$277,763 or 13%, and increased from $1,430,000 in the six months ended June 30, 2020 to $1,958,000 in the six months ended June 30, 2021, providing an increase of $528,000 or 37%20%. This increase was principally due to increases in marketing and public relations efforts and costs associated with the sales of our Covid products offset by a decrease in stock-based compensation.
General and Administrative Expenses. Our general and administrative expenses for the three months ended June 30, 2021,March 31, 2022, were $1,643,000,$3,475,987, compared to $595,000$1,562,177 for the three months ended June 30, 2020,March 31, 2021, providing an increase of $1,048,000$1,913,810 or 176%, and $3,204,000 for the six months ended June 30, 2021, compared to $925,000 for the six months ended June 30, 2020, providing an increase of $2,279,000 or 246%123%. The increase is primarily due to thean increase in stock-based compensation, salaries and professional services which consists mainly of legal fees, directors feesrelated expenses, and otherdoubtful debts partially offset by a decrease in professional services.
Finance (Income) Expenses, Net. Our net finance incomeexpenses for the three months ended June 30, 2021March 31, 2022 was ($5,171,000)$3,471,000 compared to net finance expenses of $866,000$15,654,635 for the three months ended June 30, 2020,March 31, 2021, providing an increasea decrease of $6,037,000$12,183,638 or 697%, and $10,485,000 for the six months ended June 30, 2021, compared to net finance expenses of $4,320,000 for the six months ended June 30, 2020, providing an increase of $6,165,000 or 143%78%. 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. It should be noted that during the second quarter of 2021, most of the Company’s convertible bridge loans were repaid at a cost of $2,166,000.
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 $119,000$65,469 in the three months and $492,000ended March 31, 2021 ($0 in the sixthree months ended June 30, 2021.March 31, 2022).
Net Income or Loss. Our net incomeloss for the three months ended June 30, 2021March 31, 2022 was $3,390,000,$7,588,375, compared to net loss of $2,585,000$17,557,484 for the three months ended June 30, 2020,March 31, 2021, providing an increasea decrease of $5,975,000$9,969,109 or 231%. Our net loss for the six months ended June 30, 2021 was $14,167,000, compared with a net loss of $7,223,000 for the six months ended June 30, 2020, an increase in net loss of $6,944,000 or 96%57%. The increasedecrease is primarily due to a decrease in the decrease in finance expenses, net as well as other changes as mentioned above.
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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.
Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we elected to rely on other 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 date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act).
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.
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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
Three months period ended March 31, | ||||||||||||||||
| Six months period ended June 30, | 2022 | 2021 | ||||||||||||||
| 2021 | 2020 | Unaudited | Unaudited | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net loss | $ | (14,167 | ) | $ | (7,223 | ) | $ | (7,588 | ) | $ | (17,557 | ) | ||||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Depreciation | 356 | 13 | 197 | 156 | ||||||||||||
| Interest on revolving credit line | 597 | - | ||||||||||||||
| Other losses | 30 | - | ||||||||||||||
| Liability for minimum royalties | 24 | 19 | 54 | 12 | ||||||||||||
| Stock-based compensation | 399 | 1,818 | 1,568 | 235 | ||||||||||||
| Expiration of call options to acquire potential acquiree | - | 2,000 | ||||||||||||||
| Share in losses of affiliated company | 492 | - | ||||||||||||||
| Modification of terms relating to straight loan transaction | 88 | - | - | (6 | ) | |||||||||||
| Modification of terms relating to convertible bridge loans transactions | - | 3,839 | ||||||||||||||
| Exchange differences relating to loans from shareholders | - | 83 | ||||||||||||||
| Issuance of shares as a settlement in excess of the carrying amount of financial liabilities | - | 499 | ||||||||||||||
| Amortization of discounts and accrued interest on convertible bridge loans | 13,648 | (2,503 | ) | |||||||||||||
| Direct and incremental issuance costs allocated to conversion feature of convertible bridge loan | - | 169 | ||||||||||||||
| Change in fair value, amortization of discounts and accrued interest on convertible bridge loans | 6,127 | 15,033 | ||||||||||||||
| Amortization of discounts and accrued interest on straight loans | 653 | 80 | 164 | 861 | ||||||||||||
| Change in fair value of derivative warrants liability and fair value of warrants expired | (294 | ) | - | - | (201 | ) | ||||||||||
| Change in fair value of liability related to conversion feature of convertible bridge loans | (4,307 | ) | (120 | ) | (3,431 | ) | (977 | ) | ||||||||
| Increase in trade receivables | (1,168 | ) | - | |||||||||||||
| Decrease (increase) in trade receivables | 1,035 | (41 | ) | |||||||||||||
| Increase in inventories | (1,348 | ) | (164 | ) | (38 | ) | (1,054 | ) | ||||||||
| Decrease (increase) in other current assets | 712 | (45 | ) | (294 | ) | 670 | ||||||||||
| Increase (decrease) in accounts payables | (481 | ) | 131 | |||||||||||||
| Increase (decrease) in accounts payable | 1,024 | (389 | ) | |||||||||||||
| Decrease in deferred revenues | (857 | ) | - | - | (844 | ) | ||||||||||
| Increase in other current liabilities | 260 | 78 | ||||||||||||||
| Increase (decrease) in other current liabilities | (678 | ) | 687 | |||||||||||||
| Net cash used in operating activities | (5,990 | ) | (1,495 | ) | (1,263 | ) | (3,180 | ) | ||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchase of property and equipment | (770 | ) | (25 | ) | (244 | ) | (658 | ) | ||||||||
| Restricted cash | - | 5 | ||||||||||||||
| Cash used in purchased of subsidiary consolidated for the first time | (1,176 | ) | - | |||||||||||||
| Investment in other companies | (635 | ) | (4 | ) | - | (231 | ) | |||||||||
| Net cash used in investing activities | (2,581 | ) | (24 | ) | (244 | ) | (889 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Proceeds from straight loans, net | 1,850 | 147 | 725 | 1,677 | ||||||||||||
| Repayment of Receivables financing facility | (1,249 | ) | - | 879 | (1,056 | ) | ||||||||||
| Repayment of straight loans | (1,058 | ) | - | (189 | ) | (941 | ) | |||||||||
| Repayment of convertible bridge loans | (2,166 | ) | - | - | (677 | ) | ||||||||||
| Proceeds from issuance of units consisting of convertible bridge loans, stock warrants and shares, net | 10,312 | 1,562 | - | 4,012 | ||||||||||||
| Proceeds from issuance of units consisting of ordinary shares and stock warrants | - | 30 | ||||||||||||||
| Repayments of right of use asset arising from operating leases | (23 | ) | - | |||||||||||||
| Proceeds from issuance of ordinary shares through equity line | 255 | - | - | 255 | ||||||||||||
| Net cash provided by financing activities | 7,944 | 1,739 | 1,392 | 3,270 | ||||||||||||
| Change in cash, cash equivalents | (627 | ) | 220 | (115 | ) | (799 | ) | |||||||||
| Cash, cash equivalents at beginning of period | 935 | 12 | 189 | 935 | ||||||||||||
| Cash, cash equivalents at end of period | $ | 308 | $ | 232 | $ | 74 | $ | 136 | ||||||||
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Operating Activities
Net cash used in operating activities for the sixthree months ended June 30, 2021March 31, 2022 was $5,990,000$1,263,000 compared to $1,495,000$3,180,000 in the sixthree months ended June 30, 2020.March 31, 2021. The increasedecrease in the cash flow used in operating activities in 20212022 compared to 20202021 is primarily due to a decrease in operating loss plus an increase from operating loss lessin accounts payable and stock-based compensation changeand a decrease in the fair value of the liability related to the potential conversion of convertible bridge loans, amortization of discounts and accrued interest on convertible bridge loans and changes in other current assets, plus change in fair value of derivative warrants liability and fair value of warrants expired, change in fair value of liability related to conversion feature of convertible bridge loans, increase in inventory, Increase in trade receivables and decrease in deferred revenues.loans.
Investing Activities
Net cash used in investing activities for the for the sixthree months ended June 30, 2021March 31, 2022 was $2,581,000,$244,000, compared to $24,000with $889,000 in the sixthree months ended June 30, 2020.March 31, 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 the investment inand Provista Diagnostics, Inc, and investments in other laboratories.Inc.
Financing Activities
Net cash provided by financing activities for the sixthree months ended June 30, 2021March 31, 2022 was $7,944,000,$1,392,000, compared to net cash provided by financing activities for the sixthree months ended June 30, 2020March 31, 2021 of $1,739,000.$3,270,000. This increasedecrease is primarily due to a decrease in cash received from proceeds from straight loans offset by Repaymentand proceeds from issuance of Receivables financing facility, Repayment of straight loans and Repaymentunits consisting of convertible bridge loans.loans, stock warrants and shares, net offset by an increase in cash received from the Company’s receivables financing facility.
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 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. |
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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.
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Recent Developments
3CL Acquisition
On January 22, 2021,March 11, 2022, we entered into a SecuritiesShare Purchase Agreement (the “SPA”with 3CL Sciences Ltd. (“3CL”) with Yozma Global Genomic Fund (the “Purchaser”and NLC Pharma Ltd. (“NLC”), pursuant to which we will acquire 52% of the issued and outstanding shares of 3CL and NLC will acquire 48% of the issued and outstanding shares of 3CL (the “Share Purchase Agreement”). Immediately prior to entering into the Share Purchase Agreement, NLC conveyed to 3CL all of the 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™).
In consideration of the 3CL shares being issued to us, we undertook to raise $10,000,000 for 3CL and committed to issue to NLC $3,800,000 worth of our 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 Sciences will be made up of five (5) individuals: three (3) appointed by the Company we issuedand two (2) appointed by NLC. We anticipate that the Share Purchase Agreement will close during the second quarter of 2022.
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 convertible 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 PurchaserCompany remained in an escrow account until the principal amount of $4,857,142.86 for proceeds of $3,400,000 (the “Transaction”). The closing is scheduled for January 29, 2021. July Payment was made.
The Note has a maturity date of one year from the date of issuanceApril 8, 2025, and pays interest at a rate of 4% per annum. The Note is convertible beginning on October 20, 2021, into Ordinary Shares of the Company (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 16,956,929 shares of Common Stock (the “Warrant Shares”) of the Company with an exercise price equal to $0.107415 per share. The Warrant is exercisable for 5 years from the datelesser of issuance.
The Company filed a registration statement with$0.05 or the Securities and Exchange Commission registering for resale the Conversion Shares and the Warrant Shares, but such registration statement has not yet become effective. 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 ten (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 continueslast 20 trading days for the Ordinary Shares prior to bethe 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 Conversion Price, thenCompany has the Conversion Price should resetright to such 10-day average price with a maximumimmediately notify SIH of a 20% discount fromits intention to pay the initial Conversion Price.
The foregoing descriptionsconversion amount in cash within three (3) business days of receipt of the SPA,Notice of Conversion (i.e., before SIH would take possession of shares converted under the Notice of Conversion). If, at any time between October 20, 2021 and April 20, 2022, the average of the lowest bid and closing sale price at 4:00:00 p.m., New York time (or such other time as such market publicly announces is the official close of trading) is below ($0.05), the Company has the option to buy out all or any portion of the Note and(the “Buyback Option”). In the Warrant doevent the Company exercises the Buyback Option for an amount equal to or greater than one million, one hundred seventy thousand dollars ($1,170,000) (the “Buyback Amount”), SIH may not purport to be complete and are qualified in their entirety by reference to the full textsubmit any conversions below five cents ($0.05) for ninety (90) days from receipt 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”Buyback Amount (“90 Day Period”).
TheIn the event that the Company fileduplists its Ordinary Shares to a registration agreementnational securities exchange, the Note shall automatically be exchanged into Series B preferred stock with respecta conversion price equal to the ordinary shares underlyinglesser of (a) $0.05, (b) the Tranche 2 Securities, but such registration statement has not yet become effective.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.
The foregoing descriptionAs of the Closing Agreement does not purport to be complete and is qualified in its entirety by reference to the full textdate of the Closing Agreement, a form of which is attached as Exhibit 10.1 to the Company’s Current Reportthis quarterly 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 customer10-Q, SIH 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 havesubmitted a material adverse effect on the Company’s revenues from the sale of Covid-19 testing kits.Conversion Notice.
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Products
On April 8,July 22, 2021, the Company entered intoUS Food & Drug Administration (FDA) granted a Securities Purchase Agreement (the “SPA”) with an institutional investor (the “Purchaser”) pursuant to whichnew Certificate of Free Sale for Tollovid Daily™, the Company has agreed to issue a promissory convertible note (the “Note”) to the Purchaser in the principal amount of $4,285,714.29 for proceeds of $3,000,000 (the “Transaction”). The closing occurred on April 12, 2021 (the “Closing Date”). 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 shares of Common Stock (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 16,000,000 shares of Common Stock (the “Warrant Shares”)newest member 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. From the Closing Date until 180 days thereafter, the Company shall be restricted from issuing or entering into any agreement to issue any shares of Common Stock, except under certain circumstances. This provision shall no longer be in effect if the closing sale price of the Common Stock exceeds $0.10. The Company intends to use the net proceeds from this 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.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 filedintends to establish a registration statementmonthly 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 the Securities and Exchange Commission registering for resale the Conversion Shares and the Warrant Shares, but such registration statement has not yet become effective. 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 ten (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.
The Purchaser has 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 shares of Common Stock.
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 April 14, 2021, and are incorporated herein by reference.NLC Pharma.
On April 8, 2021, the Companywe 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.
Financing and Fundraising
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.
On January 22, 2021, we entered into a Securities Purchase Agreement (the “SPA”) with Yozma Global Genomic Fund (the “Purchaser”) pursuant to which on January 29, 2021, the Company issued a promissory convertible note (the “Note”) to the Purchaser in the principal amount of $4,857,143 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. The Note is convertible into Ordinary Shares of the Company (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 16,956,929 Ordinary Shares (the “Warrant 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 20:1, the resulting adjusted Warrant Shares and Exercise Price are limited to a 20:1 ratio.
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The Company and Leviston Resources LLC, a Delaware limited liability company (the “Purchaser”) are parties to that certain Securities Purchase Agreement, dated as of July 9, 2020 (the “Purchase Agreement”), pursuant to which the Purchaser purchased an 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”).
On April 8, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with Kips Bay Select LP (the “Purchaser”) pursuant to which the Company agreed to issue a promissory convertible note (the “Note”) to the Purchaser in the principal amount of $4,285,714 for proceeds of $3,000,000 (the “Transaction”). The closing occurred on April 12, 2021 (the “Closing Date”). 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 (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 16,000,000 Ordinary Shares (the “Warrant 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 20:1, the resulting adjusted Warrant Shares and Exercise Price are limited to a 20:1 ratio. The Company used the net proceeds from this 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.
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.
On July 7, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with Kips Bay Select LP (the “Purchaser”) pursuant to which the Company agreed to issue a promissory convertible note (the “Note”) to the Purchaser in the principal amount of $1,535,714 for proceeds of $1,075,000 (the “Transaction”). The closing occurred on July 7, 2021 (the “Closing Date”). 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 (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 3,440,000 Ordinary Shares (the “Warrant 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. From the Closing Date until 180 days thereafter, the Company shall be restricted from issuing or entering into any agreement to issue any Ordinary Shares, except under certain circumstances, including an uplisting. This provision shall no longer be in effect if the closing sale price of the Ordinary shares exceeds $0.10. The Company intends to use the net proceeds for general corporate purposes.
On September 23, 2021, the Company completed the conditions precedent required to enter into a Securities Purchase Agreement (the “SPA”) with Mercer Street Global Opportunity Fund, LLC (the “Purchaser”) pursuant to which the Company issued a promissory convertible note (the “Note”) to the Purchaser in the principal amount of $2,285,143 for proceeds of $2,000,000 (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. The Note is convertible into Ordinary Shares of the Company (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 11,924,636 Ordinary Shares (the “Warrant 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 this Note 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.
On November 22, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with T-Cell Protect Hellas S.A. (“T-Cell Protect”) pursuant to which the Company issued a promissory convertible note (the “Note”) to T-Cell Protect in the principal amount of €1,000,000 (the “Transaction”). The Note has a maturity date of one year from the date of issuance and pays interest at a rate of 10% per annum. The Note is convertible into ordinary shares (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price). At any time prior to the Company uplisting its ordinary shares to a national securities exchange, T-Cell Protect may exchange the Note into either (a) a direct equity investment in 3CL Sciences at the same terms as a financing round of at least $5,000,000 (the “Sub”) or (b) into a note in the Sub, bearing 10% interest that converts into direct equity in the Sub at the same terms as a financing round of at least $5,000,000. The proceeds from this Transaction are intended to be used for the clinical development of Tollovir, the Company’s therapeutic candidate for hospitalized COVID-19 patients.
On January 13, 2022, the Company issued 1,500,000 ordinary shares to a service provider, valued at $711,000, of which 1,250,000 ordinary shares were issued in exchange of previous commitment to issue a fixed number of shares.
During the period of three months ended March 31, 2022, Principal Amount and unpaid Interest in total amount of $613,000 have been converted into 97,611,464 ordinary shares.
On February 4, 2022 and March 10, 2022, the Company issued total of 49,620,690 ordinary shares as partial conversion of $1,804,000 of principal and accrued interest, out of $3,500,000 convertible note granted to Provista Diagnostics, Inc.
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 Borrower 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. As of March 31, 2022, the Company utilized $999,000 out of the credit facility. The Company has estimated the portion of the 10% shares of Provista at $740,000 and recorded $598,000 as interest expenses and $142,000 as prepaid interest expenses under Other Current Assets.
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During the first quarter of 2021, the Company’s contractual agreement to supply Covid-19 testing kits to NOAH Laboratories, Inc., 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. On November 15, 2021, Todos USA sent a demand letter (the “Demand Letter”) to the significant customer with which our contractual agreement to supply Covid-19 testing kits expired. The Demand Letter seeks (a) payment for testing kits that Todos USA supplied for which it was not paid, in the amount of $3,465,000, (b) the return of Todos USA’s equipment, title to which remains with Todos USA unless and until the significant customer meets a minimum purchase requirement, and (c) payment of damages as a result of the significant customer’s unlawful retention of Todos USA’s equipment, in an amount anticipated to be $2 million. The Company and Todos USA are negotiating a settlement with NOAH Laboratories, Inc., which the Company believes will result in most of the Company’s demands being met.
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 March 25, 2022, the Company has not made any royalty payments to Friends. The note has been repaid.
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 is April 30, 2021. As of March 25, 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.
Reverse Split
At an extraordinary general meeting of our shareholders held on July 26, 2021, our shareholders voted to approve 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”). Although our shareholders approved 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, as the Board of Directors has not determined the ratio or the effective date of the Reverse Split. At its next general meeting, Todos’ shareholders will be asked to approve an extension of the deadline for the Reverse Split.
The Purchase Agreement with 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 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 Purchase Agreement, which we refer to in this quarterly report on Form 10-Q 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 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 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 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 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 Purchase Agreement.
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 implementation 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 COVID-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, we entered into a Share Purchase Agreement with 3CL Sciences Ltd. (“3CL”) and NLC Pharma Ltd. (“NLC”), pursuant to which we will acquire 52% of the issued and outstanding shares of 3CL and NLC will acquire 48% of the issued and outstanding shares of 3CL (the “Share Purchase Agreement”). Immediately prior to entering into the Share Purchase Agreement, NLC conveyed to 3CL all of the 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™).
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In consideration of the 3CL shares being issued to us, we undertook to raise $10,000,000 for 3CL and committed to issue to NLC $3,800,000 worth of our 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 Sciences will be made up of five (5) individuals: three (3) appointed by the Company and two (2) appointed by NLC. We anticipate that the Share Purchase Agreement will close during the second quarter of 2022.
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 Company common sharesOrdinary 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 beginning on October 20, 2021, into Ordinary Shares of the Company common shares 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 common sharesOrdinary 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). If, at any time between October 20, 2021 and April 20, 2022, the average of the lowest bid and closing sale price at 4:00:00 p.m., New York time (or such other time as such market publicly announces is the official close of trading) is below ($0.05), the Company has the option to buy out all or any portion of the Note (the “Buyback Option”). In the event the Company exercises the Buyback Option for an amount equal to or greater than one million, one hundred seventy thousand dollars ($1,170,000) (the “Buyback Amount”), SIH may not submit any conversions below five cents ($0.05) for ninety (90) days from receipt of the Buyback Amount (“90 Day Period”).
In the event that the Company uplists its common sharesOrdinary Shares to a national securities exchange, the Note shall automatically be exchanged into Series B preferred stock 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.
As of the date of this quarterly report on Form 10-Q, SIH has not submitted a Conversion Notice.
Employees and Consultants
During 2021, the Company hired 23 new employees, including management and staffing of laboratory, sales and marketing and general administrative staffing.
The foregoing descriptions of the Agreement to Purchase, the SPA, the Note and the Security Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Agreement to Purchase, SPA, Note and the Security Agreement, 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 April 23, 2021, and are incorporated herein by reference.
On July 7, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with an institutional investor (the “Purchaser”) pursuant to which the Company has agreed to issue a promissory convertible note (the “Note”) to the Purchaser in the principal amount of $1,535,714 for proceeds of $1,075,000 (the “Transaction”). The closing occurred on July 7, 2021 (the “Closing Date”). 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 shares of Common Stock (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 3,440,000 shares of Common Stock (the “Warrant 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. From the Closing Date until 180 days thereafter, the Company shall be restricted from issuing or entering into any agreement to issue any shares of Common Stock, except under certain circumstances. This provision shall no longer be in effect if the closing sale price of the Common Stock exceeds $0.10. The Company intends to use the net proceeds for general corporate purposes.
The Company has agreed to file a registration statement with the Securities and Exchange Commission registering for resale of the Conversion Shares and the Warrant Shares (the “Registration Statement). 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 ten (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.
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 filed July 8, 2021, and are incorporated herein by reference.
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.
Contractual Obligations
The following table summarizes our contractual obligations as of June 30, 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 | 15,560,000 | 15,560,000 | - | - | - | |||||||||||||||
| Other loans, net | 2,756,000 | 2,756,000 | ||||||||||||||||||
| Royalties to BGU (1) | 501,000 | 296,000 | 95,000 | 39,000 | 71,000 | |||||||||||||||
| Total (2) | 18,817,000 | 18,612,000 | 95,000 | 39,000 | 71,000 | |||||||||||||||
(1) This balance was measured based on the future cash payments discounted using an interest rate of 21%, which represents, according to management’s estimate, the applicable rate of risk for us.
(2) This does not include the repayment of approximately $272,000 of grants we received from the IIA and interest thereon, which shall be repaid as royalties upon the commercialization of our products.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our market risk during the secondfirst 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 June 30, 2021,March 31, 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 June 30, 2021,March 31, 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
ITEM 1. LEGAL PROCEEDINGS
There have been no material changes to our legal proceedings as described in “Part I, Item 3. Legal Proceedings” of our 20202021 Form 10-K.
ITEM 1A. RISK FACTORS
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.
TODOS MEDICAL LTD.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBIT INDEX
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* Furnished herewith.
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) | ||