UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 |
For
the three months ended
| 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
(Exact name of registrant as specified in its charter)
| Not Applicable | ||
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) |
(Address of principal executive offices and Zip Code)
(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.
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.)
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 | ☐ |
| ☒ | 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 ☐
As of November 14, 2022, the registrant had ordinary shares outstanding.
TODOS MEDICAL LTD.
FORM 10-Q
FOR THE QUARTER ENDED September 30, 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, Corona Diagnostics, LLC, a Nevada limited liability company and a subsidiary of Todos Medical USA, Breakthrough Diagnostics Inc., a Nevada corporation, 3CL Sciences Ltd., an Israeli corporation, 3CL Pharma USA, Inc., a Nevada corporation and Todos Botanicals, Inc., a Texas corporation. References to “revenues” refer to net revenues. References to “U.S. dollars,” “dollars,” “U.S. $” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to new Israeli shekels. All references to “shares” in this quarterly report on Form 10-Q refer to the pre-reverse split ordinary shares of Todos Medical Ltd., par value NIS 0.01 per share. As is discussed elsewhere in this quarterly report on Form 10-Q, on September 28, 2021, Todos’ shareholders approved a reverse split of its shares based upon a ratio to be determined by Todos’ management.
| 3 |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2022
| F-1 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 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)
As of September 30, | As of December 31, | |||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade receivables | ||||||||
| Inventories | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Investment in affiliated companies, net | ||||||||
| Investment in other company | ||||||||
| Property and equipment, net | ||||||||
| Right of use asset arising from operating lease | ||||||||
| Goodwill | ||||||||
| Intangible assets | ||||||||
| Other long term assets (Note 1A) | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Revolving line of credit | $ | $ | ||||||
| Loans, net | ||||||||
| Accounts payable | ||||||||
| Other current liabilities | ||||||||
| Liability for minimum royalties | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Convertible bridge loans, net | ||||||||
| Fair value of bifurcated convertible feature of convertible bridge loans | ||||||||
| Operating lease liability | ||||||||
| Deferred taxes | ||||||||
| Liability for minimum royalties | ||||||||
| Other non-current liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Shareholders’ deficit: | ||||||||
| Ordinary Shares of NIS par value each: | ||||||||
| Authorized: and shares at September 30, 2022 and December 31, 2021, respectively; Issued and outstanding: shares and shares at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Non-controlling interests | ||||||||
| Total deficit | ( | ) | ( | ) | ||||
| Total liabilities and deficit | $ | $ | ||||||
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)
Nine months period ended September 30, | Three months period ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ( | ) | ||||||||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financing expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other losses | ( | ) | ||||||||||||||
| Share in losses of affiliated companies, net | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Less: net loss attributable to non-controlling interests | ||||||||||||||||
| Net loss attributable to the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted net loss per share attributable to Company’s stockholders’ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of ordinary shares outstanding used in computation of basic and diluted net loss per share | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-4 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
(U.S. dollars in thousands except share and per share amounts)
| COMPANY STOCKHOLDERS | ||||||||||||||||||||||||||||
| Ordinary shares | Additional paid-in | Accumulated | Total stockholders’ | Non-controlling | Total | |||||||||||||||||||||||
| Shares | Amount | capital | deficit | deficit | interests | deficit | ||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Changes during the three months period ended March 31, 2022: | ||||||||||||||||||||||||||||
| Issuance of ordinary shares for call option to acquire potential acquiree | ||||||||||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | ||||||||||||||||||||||||||||
| Conversion of warrants into ordinary shares | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - | |||||||||||||||||||||||||||
| Issuance of ordinary shares to service providers | ||||||||||||||||||||||||||||
| Sale of subsidiary shares to non-controlling interests | - | |||||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance as of March 31, 2022 (unaudited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Changes during the three months period ended June 30, 2022: | ||||||||||||||||||||||||||||
| Issuance of ordinary shares as partial settlement of financial liability | ||||||||||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | ||||||||||||||||||||||||||||
| Issuance of shares in acquisition of an asset | ||||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - | |||||||||||||||||||||||||||
| Issuance of ordinary shares to service providers | ||||||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of June 30, 2022 (unaudited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Changes during the three months period ended September 30, 2022: | ||||||||||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | ||||||||||||||||||||||||||||
| Stock-based compensation to employees and directors | - | |||||||||||||||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | |||||||||||||||||||||||||||
| Issuance of ordinary shares to service providers | ||||||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2022 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-5 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
(U.S. dollars in thousands except share and per share amounts)
| COMPANY STOCKHOLDERS | ||||||||||||||||||||
| Ordinary shares | Additional paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | capital | deficit | deficit | ||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Changes during the three months period ended March 31, 2021: | ||||||||||||||||||||
| Issuance of ordinary shares as settlement of previous commitments | ( | ) | ||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | ||||||||||||||||||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction | ||||||||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | |||||||||||||||||||
| Issuance of ordinary shares in exchange for equity line received | ||||||||||||||||||||
| Issuance of ordinary shares as collateral for loan repayment | ||||||||||||||||||||
| Issuance of ordinary shares or commitment for issuance of fixed number of ordinary shares to service providers | ||||||||||||||||||||
| Stock-based compensation to employees and directors | - | |||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of March 31, 2021 (unaudited) | ( | ) | ( | ) | ||||||||||||||||
| Changes during the three months period ended June 30, 2021: | ||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | ||||||||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | |||||||||||||||||||
| Stock-based compensation to service providers | - | |||||||||||||||||||
| Commitment to issue shares in acquisition of subsidiary | - | |||||||||||||||||||
| Stock-based compensation to employees and directors | - | |||||||||||||||||||
| Net income for the period | - | |||||||||||||||||||
| Balance as of June 30, 2021 (unaudited) | ( | ) | ( | ) | ||||||||||||||||
| Changes during the three months period ended September 30, 2021: | ||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | ||||||||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | |||||||||||||||||||
| Stock-based compensation to service providers | ||||||||||||||||||||
| Issuance of shares in acquisition of subsidiary | ( | ) | ||||||||||||||||||
| Stock-based compensation to employees and directors | - | |||||||||||||||||||
| Net income for the period | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2021 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
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)
Nine months period ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | Unaudited | Unaudited | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Impairment of investment in a subsidiary | ||||||||
| Interest on short term loans and revolving credit line | ||||||||
| Sale of subsidiary shares to non-controlling interests | ||||||||
| Liability for minimum royalties | ||||||||
| Stock-based compensation | ||||||||
| Modification of terms relating to straight loan transaction | ||||||||
| Share in losses of affiliated company | ||||||||
| Change in fair value, amortization of discounts and accrued interest on convertible bridge loans | ||||||||
| Amortization of discounts and accrued interest on straight loans | ||||||||
| 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 | ( | ) | ( | ) | ||||
| Decrease (increase) in trade receivables | ( | ) | ||||||
| Decrease (increase) in inventories | ( | ) | ||||||
| Decrease in other current assets | ||||||||
| Increase (decrease) in accounts payable | ( | ) | ||||||
| Decrease in deferred revenues | ( | ) | ||||||
| Increase (decrease) in other current liabilities | ( | ) | ( | ) | ||||
| Operating lease liability | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
Increase in other long term assets | ( | ) | ||||||
| Cash used in purchased of subsidiary | ( | ) | ||||||
| Investment in other companies | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from straight loans and revolving credit line | ||||||||
| Repayment of Receivables financing facility | ( | ) | ||||||
| Repayment of straight loans | ( | ) | ( | ) | ||||
| Repayment of convertible bridge loans | ( | ) | ||||||
| Proceeds from issuance of units consisting of convertible bridge loans, stock warrants and shares, net | ||||||||
| Proceeds from issuance of ordinary shares through equity line | ||||||||
| Net cash provided by financing activities | ||||||||
| Change in cash, cash equivalents | ( | ) | ( | ) | ||||
| Cash, cash equivalents at beginning of period | ||||||||
| Cash, cash equivalents at end of period | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-7 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)
(U.S. dollars in thousands)
Nine months period ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | Unaudited | |||||||
| Supplemental disclosure of non-cash activities: | ||||||||
| Issuance of warrants as part of bridge loan transactions | ||||||||
| Partial conversion of convertible bridge loans and liability related to conversion feature of convertible bridge loans into ordinary shares | ||||||||
| Issuance of ordinary shares for call option to acquire potential acquiree | ||||||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction | ||||||||
| Sale of subsidiary shares to non-controlling interests | ||||||||
| Shares issued in settlement of a financial liability | ||||||||
| Issuance of shares upon acquisition of an asset | ||||||||
| Cash used in purchase of subsidiary consolidated for the first time: | ||||||||
| Working capital (excluding cash and cash equivalents) | ( | ) | ||||||
| Fixed assets | ||||||||
| Long term assets | ||||||||
| Net assets acquired | ||||||||
| Goodwill acquired | ||||||||
| Intangible assets acquired | ||||||||
| Second cash installment payable | ( | ) | ||||||
| Consideration in convertible promissory note | ( | ) | ||||||
| Consideration in Shares | ( | ) | ||||||
| Deferred tax liability | ( | ) | ||||||
| Net cash used in purchase of subsidiary consolidated for the first time | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-8 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 1 – GENERAL
| A. | Operations |
Todos Medical Ltd. (the “Company” or “Todos”) was incorporated under the laws of the State of Israel and commenced its operations on April 22, 2010. The Company engineers life-saving diagnostic solutions for the early detection of a variety of cancers. The Company’s patented Todos Biochemical Infrared Analyses (TBIA) is a proprietary cancer-screening technology using peripheral blood analysis that deploys deep examination into cancer’s influence on the immune system, looking for biochemical changes in blood mononuclear cells and plasma. Todos’ two internally developed cancer-screening tests, TMB-1 and TMB-2, have received a CE mark in Europe.
Todos is also developing blood tests for the early detection of neurodegenerative disorders, such as Alzheimer’s disease. The Lymphocyte Proliferation Test (LymPro Test™) is a diagnostic blood test that determines the ability of peripheral blood lymphocytes (PBLs) and monocytes to withstand an exogenous mitogenic stimulation that induces them to enter the cell cycle. LymPro is unique in the use of peripheral blood lymphocytes as a surrogate for neuronal cell function, suggesting a common relationship between PBLs and neurons in the brain.
Commencing 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.
On March 11, 2022, the Company entered into a Share Purchase Agreement with 3CL Sciences Ltd. (“3CL”) and NLC Pharma Ltd. (“NLC”), pursuant to which Todos will acquire % of the issued and outstanding shares of 3CL and NLC will acquire % of the issued and outstanding shares of 3CL (the “Share Purchase Agreement”). Immediately prior to the closing of the Share Purchase Agreement, NLC will convey to 3CL all of the 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 to be issued to the Company, Todos undertook to raise $for 3CL and committed to pay $
Revenues of the nine months ended September 30, 2022, resulted from sales of COVID-19 related products, lab testing services, testing kits and dietary supplement, Tollovid™. Through September 30, 2022, the Company has not yet generated any revenue from its developed cancer-screening tests TMB-1 and TMB-2 or LymPro Test™.
| F-9 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except shares amounts)
| B. | Foreign operations |
| 1. | Todos Medical (Singapore) Pte Ltd |
On January 27, 2016, the Company incorporated a wholly owned subsidiary in Singapore under the name of Todos Medical (Singapore) Pte Ltd. (“Todos Singapore”) for the purpose of advancing clinical trials of the Company’s core technology for breast cancer in Southeast Asia. As of September 30, 2022, Todos Singapore has not yet commenced its business operations.
| 2. | Todos Medical USA |
In January 2020, the Company incorporated a U.S. subsidiary named Todos Medical USA (“Todos U.S.”) for the purpose of conducting business as medical importer and distributor focused on the distribution of the Company’s testing products and services to customers in the North America and Latin America.
| 3. | Corona Diagnostics, LLC |
In April 2020, the Company incorporated a U.S. subsidiary named Corona Diagnostics, LLC (“Corona Diagnostics”) for the purpose of marketing COVID-19 related products in the United States to validate potential products the Company is contemplating distributing and creating marketing materials for the testing products based upon those validations.
| 4. | Breakthrough Diagnostics, Inc. |
On
July 28, 2020, the Company completed the purchase of
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 an agreement to purchase
On
March 14, 2022, the Company entered into a Revolving Line of Credit Agreement with Testing 123, LLC. Under the terms of the Revolving
Line of Credit Agreement, the Company agreed to deliver to Testing 123, LLC, shares, equal to a
| 6. | Bio Imagery Ltd. |
In August 2020, the Company entered into an agreement with Care GB Plus Ltd, under which Bio Imagery Ltd. (“Bio Imagery”) has been incorporated in Israel for the purpose of developing, marketing and commercializing the Products and all the Intellectual Property of the Company (“Todos Cancer Assets”), developing new Intellectual Property, products and services, and pursue the business based on the Todos Cancer Assets and on new intellectual property that will be developed by Bio Imagery. Under the agreement, the Company granted Bio Imagery an irrevocable, perpetual, exclusive license to distribute, market and sale of the products and new products in Israel, Europe and Africa (the “Territories”). Distribution, marketing and sale in other Territories (except China) are authorized by the Company’s written and in advance approval.
| F-10 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands except shares amounts)
On
April 5, 2022 the Company entered into an Agreement Addendum according to which the Company issued ordinary shares of the
Company to Care GB Plus Ltd to increase its holding in Bio Imagery to
At the Agreement Addendum Closing Date, Bio Imagery was determined to be excluding substantive process as required under the definition of business in accordance with the provisions of ASC Topic 805 “Business Combination”. The entire additional investment was charged to expenses at the acquisition date as “other expenses” in the profit and loss as Bio Imagery has not yet commenced its business operations.
| 7. | Todos Botanicals, inc |
In September 2022, the Company incorporated a U.S. subsidiary named Todos Botanicals, Inc (“Todos Botanicals”) for the purpose of manufacturing, marketing and sales of its proprietary 3CL protease inhibitor immune support dietary supplement Tollovid™ and botanical ‘0% THC’ CBD products in pill, tincture, gummy, candy and cream finished products to third parties.
| 8. | Other entities |
In June 2020, the Company entered into agreement with NLC Pharma Ltd., under which Antigen COVID Test Killer (“CATK”) was formed as a Israeli based company, for the purpose of development of diagnostic candidate Antigen Killer and product commercialize through the Company’s sales channels. As of September 30, 2022, the Company hold 15% of the outstanding equity of CATK. As of September 30, 2022, CATK has not commenced its business operations.
See also note 1 regarding the Share Purchase Agreement with 3CL Sciences Ltd. Signed on March 11, 2022.
The Company and its entities herein considered as the “Group”.
| F-11 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 1 - GENERAL
| C. | Going concern uncertainty |
The
Company has devoted substantially all of its efforts to research and development of its products and raising capital to fund this 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 September 30, 2022, the Company has incurred accumulated losses of $
| D. | 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 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
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 $
| F-12 |
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, 2021, as filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022 (the “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 nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 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) Initial 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 Entity (VIE) and if so, whether the Group is its Primary Beneficiary (PB) (v) deferred income taxes and (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. | 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 will be 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. The Company will start amortizing the intangible asset when the asset will be brought into actual use.
During
the nine and three months ended September 30, 2022 the Company recorded $
| E. | Basic and diluted net loss per ordinary share |
The Company computes net loss per share in accordance with ASC 260, “Earning per Share”, which requires presentation of both basic and diluted loss per share on the face of the statement of operations.
Basic net loss per ordinary share is computed by dividing the net loss for the period applicable to ordinary shareholders, by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share gives effect to all potentially dilutive common shares outstanding during the year using the treasury stock method with respect to stock options and certain stock warrants and using the if-converted method with respect to convertible bridge loans and certain stock warrants. In computing diluted loss per share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. During the period of nine months ended September 30, 2022 and 2021 the total weighted average number of ordinary shares related to outstanding stock options, restricted stock units, stock warrants and convertible bridge loans excluded from the calculation of the diluted loss per share was and , respectively.
| F-13 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
| Nine month period ended | Three month period ended | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) attributable to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Shares of common stock used in computing basic and diluted net income (loss) per share | ||||||||||||||||
| Net income (loss) per share of common stock, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| F. | Recent Accounting Pronouncements |
On October 1, 2021, the Company early adopted ASU No. 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 and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The new standard was effective for us beginning January 1, 2022, with early adoption permitted. The adoption of this new standard did not have a material impact on our consolidated financial statements.
Other new pronouncements issued but not effective as of September 30, 2022 are not expected to have a material impact on the Company’s consolidated financial statements.
| F-14 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS
| A. | On September 28, 2022, the Company held its Annual General Meeting of Shareholders, at which the shareholders of the Company approved the increase of the authorized share capital of the Company to a total of up to and in addition, approved Company’s Board of Directors and compensation committee meetings, dated July 17, 2022 as follows: |
| 1. | Cash
compensation to the CEO, CFO and other key individuals up to a total of | |
| 2. | Compensation
package for the Company’s Chief Executive Officer that include | |
| 3. | Compensation
package for the Company’s Chief Financial Officer that include | |
| 4. | Compensation
package for the Company’s members of the Board of Directors and its committees that include |
| B. | Exchange of warrants |
On March 10, 2022 the Company and Leonite Capital LLC (the “Investor”) entered into an Agreement pursuant to which, the Company agreed to issue the Investor ordinary shares of the Company as full conversion of all Investor’s outstanding warrants. On March 17, 2022, the Company issued ordinary shares of the Company pursuant to the agreement. The Company accounted for the warrants within the equity.
| C. | Revolving Line of Credit Agreement |
On
March 14, 2022, the Company and Testing 123, LLC (the “Lender”) signed a Revolving Line of Credit Agreement, pursuant to
which the Lender will provide the Company with a credit facility of up to $
In
additional to the above
On
April 7, 2022 the Company issued ordinary shares (with fair value of $
As of September 30, 2022, the Company utilized the full credit facility.
The
Company has estimated the fair value of the % portion of shares of Provista on March 14, 2022 at $
| F-15 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
| D. | Issuance of Ordinary Shares |
| 1. | On January 13, 2022, the Company issued ordinary shares to a service provider of which ordinary shares were issued in exchange of previous commitment to issue a fixed number of shares. | |
| 2. | On
February 4, 2022 and March 10, 2022 the Company issued total of ordinary shares as partial conversion of $ | |
| 3. | On March 17, 2022, the Company issued ordinary shares – see 3B above. | |
| 4. | On April 8, 2022 the Company issued ordinary shares as part of its April 7, 2022 settlement agreement – see 3E below. | |
| 5. | On April 7, 2022 the Company issued ordinary shares to increase its interest in Bio Imagery. see note 1B6 above. | |
| 6. | On April 7, 2022 the Company issued ordinary shares to a service provider in consideration for his annual investor relations services. | |
| 7. | On
April 7, 2022 the Company issued ordinary shares (with fair value of $ | |
| 8. | On August 8, 2022 the Company issued ordinary shares to a service provider in consideration for his 6 months market relations services. | |
| 9. | During the period of nine months ended September 30, 2022, Principal Amount
and unpaid Interest in total amount of $ |
| E. | Settlement Agreement with Toledo Advisors LLC |
| F. | Former employee motion |
On
September 4, 2022, a former employee of the Company filed a motion with the Tel Aviv District Court against the Company for unpaid severance
pay, unpaid salary, various social benefits and relates claims totaling NIS
Although management cannot estimate the outcomes of such motion at this early stage it believes that the current accruals in the financial statement in respect of the former employee are adequate.
| F-16 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 4 - OTHER CURRENT LIABILITIES
As of September 30, | As of December 31, | |||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Accrued payroll and related taxes | $ | $ | ||||||
| Provision for vacation | ||||||||
| Management and directors | ||||||||
| Accrued expenses and other accounts payables | ||||||||
| $ | $ | |||||||
Stock-based compensation expenses incurred for employees (and directors) and non-employees for the period of nine and three months ended September 30, 2022, amounted to $ and $, respectively.
A. STOCK OPTIONS
On January 11, 2016, the Company’s Board of Directors approved and adopted the Todos Medical Ltd. 2015 Israeli Share Option Plan (the “2015 Plan”), pursuant to which the Company’s Board of Directors may award stock options to purchase its ordinary shares to designated participants. Subject to the terms and conditions of the 2015 Plan, the Company’s Board of Directors has full authority in its discretion, from time to time and at any time, to determine (i) the designate participants; (ii) the terms and provisions of the respective Option Agreements, including, but not limited to, the number of Options to be granted to each Optionee, the number of Shares to be covered by each Option, provisions concerning the time and the extent to which the Options may be exercised and the nature and duration of restrictions as to the transferability or restrictions constituting substantial risk of forfeiture and to cancel or suspend awards, as necessary; (iii) determine the Fair Market Value of the Shares covered by each Option; (iv) make an election as to the type of Approved 102 Option under Israeli IRS law; (v) designate the type of Options; (vi) take any measures, and to take actions, as deemed necessary or advisable for the administration and implementation of the 2015 Plan; (vii) interpret the provisions of the 2015 Plan and to amend from time to time the terms of the 2015 Plan.
The 2015 Plan permits grant of up to options to purchase ordinary shares subject to adjustments set in the 2015 Plan. As of September 30, 2022, there were ordinary shares available for future issuance under the 2015 Plan.
Number of Options | Weighted Average Exercise Price | |||||||
| Unaudited | Unaudited | |||||||
| Outstanding as of January 1, 2022 | ||||||||
| Granted | ||||||||
| Forfeited or expired | ||||||||
| Outstanding as of March 31, 2022 | ||||||||
| Granted | ||||||||
| Forfeited or expired | ||||||||
| Outstanding as of June 30, 2022 | ||||||||
| Granted | ||||||||
| Forfeited or expired | ||||||||
| Outstanding as of September 30, 2022 | ||||||||
| Exercisable as of September 30, 2022 | ||||||||
| Outstanding as of January 1, 2021 | ||||||||
| Granted | ||||||||
| Forfeited or expired | ( | ) | ||||||
| Outstanding as of March 31, 2021 | ||||||||
| Granted | ||||||||
| Forfeited or expired | ||||||||
| Outstanding as of June 30, 2021 | ||||||||
| Granted | ||||||||
| Forfeited or expired | ||||||||
| Outstanding as of September 30, 2021 | ||||||||
As of September 30, 2022, the aggregate intrinsic value for the stock options outstanding and exercisable according to $ price per share is $, with a weighted average remaining contractual life of years.
| F-17 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
B. RESTRICTED STOCK UNITS
The Company issues restricted stock units (“RSU”) under the 2015 Plan to employees and non-employees. The following table outlines the restricted stock awards activity for the Company’s during the periods of nine months ended September 30, 2022 and 2021:
| Number of RSU’s | ||||
| Unaudited | ||||
| Outstanding as of January 1, 2022 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Forfeited or expired | ||||
| Outstanding as of March 31, 2022 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Outstanding as of June 30, 2022 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Outstanding as of September 30, 2022 | ||||
| Weighted average grant date fair value of restricted stock awards granted during the period | ||||
| Outstanding as of January 1, 2021 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Forfeited or expired | ||||
| Outstanding as of March 31, 2021 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Forfeited or expired | ||||
| Outstanding as of June 30, 2021 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Forfeited or expired | ||||
| Outstanding as of June 30, 2021 | ||||
Weighted average grant date fair value of restricted stock awards granted during the nine months period ended September 30, 2022 was $.
| F-18 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 6 - FINANCING EXPENSES , NET
Nine months period ended September 30, | Three months period ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||||
| Modification of terms relating to straight loan transaction | $ | $ | $ | $ | ||||||||||||
| Amortization of discounts and accrued interest on convertible bridge loans | ||||||||||||||||
| Amortization of discounts and accrued interest on straight loans | ||||||||||||||||
| 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 | ( | ) | ( | ) | ( | ) | ||||||||||
| Settlement in cash of prepayment obligation related to convertible bridge loan | ||||||||||||||||
| Interest and related royalties under receivables financing facility | ( | ) | ||||||||||||||
| Amortization of prepaid expenses related to revolving line of credit agreement | ||||||||||||||||
| Exchange rate differences and other finance expenses | ( | ) | ( | ) | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
NOTE 7 - TAXES ON INCOME
| A. | Deferred income taxes reflect the net tax effects of net operating loss and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows: |
As of September 30, | ||||||||
| 2022 | 2021 | |||||||
| Composition of deferred tax assets: | Unaudited | Unaudited | ||||||
| Net operating loss carry-forward | $ | $ | ||||||
| Research and development credits | ||||||||
| Allowance for Bad Debt | ||||||||
| Others | ||||||||
| Net deferred tax asset before deferred tax liabilities and valuation allowance | ||||||||
| Composition of deferred tax liabilities: | ||||||||
| Intangible assets upon acquisition of subsidiary | ( | ) | ( | ) | ||||
| Depreciation costs | ( | ) | ( | ) | ||||
| Net deferred tax asset before valuation allowance | ||||||||
| Valuation allowance | ( | ) | ||||||
| Net deferred tax assets | ( | ) | ( | ) | ||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuation allowance as of September 30, 2022.
| B. | For the period of nine months ended September 30, 2022, the following table reconciles the statutory income tax rate to the effective income tax rate: |
| Nine months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | Unaudited | |||||||
| Tax rate | % | % | ||||||
| Tax expense (benefit) at statutory rate | $ | ( | ) | $ | ( | ) | ||
| Tax rate differential | ||||||||
| Permanent differences with respect to stock-based compensation | ||||||||
| Permanent differences with respect to derivative warrants liabilities, bifurcated conversion feature and convertible loans | ||||||||
| Loss carryforwards and others | ||||||||
| Income tax expense (benefit) | $ | $ | ||||||
| F-19 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 8 – SEGMENT REPORTING
| A. | General information |
Commencing 2020, the operations of the Company are conducted through three different core activities: Breast Cancer Test (TM-B1, TM-B2), Alzheimer and COVID-19 testing, each of which are operating segments. These activities also represent the reportable segments of the Group.
The reportable segments are viewed and evaluated separately by Company 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 |
| COVID-19 | ||||||||||||||||||||
| Breast Cancer Test | ||||||||||||||||||||