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, 2021 |
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 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 | ☐ |
| ☒ | 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 11, 2021, the registrant had ordinary shares outstanding.
TODOS MEDICAL LTD.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2021
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. 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 July 26, 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, 2021
| F-1 |
TODOS MEDICAL LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2021
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, | |||||||
| 2021 | 2020 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade receivables | ||||||||
| Inventories | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Investment in affiliated companies accounted for under equity method | ||||||||
| Investment in other company | ||||||||
| Property and equipment, net | ||||||||
| Right of use asset arising from operating lease | - | |||||||
| Prepaid expenses | ||||||||
| Goodwill | - | |||||||
| Intangible assets | - | |||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Receivables financing facility, net | $ | $ | ||||||
| Loans | ||||||||
| Accounts payable | ||||||||
| Deferred revenues | ||||||||
| Other current liabilities | ||||||||
| Liability for minimum royalties | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Convertible bridge loans, net | ||||||||
| Derivative warrants liability, net | ||||||||
| Fair value of bifurcated convertible feature of convertible bridge loans | ||||||||
| Operating lease liability | ||||||||
| Deferred taxes | - | |||||||
| Liability for minimum royalties | ||||||||
| Total non-current liabilities | ||||||||
| Shareholders’ deficit: | ||||||||
| Ordinary Shares of NIS par value each: | ||||||||
| Authorized: and shares at September 30, 2021 and December 31, 2020, respectively; Issued and outstanding: shares and shares at September 30, 2021 and December 31, 2020, respectively | 2,593 | 1,059 | ||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-3 |
TODOS MEDICAL LTD.
CONDENSED STATEMENTS OF OPERATIONS
| Nine months period ended | Three months period ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit (loss) | ( | ) | ||||||||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Financing expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Share in losses of affiliated companies accounted for under equity method, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of ordinary shares outstanding attributable to ordinary shareholders 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 SHAREHOLDERS’ DEFICIT
(U.S. dollars in thousands except share and per share amounts)
| Ordinary shares | Additional paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | capital | deficit | deficit | ||||||||||||||||
| Balance as of December 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Changes during the three months period ended March 31, 2020: | ||||||||||||||||||||
| Issuance of ordinary shares for call option to acquire potential acquiree | - | |||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | - | |||||||||||||||||||
| Classification of derivative warrants liability into equity as result of partial conversion of convertible bridge loans into ordinary shares | - | - | - | |||||||||||||||||
| Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions | - | |||||||||||||||||||
| Commitment to issue units consisting of ordinary shares and stock warrants | - | - | - | |||||||||||||||||
| 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 March 31, 2020 (unaudited) | ( | ) | ( | ) | ||||||||||||||||
| Changes during the three months period ended June 30, 2020: | ||||||||||||||||||||
| Issuance of ordinary shares for call option to acquire potential acquiree | - | |||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | - | |||||||||||||||||||
| Classification of derivative warrants liability into equity as result of partial conversion of convertible bridge loans into ordinary shares | - | - | - | |||||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | - | - | |||||||||||||||||
| Issuance of ordinary shares as partial settlement of financial liability | - | |||||||||||||||||||
| Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions | - | |||||||||||||||||||
| Issuance of ordinary shares to service providers | - | |||||||||||||||||||
| Net loss for the period | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance as of June 30, 2020 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Changes during the three months period ended September 30, 2020: | ||||||||||||||||||||
| Partial conversion of convertible bridge loans into ordinary shares | - | |||||||||||||||||||
| Issuance of stock warrants as part of convertible bridge loan received | - | - | - | |||||||||||||||||
| Issuance of ordinary shares as commitment shares in exchange for equity line granted | - | |||||||||||||||||||
| Issuance of ordinary shares through equity line | - | |||||||||||||||||||
| Issuance of ordinary shares as consideration to obtain control over affiliated company | - | |||||||||||||||||||
| Issuance of ordinary shares for call option to acquire potential acquire | - | |||||||||||||||||||
| Issuance of ordinary shares as commitment shares in exchange for receivables financing facility | - | |||||||||||||||||||
| Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions | - | |||||||||||||||||||
| Issuance of units consisting of ordinary shares (or fixed number of shares to be issued) and warrants | ( | ) | - | - | ||||||||||||||||
| Classification of derivative warrants liability into equity as result of partial conversion of convertible bridge loans into ordinary shares | - | - | - | |||||||||||||||||
| Amount related to fixed number of ordinary shares to be issued as contingent consideration | - | - | - | |||||||||||||||||
| Share based compensation for employees & directors | - | - | - | |||||||||||||||||
| Share based compensation for service providers | - | - | - | |||||||||||||||||
| Net loss for the period | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance as of September 30, 2020 (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 SHAREHOLDERS’ DEFICIT
(U.S. dollars in thousands except share and per share amounts)
| Ordinary shares | Additional paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | capital | deficit | deficit | ||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| 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 loss 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, | ||||||||
| 2021 | 2020 | |||||||
| Unaudited | Unaudited | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Liability for minimum royalties | ||||||||
| Stock-based compensation | ||||||||
| Expiration of call options to acquire potential acquiree | ||||||||
| Impairment of intangible IPR&D, net of taxes | ||||||||
| Impairment of investment in affiliated company | ||||||||
| Revaluation of investment in affiliated company to fair value | ( | ) | ||||||
| Share in losses of affiliated company | ||||||||
| Modification of terms relating to straight loan transaction | ||||||||
| Modification of terms relating to convertible bridge loans transactions | ( | ) | ||||||
| Exchange differences relating to loans from shareholders | ||||||||
| Issuance of shares as a settlement in excess of the carrying amount of financial liabilities | ||||||||
| Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions | ||||||||
| 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 | ( | ) | ||||||
| Increase in trade receivables | ( | ) | ( | ) | ||||
| Increase in inventories | ( | ) | ( | ) | ||||
| Decrease (increase) in other current assets | ||||||||
| Increase (decrease) in accounts payables | ( | ) | ||||||
| Decrease in deferred revenues | ( | ) | ||||||
| Increase (decrease) in other current liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Restricted cash | ||||||||
| Purchase of intangible IPR&D | ( | ) | ||||||
| Cash used in purchased of subsidiary consolidated for the first time | ( | ) | ||||||
| Investment in other companies | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from straight loans, net | ||||||||
| 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 units consisting of ordinary shares and stock warrants | ||||||||
| 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, | ||||||||
| 2021 | 2020 | |||||||
| 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 stock warrants as part of convertible bridge loan received | ( | ) | ||||||
| Issuance of shares upon acquisition of an IPR&D | ||||||||
| Issuance of shares for receiving an equity line | ( | ) | ||||||
| Issuance of shares or commitment to issue fixed number of shares for receiving convertible bridge loans | ||||||||
| Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction | ||||||||
| Issuance of shares as settlement of financial liabilities | ( | ) | ||||||
| Investment in affiliated company by issuance shares and commitment for issued shares as contingent consideration and commitment for funding | ( | ) | ||||||
| Classification of warrants from liability into equity upon partial conversion of convertible bridge loans into ordinary shares | ( | ) | ||||||
| Conversion of loan from shareholder into ordinary shares | ||||||||
| Cash used in purchased 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.
Additionally, 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, upon completion of the Share Purchase Agreement for the purchase of Provista Diagnostics, Inc. (see B below), the Company, through Provista Diagnostics, Inc. provide diagnostic testing laboratory 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.
For the period of nine months ended September 30, 2021, all of the revenue resulted from sales of COVID-19 related products and testing kits. Through September 30, 2021, the Company has not yet generated any revenue from its developed cancer-screening tests TMB-1 and TMB-2, LymPro Test™ , or its dietary supplement, Tollovid™.
| B. | Share Purchase Agreement |
On April 19, 2021, the Company entered into a Share Purchase Agreement (“SPA”) with Strategic Investment Holdings, LLC, Ascenda BioSciences LLC (“SIH”, “Ascenda” and together referring as “Sellers”, respectively) and Provista Diagnostics, Inc. (“Provista”). Ascenda was the sole owner of the outstanding securities of Provista and SIH is the sole owner of all the outstanding securities of Ascenda. Provista is a medical diagnostics company based in Alpharetta, Georgia that owns the intellectual property rights to the proprietary breast cancer blood test, Videssa®, and has a diagnostic testing laboratory currently performing COVID-19 PCR testing, primarily for the medical and entertainment industries.
Subject
to the terms and conditions of the SPA, the Company shall purchase from the Sellers shares of Preferred Stock and shares
of Ordinary Stock (collectively the “Provista Shares”) representing
| 1. | On
or before April 19, 2021, (the “First Closing Date”), the Company shall deliver to Sellers a non-refundable deposit of
$ | |
| 2. | On or before the First Closing Date, the Company shall deliver to Sellers or Sellers’ designees such number of non-refundable shares of its ordinary stock, par value NIS , (the “Todos Deposit Shares”) with a fair market value of $, as defined in the SPA. ordinary shares were delivered in August 2021. | |
| 3. | On
or before July 1, 2021 (the “Second Closing Date”), the Company shall deliver to the Sellers a second payment of $ | |
| 4. | The
Company shall have the option of extending the payment of the Second Cash Payment until July 15, 2021, by paying the Sellers an additional
amount of $ |
| F-9 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 1 - GENERAL (Cont.)
| 5. | On
or before the Second Closing Date, the Company shall deliver to Sellers or their designees the Convertible Note in the principal
amount of $ |
In
the event the Sellers deliver a conversion notice to the Company at a per share price less than $
In
the event that the Company uplists its shares of common stock to a national securities exchange, the Note shall automatically be exchanged
into preferred stock (the “Series B Preferred Stock”) with a conversion price equal to the lesser of (i) $
If, at any time while this Note is outstanding, (i) the Company effects a Fundamental Transaction, , as defined in the SPA, then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of common stock (the “Alternate Consideration”).
| 6. | The Company’s obligation to deliver the Second Cash Payment and the Convertible Note to the Seller at the Second Closing shall be secured by the Provista Shares to be held and released in accordance with the Escrow Agreement and all of Provista’ s assets (the “Assets”) pursuant to the terms of the Security Agreement. | |
| 7. | At
the First Closing, the Sellers shall hold full right, title, and interest in and to the Cash Deposit, and the Todos Deposit Shares
paid to the Sellers or their designees and/or assignees on the First Closing Date free and clear of all rights, liens and encumbrances,
without limitation. Additionally, should the Company fail to deliver the Second Cash Payment and/or the Convertible Note by the Second
Closing Date, the Escrow Agent shall return the Provista Shares to the Sellers, and the Sellers shall become the sole owners. The
Company further agrees and understands that in the event that the Company fails to deliver the Second Cash Payment and/or the Convertible
Note to the Sellers at the Second Closing, the Cash Deposit and the Todos Deposit Shares shall be the property of the Sellers, and
the Sellers shall retain and hold full right, title, and interest in and be the sole owners of the Cash Deposit, the Todos Deposit
Shares and |
The consummation of the transactions contemplated by the SPA have been taken place as of April 19, 2021.
| F-10 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 1 - GENERAL (Cont.)
| C. | Purchase price allocation |
| 1. | Non-refundable
shares of its ordinary stock - As agreed in the SPA, the Company committed to issue non-refundable ordinary stock, par
value NIS . The fair value of the non-refundable shares was estimated as of the Closing Date based on the Company’s share
price as quoted in the OTC as of the Closing Date at $ | |
| 2. | The
fair value of the convertible note was estimated by third party appraiser as weighted average of the two possible scenarios of the
total loan amount conversion as of April 19, 2021, |
The Optional / Maturity Conversion (scenario 1) was estimated by the appraiser using the Monte Carlo Simulation Model based on the following parameters:
| April 19, 2021 | ||||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Volatility | % | |||
| Share price | ||||
| Conversion price | * | |||
| Fair value | $ | |||
| ● |
The Mandatory Conversion (scenario 2) was estimated by the appraiser using the Monte Carlo Simulation Model based on the following parameters:
| April 19, 2021 | ||||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Volatility | % | |||
| Share price | ||||
| Conversion price | * | |||
| Fair value | $ | |||
| ● |
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 $
The following table summarizes the total purchase price and purchase price allocation:
| U.S. dollars in thousands | ||||
| Unaudited | ||||
| Cash payment | ||||
| Consideration in Shares | ||||
| Fair value of convertible promissory note | ||||
| Total purchase price | ||||
| Cash and cash equivalents | ||||
| Trade receivables | ||||
| Property and equipment, net | ||||
| Security deposit | ||||
| Technology intangible asset | ||||
| Total identifiable assets | ||||
| Accounts payable | ( | ) | ||
| Deferred tax liability | ( | ) | ||
| Due to related party | ( | ) | ||
| Total liability assumed | ( | ) | ||
| Total goodwill | ||||
| F-11 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 1 - GENERAL (Cont.)
Unaudited pro forma results of operations for the nine months ended September 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.
| Nine months ended September 30, | Year ended December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| Revenues | $ | $ | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Basic and diluted net loss per share | ( | ) | ( | ) | ||||
| D. | 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, 2021, Todos Singapore has not yet commenced its business operations. | ||
| 2. | Todos Medical USA | |
| In January 2020, the Company incorporated a U.S. subsidiary named Todos Medical USA (“Todos U.S.”) for the purpose of conducting business as medical importer and distributor focused on the distribution of the Company’s testing products and services to customers in the North America and Latin America. | ||
| 3. | Corona Diagnostics, LLC | |
| In April 2020, the Company incorporated a U.S. subsidiary named Corona Diagnostics, LLC (“Corona Diagnostics”) for the purpose of marketing COVID-19 related products in the United States to validate potential products the Company is contemplating distributing and creating marketing materials for the testing products based upon those validations. | ||
| 4. | Breakthrough Diagnostics, Inc. | |
On February 27, 2019, the Company entered into Shares Purchase and Assignment of License Agreement with Amarantus Bioscience Holdings, Inc. (“Amarantus”), under which the Company purchased
At the Closing Date, 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”. In addition, it was determined that the License represents IPR&D with no alternative future use and therefore the entire purchase price allocated to the acquired IPR&D was charged to expense at the acquisition date as part of “Research and Development expenses” line in operations in the accompanying consolidated statement of operations for the year ended December 31, 2020. | ||
| 5. | Other entities |
| A. | In June 2020, the Company entered into an agreement with NLC Pharma Ltd., under which Antigen COVID Test Killer was formed for the purpose of developing the diagnostic candidate Antigen Killer and product commercialization through the Company’s sales channels. | |
| 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”) and to develop 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. As of September
30, 2021, Bio Imagery has not yet commenced its business operations and the Company wrote off its investment in the amount of
$ |
The Company and its entities herein considered as the “Group”.
| 6. | Provista Diagnostics, Inc | |
| See note 1B and 1C above |
| F-12 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 1 - GENERAL (Cont.)
| E. | 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. 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, 2021, the Company has incurred accumulated losses of $ | |
| During
the year ended December 31, 2020, the Company raised net amounts of $ | |
| F. | 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 | |
| G. | 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 $ |
| F-13 |
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, as filed with the Securities and Exchange Commission (“SEC”) on April 21, 2021 (the “2020 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 and three months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 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 Entities (VIE) and if so, whether the Group is its Primary Beneficiary (PB) and (v) 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 |
| 1. | 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. | |
| 2. | 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. |
| E. | Basic and diluted net loss per ordinary share |
The Company computes net loss per share in accordance with ASC 260, “Earning per Share”, which requires presentation of both basic and diluted loss per share on the face of the statement of operations.
Basic net loss per ordinary share is computed by dividing the net loss for the period applicable to ordinary shareholders, by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share gives effect to all potentially dilutive common shares outstanding during the year using the treasury stock method with respect to stock options and certain stock warrants (accounted for as derivative liability) and using the if-converted method with respect to convertible bridge loans and certain stock warrants. In computing diluted loss per share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
| F-14 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Nine month period ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Unaudited | Unaudited | |||||||
| Numerator: | ||||||||
| Net loss attributable to common shareholders | $ | $ | ||||||
| Revaluation of liability related to warrants to purchase shares of common Stock | - | - | ||||||
| Net loss attributable to common shareholders | $ | $ | ||||||
| Denominator: | ||||||||
| Shares of common stock used in computing basic net loss per share | ||||||||
| 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 | ||||||||
| Net loss per share of common stock, basic and diluted | $ | $ | ||||||
During the period of nine months ended September 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.
| F. | Leases |
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our condensed consolidated balance sheets.
ROU assets represent Company’s right to use an underlying asset for the lease term and lease liabilities represent Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, the Company generally uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
| G. | Recent Accounting Pronouncements |
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) which changes the impairment model for most financial assets and certain other 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. The guidance also requires increased disclosures. For the Company, the amendments in the update were originally effective for fiscal years 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 date of ASU 2016-13 for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted.
The Company is currently assessing the impact the guidance will have on its condensed consolidated financial statements.
| F-15 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS
| A. | Secured Convertible Equipment Loan Agreement |
On
December 31, 2020 (the “Effective Date”), the Company entered into Secured Convertible Equipment Loan Agreement with a private
lender (the “Lender”), under which at the Effective Date and for the purpose for purchasing two Liquid Handler Machines (the
“Collateral”) to be placed in the laboratory of a Company’s client, the Company will receive from the Lender a net
cash amount of $
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
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.
The total
discount amortization expenses of $
| B. | Securities Purchase Agreement |
On
January 22, 2021, the Company entered into a Securities Purchase Agreement with Yozma Global Genomic Fund 1 (“Yozma”) pursuant
to which Yozma purchased from Todos a convertible note in the original principal amount of up to $
At
the Company’s option and upon 30 days’ notice to Yozma,
| F-16 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.)
| B. | Securities Purchase Agreement |
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
In
addition, the Company granted Yozma a warrant to purchase up to
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 $
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 $
The
Company recorded an income of $
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
For more information in connection to additional funds raising and filing of registration statement on Form S-1 under the aforesaid Securities Purchase Agreement subsequent to the balance sheet date.
| F-17 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.)
| C. | First Amendment to Secured Convertible Equipment Loan Agreement |
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 $
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 September 30, 2021 the loan was repaid in full.
| D. | Closing Agreement |
On
March 3, 2021, the Company and one of its lenders entered into a Closing Agreement (the “Closing Agreement”), under which
the lender exercised its right to invest an additional $
Upon
initial recognition, it was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument.
The management by assistance of third-party appraiser measured the embedded conversion feature in total amount of $
The
Company recorded interest expenses amounting to $
| E. | Assignment of Receivable Agreement |
During the period of nine months ended September 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 nine months ended September 30, 2021, the Assignor received an amount of $
| F-18 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.)
| F. | Securities Purchase Agreement |
| 1. | On
April 9, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with a Family Office Investor (the
“Family Office”) to which the Company has agreed to issue a promissory convertible note (the “Note”) to the
Family Office in the principal amount of $ |
The
Family Office shall have the option, exercisable at the Family Office’s sole discretion, on the date that is ninety (90) days following
the date of effectiveness of a registration statement filed by the Company, to purchase a Second Note and the Second Warrant, for a principal
amount of $
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 $
Furthermore,
it was determined that the Convertible note is hybrid instrument embodies both an embedded derivative and a host contract and that the
embedded conversion feature is required to be bifurcated from the host loan instrument using the with-and-without method. The embedded
derivative was measured first at fair value, and the residual amount was allocated to the host contract. The embedded conversion feature
was recognized in total amount of $
The
Company recorded an income of $
| 2. | Further
to the Securities Purchase Agreement described in Note 3B, on April 27, 2021, the Company entered into an additional Securities Purchase
Agreement (the “SPA”) with Yozma to which the Company has agreed to issue a promissory convertible note (the “Note”)
to Yozma in the principal amount of $ |
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 $
| F-19 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.)
The
Company recorded expenses in the amount of $
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 Agreement with Family Office and Yozma (first and second Tranches). As the Company complied with the registration statement filing requirements, as of September 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”.
| 3. | 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 $ |
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.
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 $
Furthermore,
it was determined that the Convertible note is hybrid instrument embodies both an embedded derivative and a host contract and that the
embedded conversion feature is required to be bifurcated from the host loan instrument using the with-and-without method. The embedded
derivative was measured first at fair value, and the residual amount was allocated to the host contract. The embedded conversion feature
was recognized in total amount of $
The
Company recorded an expense of $
| F-20 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 3 - SIGNIFICANT TRANSACTIONS (Cont.)
| 4. | On
September 15, 2021, the Company completed the conditions precedent required to enter into a Securities Purchase Agreement (the
“SPA”) with an institutional investor (the “Purchaser”) pursuant to which the Company issued a promissory convertible
note (the “Note”) to the Purchaser in the principal amount of $ |
The Company has agreed to file a registration statement with the Securities and Exchange Commission registering for resale the Conversion Shares and the Warrant Shares (the “Registration Statement). Subsequent to the effective date of the 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.
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 $
Furthermore,
it was determined that the Convertible note is hybrid instrument embodies both an embedded derivative and a host contract and that the
embedded conversion feature is required to be bifurcated from the host loan instrument using the with-and-without method. The embedded
derivative was measured first at fair value, and the residual amount was allocated to the host contract. The embedded conversion feature
was recognized in total amount of $
The
Company recorded an income of $
| G. | Secured Promissory Note |
On July 19, 2021, the Company entered into Secured
Promissory Note (the “Note”) with a lender (the “Lender”), pursuant to which the Company has agreed to issue a
Note to the Lender in the principal amount of $
| H. | Lease Agreement |
The Company signed a lease agreement for office
space in Georgia, US through June 30, 2023 with monthly payments of $
| F-21 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 4 - SHAREHOLDERS’ DEFICIT
| A. | Ordinary Shares: |
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.
| B. | On July 26, 2021 the Annual General Meeting of the Company approved: |
| 1. | The resolution to amend the Company’s Articles of Association: (a) to authorize the creation of redeemable Preferred shares of the Company; (b) to authorize the creation of five thousand redeemable Preferred B Shares of the Company; (c) to increase the Company’s authorized share capital to permit the issuance of a total of up to ordinary shares of the Company; and (d) to allow the Company to fulfill relevant provisions of U.S. law in lieu of Israeli law requirements regarding External Directors, if and to the extent allowed to do so under Israeli corporate law and regulation was approved by the stockholders by the votes set forth in the table below | |
| 2. | The nomination of additional two external directors to the board of directors of the Company for a period ending on July 26, 2024. | |
| 3. | The
extension for an additional year the authority granted to the Company’s Board of Directors to effect a reverse split of the
Company’s ordinary shares (as per resolution of the Company’s Shareholders’ Meeting of May 11, 2020), such that
the authority so granted shall extend until July 26, 2022, and to expand such authority to include |
| C. | Issuance of Ordinary Shares: |
| 1. | In
March 2020, the Company entered into subscription agreements with several investors under which the Company raised gross funds in
total amount of $ | |
| 2. | On
August 4, 2020, the Company entered into a Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement
(the “Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which
Lincoln Park has agreed to purchase from the Company, from time to time, up to $ |
The Company does not have the right to commence any further sales to Lincoln Park under the Purchase Agreement until all of the conditions thereto that are set forth in the Purchase Agreement, all of which are outside of Lincoln Park’s control, have been satisfied, including, among other things, the Registration Statement being declared effective by the SEC (the date on which all such conditions are satisfied, the “Commencement Date”). .
| F-22 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 4 - SHAREHOLDERS’ DEFICIT (Cont.)
.
In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts of the Company’s Ordinary Shares in “accelerated purchases” and in “additional accelerated purchases” under the terms set forth in the Purchase Agreement.
In
connection with the Purchase Agreement, the Company issued 5,812,500 Ordinary shares to Lincoln Park as a commitment fee of $
During
the year ended December 31, 2020 and the period of nine months ended September 30, 2021, the Company sold and Ordinary
Shares to Lincoln Park in an initial purchase out of the Investment Amount under the Purchase Agreement for a total purchase price of
$
| 3. | During the period of nine months ended September 30, 2021, Principal Amount and unpaid Interest in total amount of $ have been converted into ordinary shares. In addition, the Company issued ordinary shares of NIS par value as fulfillment of commitment related to loan received in 2020. | |
| 4. | During the period of nine months ended September 30, 2021, one of the Company’s Secured Convertible Equipment Loan Agreement was entered into default scenario as result of lapse of the original maturity date, as defined. Consequently, ordinary shares of NIS par value of the Company were issued as collateral shares for purpose of repayment of the principal amount. The issued shares have been valued at $ and was deducted from the fair value of the principal amount. | |
| 5. | During the period of nine months ended September 30, 2021, the Company entered into several service agreements with certain service providers, whereby the Company issued ordinary share of NIS par value or the Company is committed to issue fixed number of ordinary shares in exchange for services that have been rendered. Consequently, the Company recorded related stock-based compensation expense of $ and $ as part of “Sales and Marketing Expenses” and “General and Administrative Expenses” lines in operations in the accompanying consolidated statement of operations, respectively. |
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, 2021, there were ordinary shares available for future issuance under the 2015 Plan.
| F-23 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 5 - STOCK OPTIONS (Cont.)
| Number of Options | Weighted Average Exercise Price | |||||||
Unaudited | Unaudited | |||||||
| Outstanding as of July 1, 2021 | ||||||||
| Granted | ||||||||
| Forfeited or expired | - | |||||||
| Outstanding as of September 30, 2021 | ||||||||
| Exercisable as of September 30, 2021 | ||||||||
| Outstanding as of January 1, 2021 | ||||||||
| Granted | ||||||||
| Forfeited or expired | ( | ) | ||||||
| Outstanding as of September 30, 2021 |
| Outstanding as of July 1, 2020 | ||||||||
| Granted | ||||||||
| Forfeited or expired | ( | ) | ||||||
| Outstanding as of September 30, 2020 | ||||||||
| Exercisable as of September 30, 2020 |
| Outstanding as of January 1, 2020 | ||||||||
| Granted | ||||||||
| Forfeited or expired | ( | ) | ||||||
| Outstanding as of September 30, 2020 |
| A. | On
July 29, 2020 (the “Commitment Date”), the Company held its Annual General Meeting of Shareholders, at which the shareholders
of the Company approved compensation packages for two officers that include inter alia the Company is obligated to grant of
stock options which are exercisable into the same number of shares of common stock at an exercise price of $ per share and shall
become vested quarterly over a -year period from its grant date. At the Commitment Date, the Company by assistance of third-party
appraiser measured the fair value of the stock options in total amount of $ by using Black-Scholes-Merton pricing model in which
the assumptions that have been used are as follows: expected dividend yield of |
In addition, as one-time bonus as compensation for uncompensated efforts to the Commitment Date, the Company is obligated to grant fully vested shares equal to $ based on the fair market value of the Company’s shares as of July 28, 2020. The Company recorded stock-based compensation expense of this amount as part of “General and Administrative Expenses” line in operations in the accompanying consolidated statement of operations during the year ended December 31, 2020.
Moreover, upon consummation of the Company’s planned public offering, restricted stock units’ bonuses will be granted to the aforesaid officers. At the Commitment Date, December 31, 2020 and September 30, 2021, the likelihood that the Performance Milestone for consummation of the Company’s planned public offering was not considered as probable. Thus, during the year ended December 31, 2020 and the period of nine months ended September 30, 2021, stock-based compensation expense has not been recorded with respect to the Performance Milestone.
During the period of nine months ended September 30, 2021, the Company recorded stock-based compensation expense amounting to $, as part of “General and Administrative Expenses” line in operations in the accompanying consolidated statement of operations.
| B. | On July 29, 2020 (the “Commitment Date”), the Company held its Annual General Meeting of Shareholders, at which the shareholders of the Company approved compensation packages for all its members of the Board of Directors that include inter alia grant of restricted stock units equal to aggregate amount of $ that shall become vested quarterly over a -year period from its grant date (except the restricted stock of the board chairman who will be vested quarterly over a 1-year period). |
During the period of nine months ended September 30, 2021, the Company recorded stock-based compensation expense amounting to $, respectively, as part of “General and Administrative Expenses” line in operations in the accompanying consolidated statement of operations.
| C. | Compensation packages for officers and members of the Board of Directors and its committees |
| 1. | On
March 10, 2021, the Company’s Compensation Committee of the Board of Directors has approved compensation package for the Company’s
Chief Executive Officer that include inter alia (i) based annual salary of $ |
| F-24 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 5 - STOCK OPTIONS (Cont.)
| 2. | On
March 10, 2021, the Company’s Compensation Committee of the Board of Directors has approved compensation package for the Company’s
Chief Financial Officer that include inter alia (i) based annual salary of $ | |
| 3. | On
March 10, 2021, the Company’s Compensation Committee of the Board of Directors has approved compensation package for the Company’s
members of the Board of Directors and its committees that include inter alia (i) each board member will receive $ |
On July 26, 2021 the Annual General Meeting of the Company approved the Compensation packages for officers and members of the Board of Directors and its committees as detailed above.
As of September 30, 2021, 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.
Stock-based compensation expenses incurred for employees (and directors) and non-employees for the period of nine months ended September 30, 2021, amounted to $.
As of September 30, 2021, the aggregate accrual for officers and members of the board and its committees in connection with salary and other benefits, amounted to $1,515 and is included in Other Current liabilities in the balance sheet.
NOTE 6 - FINANCING EXPENSES, NET
Nine months period ended September 30, | Three months period ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||||
| Modification of terms relating to straight loan transaction | $ | $ | $ | $ | ||||||||||||
| Modification of terms relating to convertible bridge loans transactions | - | ( | ) | - | ( | ) | ||||||||||
| Exchange differences relating to loans from shareholders | - | - | ( | ) | ||||||||||||
| Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions | ||||||||||||||||
| Issuance of shares as a settlement in excess of the carrying amount of financial liabilities | - | - | ||||||||||||||
| 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 | ( | ) | - | - | ||||||||||||
| Issuance of shares as call options to acquire potential acquire | - | - | ||||||||||||||
| 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 commitment shares in connection with receivables financing facility and equity line | - | |||||||||||||||
| Exchange rate differences and other finance expenses | ( | ) | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| F-25 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
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, | ||||
| Composition of deferred tax assets: | 2021 | |||
| Net operating loss carry-forward | $ | |||
Deferred tax liability in respect of Share Purchase Agreement (see note 1B) | ( | ) | ||
| Valuation allowance | ( | ) | ||
| Net deferred tax liabilities | $ | ( | ) | |
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 30,2021 and December 31, 2020.
| B. | For the nine months ended September 30, 2021, the following table reconciles the statutory income tax rate to the effective income tax rate: |
| Nine months ended September 30, | ||||
| 2021 | ||||
| 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 | ||||
| Change in temporary differences | ||||
| Income tax expense (benefit) | $ | |||
| F-26 |
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 (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 |
| Breast | COVID-19 | |||||||||||||||
| Cancer Test | Alzheimer | Testing | Total | |||||||||||||
Unaudited | ||||||||||||||||
| Nine months ended September 30, 2021 | ||||||||||||||||
| Revenues | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Unallocated amounts: | ||||||||||||||||
| Financing expenses, net | ( | ) | ||||||||||||||
| Share in losses of affiliated companies accounted for under equity method, net | ( | ) | ||||||||||||||
| Net loss | ( | ) | ||||||||||||||
| Total Assets | ||||||||||||||||
| Other significant items: | ||||||||||||||||
| Total expenditures for assets of reportable segment | ||||||||||||||||
| Total depreciation for reportable segment | ( | ) | ( | ) | ( | ) | ||||||||||
The evaluation of performance is based on the operating income of each of the three reportable segments.
Accounting policies of the segments are the same as those described in the accounting policies applied in the consolidated financial 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: |
Nine months period ended September 30, | Three months period ended September 30, | Nine months period ended September 30, | Three months period ended September 30, | |||||||||||||
| 2021 | 2021 | 2020 | 2020 | |||||||||||||
| Unaudited | Unaudited | |||||||||||||||
| Israel | $ | $ | $ | $ | - | |||||||||||
| United States | ||||||||||||||||
| F-27 |
TODOS MEDICAL LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. dollars in thousands)
NOTE 8 – SEGMENT REPORTING (Cont.)
| D. | Property and equipment, net, by geographic areas: |
| As of | As of | |||||||
| September 30, 2021 | December 31, 2020 | |||||||
| Unaudited | ||||||||
| Israel | $ | $ | ||||||
| United States | ||||||||