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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022

 

For the three months ended September 30, 2022

 

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

 

For the transition period from to

 

Commission file number 000-56026

 

TODOS MEDICAL LTD.

(Exact name of registrant as specified in its charter)

 

Israel   Not Applicable
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

121 Derech Menachem Begin, 30th Floor, Tel Aviv, 6701203 Israel

(Address of principal executive offices and Zip Code)

 

+972 (52) 642-0126

(Registrant’s telephone number, including area code)

(I.R.S. Employer Identification No.)

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act: None

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ☒ No ☐

 

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

 

Large accelerated filer Accelerated filer
       
Non-accelerated filer Smaller reporting company
       
    Emerging growth company

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of November 14, 2022, the registrant had 1,408,127,143 ordinary shares outstanding.

 

 

 

 
 

 

TODOS MEDICAL LTD.

FORM 10-Q

FOR THE QUARTER ENDED September 30, 2022

 

TABLE OF CONTENTS

 

  Page No.
GENERAL AND WHERE YOU CAN FIND MORE INFORMATION 3
PART I FINANCIAL INFORMATION F-1
ITEM 1. FINANCIAL STATEMENTS (unaudited) F-1
CONDENSED CONSOLIDATED BALANCE SHEETS – SEPTEMBER 30, 2022 AND DECEMBER 31, 2021 F-3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021 F-4
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021 F-5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE MONTHS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021 F-7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS F-9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 4
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 25
ITEM 4. CONTROLS AND PROCEDURES 25
PART II OTHER INFORMATION 25
ITEM 1. LEGAL PROCEEDINGS 26
ITEM 1A. RISK FACTORS 26
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 26
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 26
ITEM 4. MINE SAFETY DISCLOSURES 26
ITEM 5. OTHER INFORMATION 27
ITEM 6. EXHIBITS 27
SIGNATURES 31

 

2
Table of Contents

 

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
Table of Contents

 

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

 

  Page
Condensed Consolidated Balance Sheets F-3
Condensed Consolidated Statements of Operations F-4
Condensed Consolidated Statements of Changes in Deficit F-5
Condensed Consolidated Statements of Cash Flows F-7 - F-8
Notes to Condensed Consolidated Financial Statements F-9 - F-21

 

F-2
Table of Contents

 

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  $57   $189 
Trade receivables   670    2,520 
Inventories   1,320    1,603 
Other current assets   540    404 
Total current assets   2,587    4,716 
           
Non-current assets:          
Investment in affiliated companies, net   40    40 
Investment in other company   455    455 
Property and equipment, net   1,598    2,045 
Right of use asset arising from operating lease   98    143 
Goodwill   6,216    6,216 
Intangible assets   1,500    1,500 
Other long term assets (Note 1A)   

1,733

    - 
Total non-current assets   11,640    10,399 
           
Total assets  $14,227   $15,115 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIT          
Current liabilities:          
Revolving line of credit  $2,527   $- 
Loans, net   3,330    2,023 
Accounts payable   4,119    2,276 
Other current liabilities   3,761    4,284 
Liability for minimum royalties   474    377 
Total current liabilities   14,211    8,960 
           
Non-current liabilities:          
Convertible bridge loans, net   29,797    25,406 
Fair value of bifurcated convertible feature of convertible bridge loans   

136

    4,182 
Operating lease liability   82    141 
Deferred taxes   315    315 
Liability for minimum royalties   216    183 
Other non-current liabilities   105    140 
Total non-current liabilities   30,651    30,367 
           
Shareholders’ deficit:          
Ordinary Shares of NIS 0.01 par value each:          
Authorized: 10,000,000,000 and 5,000,000,000 shares at September 30, 2022 and December 31, 2021, respectively; Issued and outstanding: 1,354,369,182 shares and 975,644,432 shares at September 30, 2022 and December 31, 2021, respectively   4,045    2,913 
Additional paid-in capital   75,341    63,470 
Accumulated deficit   (110,596)   (90,595)
Total shareholders’ deficit   (31,210)   (24,212)
Non-controlling interests   575    - 
Total deficit   (30,635)   (24,212)
           
Total liabilities and deficit  $14,227   $15,115 

 

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

 

F-3
Table of Contents

 

TODOS MEDICAL LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands except share and per share amounts)

 

   2022   2021   2022   2021 
  

Nine months period ended

September 30,

  

Three months period ended

September 30,

 
   2022   2021   2022   2021 
   Unaudited   Unaudited 
         
Revenues  $6,292   $7,773   $1,914   $1,010 
Cost of revenues   (3,615)   (5,191)   (1,274)   (1,043)
Gross profit   2,677    2,582    640    (33)
                     
Research and development expenses   (600)   (685)   (145)   (166)
Sales and marketing expenses   (2,368)   (2,387)   (540)   (429)
General and administrative expenses   (7,639)   (5,198)   (1,757)   (1,869)
                     
Operating loss   (7,930)   (5,688)   (1,802)   (2,497)
                     
Financing expenses, net   (11,735)   (17,360)   (3,859)   (6,875)
Other losses   (396)   -    -    - 
Share in losses of affiliated companies, net   -    (1,499)   -    (1,007)
                     
Net loss  $(20,061)  $(24,547)  $(5,661)  $(10,379)
Less: net loss attributable to non-controlling interests   60    -    31    - 
Net loss attributable to the Company  $(20,001)  $(24,547)  $(5,630)  $(10,379)
                     
Basic and diluted net loss per share attributable to Company’s stockholders’  $(0.02)  $(0.04)  $(0.00)  $(0.01)
                     
Weighted average number of ordinary shares outstanding used in computation of basic and diluted net loss per share   1,167,267,564    637,916,356    1,279,535,548    736,939,641 

 

 

 

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

 

F-4
Table of Contents

 

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   975,644,432   $2,913   $63,470   $(90,595)  $(24,212)   -   $(24,212)
Changes during the three months period ended March 31, 2022:                                   
Issuance of ordinary shares for call option to acquire potential acquiree   49,620,690    152    1,652    -    1,804    -    1,804 
Partial conversion of convertible bridge loans into ordinary shares   97,611,464    305    2,962    -    3,267    -    3,267 
Conversion of warrants into ordinary shares   16,000,000    49    (49)   -    -    -    - 
Stock-based compensation to employees and directors   -    -    887    -    887    -    887 
Issuance of ordinary shares to service providers   1,500,000    4    707    -    711    -    711 
Sale of subsidiary shares to non-controlling interests   -    -    75    -    75    635    710 
Net loss for the period   -    -    -    (7,588)   (7,588)   -    (7,588)
Balance as of March 31, 2022 (unaudited)   1,140,376,586    3,423    69,704    (98,183)   (25,056)   635    (24,421)
Changes during the three months period ended June 30, 2022:                                   
Issuance of ordinary shares as partial settlement of financial liability   11,160,714    35    165    -    200         200 
Partial conversion of convertible bridge loans into ordinary shares   15,625,000    16    202    -    218         218 
Issuance of shares in acquisition of an asset   24,000,000    77    319    -    396         396 
Stock-based compensation to employees and directors   -    -    228    -    228         228 
Issuance of ordinary shares to service providers   2,012,821    6    389    -    395         395 
Net loss for the period   -    -    -    (6,783)   (6,783)   (29)   (6,812)
Balance as of June 30, 2022 (unaudited)   1,193,175,121    3,557    71,007    (104,966)   (30,402)   606    (29,796)
Changes during the three months period ended September 30, 2022:                                   
Partial conversion of convertible bridge loans into ordinary shares   151,194,061    458    

3,792

    -    4,250    -     4,250 
Stock-based compensation to employees and directors   -    -    218    -    218         218 
Issuance of stock warrants as part of convertible bridge loan received   -    -    44    -    44    -    44 
Issuance of ordinary shares to service providers   10,000,000    30    280    -    310         310 
Net loss for the period   -    -    -    (5,630)   (5,630)   (31)   (5,661)
Balance as of September 30, 2022 (unaudited)   1,354,369,182   $4,045   $75,341   $(110,596)  $(31,210)  $575   $(30,635)

 

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

 

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TODOS MEDICAL LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT

(U.S. dollars in thousands except share and per share amounts)

 

   Shares   Amount   capital   deficit   deficit 
   COMPANY STOCKHOLDERS 
   Ordinary shares   Additional paid-in   Accumulated   Total Shareholders’ 
   Shares   Amount   capital   deficit   deficit 
                     
Balance as of December 31, 2020   376,335,802   $1,059   $35,211   $(47,281)  $(11,011)
Changes during the three months period ended March 31, 2021:                         
Issuance of ordinary shares as settlement of previous commitments   2,500,000    8    (8)   -    - 
Partial conversion of convertible bridge loans into ordinary shares   134,358,817    409    6,461    -    6,870 
Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction   2,000,000    6    82    -    88 
Issuance of stock warrants as part of convertible bridge loan received   -    -    792    -    792 
Issuance of ordinary shares in exchange for equity line received   5,229,809    16    239    -    255 
Issuance of ordinary shares as collateral for loan repayment   20,000,000    61    809    -    870 
Issuance of ordinary shares or commitment for issuance of fixed number of ordinary shares to service providers   11,921,053    36    30    -    66 
Stock-based compensation to employees and directors   -    -    169    -    169 
Net loss for the period   -    -    -    (17,557)   (17,557)
Balance as of March 31, 2021 (unaudited)   552,345,481    1,595    43,785    (64,838)   (19,458)
Changes during the three months period ended June 30, 2021:                         
Partial conversion of convertible bridge loans into ordinary shares   55,415,011    170    1,606    -    1,776 
Issuance of stock warrants as part of convertible bridge loan received   -    -    3,430    -    3,430 
Stock-based compensation to service providers   -    -    21    -    21 
Commitment to issue shares in acquisition of subsidiary   -    -    1,699    -    1,699 
Stock-based compensation to employees and directors   -    -    143    -    143 
Net income for the period   -    -    -    3,390    3,390 
Balance as of June 30, 2021 (unaudited)   607,760,492    1,765    50,684    (61,448)   (8,999)
Changes during the three months period ended September 30, 2021:                         
Partial conversion of convertible bridge loans into ordinary shares   238,190,489    739    7,179    -    7,918 
Issuance of stock warrants as part of convertible bridge loan received   -    -    728    -    728 
Stock-based compensation to service providers   3,000,000    9    76    -    85 
Issuance of shares in acquisition of subsidiary   25,862,069    80    (80)   -    - 
Stock-based compensation to employees and directors   -    -    148    -    148 
Net income for the period   -    -    -    (10,379)   (10,379)
Balance as of September 30, 2021 (unaudited)   874,813,050   $2,593   $58,735   $(71,827)  $(10,499)

 

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

 

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TODOS MEDICAL LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

 

   2022   2021 
  

Nine months period ended

September 30,

 
   2022   2021 
Cash flows from operating activities:  Unaudited   Unaudited 
Net loss  $(20,061 )  $(24,547)
Adjustments required to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   584    556 
Impairment of investment in a subsidiary   396    -  
Interest on short term loans and revolving credit line   786    -  
Sale of subsidiary shares to non-controlling interests   710    -  
Liability for minimum royalties   131    53 
Stock-based compensation   2,752    633 
Modification of terms relating to straight loan transaction   -    88 
Share in losses of affiliated company   -    1,499 
Change in fair value, amortization of discounts and accrued interest on convertible bridge loans   13,076    18,080 
Amortization of discounts and accrued interest on straight loans   -    2,290 
Change in fair value of derivative warrants liability and fair value of warrants expired   -    (299)
Change in fair value of liability related to conversion feature of convertible bridge loans   (3,651)   (3,777)
Decrease (increase) in trade receivables   1,850    (1,629)
Decrease (increase) in inventories   283    (806)
Decrease in other current assets   

64

   705 
Increase (decrease) in accounts payable   1,844    (961)
Decrease in deferred revenues   -    (857)
Increase (decrease) in other current liabilities   (559)   (326)
Operating lease liability   (77)   - 
Net cash used in operating activities   (1,872)   (9,299)
           
Cash flows from investing activities:          
Purchase of property and equipment   (74)   (965)

Increase in other long term assets

   (1,733)   - 
Cash used in purchased of subsidiary   -    (1,176)
Investment in other companies   -    (1,024)
Net cash used in investing activities   (1,807)   (3,165)
           
Cash flows from financing activities:          
Proceeds from straight loans and revolving credit line   6,291    2,496 
Repayment of Receivables financing facility   -    (1,249)
Repayment of straight loans   (3,244)   (1,329)
Repayment of convertible bridge loans   -    (2,165)
Proceeds from issuance of units consisting of convertible bridge loans, stock warrants and shares, net   

500

    13,687 
Proceeds from issuance of ordinary shares through equity line   -     255 
Net cash provided by financing activities   3,547    11,695 
           
Change in cash, cash equivalents   (132)   (769)
Cash, cash equivalents at beginning of period   189    935 
Cash, cash equivalents at end of period  $57  $166

 

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

 

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TODOS MEDICAL LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)

(U.S. dollars in thousands)

 

  

Nine months period ended

September 30,

 
   2022   2021 
   Unaudited   Unaudited 
Supplemental disclosure of non-cash activities:        
Issuance of warrants as part of bridge loan transactions   -    4,157 
Partial conversion of convertible bridge loans and liability related to conversion feature of convertible bridge loans into ordinary shares   9,536    16,493 
Issuance of ordinary shares for call option to acquire potential acquiree   1,804    - 
Issuance of ordinary shares upon modification of terms relating to convertible straight loan transaction   -    792 
Sale of subsidiary shares to non-controlling interests   635    - 
Shares issued in settlement of a financial liability   200    - 
Issuance of shares upon acquisition of an asset   396    - 
           
Cash used in purchase of subsidiary consolidated for the first time:          
Working capital (excluding cash and cash equivalents)        (18)
Fixed assets        183 
Long term assets        3 
Net assets acquired        168 
Goodwill acquired        7,761 
Intangible assets acquired        1,500 
Second cash installment payable        (1,250)
Consideration in convertible promissory note        (4,989)
Consideration in Shares        (1,699)
Deferred tax liability        (315)
Net cash used in purchase of subsidiary consolidated for the first time        1,176 

 

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

 

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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 52% of the issued and outstanding shares of 3CL and NLC will acquire 48% of the issued and outstanding shares of 3CL (the “Share Purchase Agreement”). Immediately prior to 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 $8,000 for 3CL and committed to pay $2,000 to NLC and to issue to NLC $3,800 worth of the Company’s ordinary shares, based upon the closing price for our ordinary shares the day before the closing of the Share Purchase Agreement. The Company and NLC agreed to identify a seasoned biopharmaceutical CEO to run 3CL going forward. The board of directors of 3CL will be made up of five (5) individuals: three (3) appointed by the Company and two (2) appointed by NLC. The Company anticipate that the Share Purchase Agreement will close during the second half of 2022, subsequent to the date on which these unaudited condensed consolidated financial statements are issued. As of September 30, 2022, the Company forwarded 3CL $1,733 on account of the investment.

 

Revenues of the nine months ended September 30, 2022, resulted from sales of COVID-19 related products, 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™.

 

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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 100% of the issued and outstanding common stock of Breakthrough Diagnostics, Inc. (“Breakthrough”), a U.S based company, for entering into the field of early detection of Alzheimer’s disease.

 

Breakthrough was determined to be excluding substantive process as required under the definition of business in accordance with the provisions of ASC Topic 805 “Business Combination”, it was also determined that the asset purchased had no alternative future use and therefore the entire purchase price allocated to the acquired IPR&D was charged to expense in the consolidated statement of operations.

 

5.Provista Diagnostics, Inc

 

On April 19, 2021, the Company entered into an agreement to purchase 100% of the issued and outstanding common stock of Provista Diagnostics, Inc. Provista is a molecular diagnostics company based in the U.S focused on developing and commercializing proprietary blood-based proteomic diagnostic, prognostic and monitoring tests in women’s cancer, Videssa®, such as breast and gynecologic cancers. Provista also operates a laboratory for purposes of test validation and commercialization activities related to the distribution and sampling of COVID-19 testing.

 

On March 14, 2022, the Company entered into a Revolving Line of Credit Agreement with Testing 123, LLC. Under the terms of the Revolving Line of Credit Agreement, the Company agreed to deliver to Testing 123, LLC, shares, equal to a 10% ownership stake in Provista. In the event that additional shares of Provista are issued, the Company committed to issue the Lender additional shares so that his 10% stake in Provista is maintained.

 

6.Bio Imagery Ltd.

 

In August 2020, the Company entered into an agreement with Care GB Plus Ltd, under which Bio Imagery Ltd. (“Bio Imagery”) has been incorporated in Israel for the purpose of developing, marketing and commercializing the Products and all the Intellectual Property of the Company (“Todos Cancer Assets”), developing new Intellectual Property, products and services, and pursue the business based on the Todos Cancer Assets and on new intellectual property that will be developed by Bio Imagery. Under the agreement, the Company granted Bio Imagery an irrevocable, perpetual, exclusive license to distribute, market and sale of the products and new products in Israel, Europe and Africa (the “Territories”). Distribution, marketing and sale in other Territories (except China) are authorized by the Company’s written and in advance approval.

 

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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 24,000,000 ordinary shares of the Company to Care GB Plus Ltd to increase its holding in Bio Imagery to 51%. The Company estimated the value of the shares issued based on the share price of the Company as of the agreement date at $396.

 

At the Agreement Addendum Closing Date, Bio Imagery was determined to be excluding substantive process as required under the definition of business in accordance with the provisions of ASC Topic 805 “Business Combination”. The entire additional investment was charged to expenses at the acquisition date as “other expenses” in the profit and loss as Bio Imagery has not yet commenced its business operations.

 

7.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”.

 

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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 $110,596. As of September 30, 2022, the Company’s current liabilities exceed its current assets by $11,624, and there is a shareholders’ deficit of $30,635. The Company has generated negative operating cash flow for all periods. As of November 14, 2022 (date of approval of these financial statements), the total cash and cash equivalent balance is approximately $215. Management has considered the significance of such condition in relation to the Company’s ability to meet its current obligations and to achieve its business targets and determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to finance its operations through the sale of equity and to the extent available, short-term and long-term loans and also through revenues from sales of corona testing related products. There can be no assurance that the Company will succeed in obtaining the necessary financing to continue its operations as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

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 $ 6,276  and $7,773 during the nine months ended September 30, 2022 and 2021, respectively. However, the Company may face uncertainties around its estimates of revenue collectability and accounts receivable credit losses and its expectation to receive funds from external sources for financing its operations. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. The Company estimates may change as new events occur and additional information emerges.

 

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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 $0, of impairment losses.

 

E.Basic and diluted net loss per ordinary share

 

The Company computes net loss per share in accordance with ASC 260, “Earning per Share”, which requires presentation of both basic and diluted loss per share on the face of the statement of operations.

 

Basic net loss per ordinary share is computed by dividing the net loss for the period applicable to ordinary shareholders, by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share gives effect to all potentially dilutive common shares outstanding during the year using the treasury stock method with respect to stock options and certain stock warrants 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 1,818,487,072 and 452,109,492, respectively.

 

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TODOS MEDICAL LTD.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

 

The net loss and the weighted average number of shares used in computing basic and diluted net loss per share for the period of nine and three months ended September 30, 2022 and 2021, is as follows:

 

   2022   2021   2022   2021 
   Nine month period ended   Three month period ended 
   2022   2021   2022   2021 
   Unaudited   Unaudited 
                 
Numerator:                    
Net income (loss) attributable to common shareholders  $(20,001)  $

(24,547

)  $

(5,630

)  $(10,379)
                     
Denominator:                    
Shares of common stock used in computing basic and diluted net income (loss) per share   1,167,267,564    637,916,356    1,279,535,548    

736,939,641

 
Net income (loss) per share of common stock, basic and diluted  $(0.02)  $(0.04)  $(0.00)  $(0.01

 

 

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.

 

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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 10,000,000,000 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 5% out of the gross margin for the year ended December 31, 2021.
     
  2. Compensation package for the Company’s Chief Executive Officer that include (i) based annual salary of $400; (ii) an immediate granting of 50% of salary in restricted shares for uncompensated efforts to date; (iii) cash bonus of 50% of base salary upon uplisting (iv) 100 million restricted shares bonus upon uplisting (iv) grant of 8,750,000 stock options to purchase the same number of shares, vesting quarterly over the course of five years and (vi) Restricted Stock Units bonus with value ranging from $250 up to $1,400 as determined in Board resolution, and cash bonus of $250 up to $1,000 which are based on cumulative volume of sales range from $25,000 up to $100,000 or milestone bonuses in form of Restricted Stock Units in value of $10,000 up to $40,000 which are based on market cap range of $1,000,000 up to $2,000,000 , as determined in Board resolution.
     
  3. Compensation package for the Company’s Chief Financial Officer that include (i) based annual salary of $250; (ii) an immediate granting of 50% of salary in restricted shares for uncompensated efforts to date; (iii) cash bonus of 50% of base salary upon uplisting (iv) 50 million restricted shares bonus upon uplisting (iv) grant of 5,000,000 stock options to purchase the same number of shares, vesting quarterly over the course of five years and (vi) Restricted Stock Units bonus with value ranging from $50,000 up to $100,000, and cash bonus range of $75 up to $150 which are based on cumulative volume of sales range from $25,000 up to $100,000.
     
  4. Compensation package for the Company’s members of the Board of Directors and its committees that include (i) each board member will receive $65 annual salary and $150 in RSU vesting quarterly over three years; (ii) the expert director will receive $86 annual salary and $150 in RSU vesting quarterly over three years; (iii) Upon uplisting, each Director shall be granted RSU’s equal to the dollar amount of that Director’s total annual compensation, provided that the terms applicable to Board members’ annual RSU grant shall apply; (iv) additional annual cash compensation ranging from $6 up to $44 and equal amounts in RSU, for each director based on his additional committee he or she is serving.

 

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 16,000,000 ordinary shares of the Company as full conversion of all Investor’s outstanding warrants. On March 17, 2022, the Company issued 16,000,000 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 $1,250 bearing a monthly interest of 5% calculated for a minimum period of 60 days. The Company may draw funds under the agreement from the date of the agreement and until March 14, 2023. The Maturity date of each draw will be the earlier of (i) 60 days from the date of the loan, (ii) the occurrence of an event of default as defined in the agreement and (iii) with respect to funds received by Borrower through collections on receivables included in a Receivables Pool, as defined in the agreement, 3 days after such funds have been received by the escrow account agent or the Company.

 

In additional to the above the Company agreed to issue the Lender shares, a 10% ownership stake in Provista. In the event that additional shares of Provista are issued, the Company committed to issue the Lender additional shares such that his stake in Provista shall be maintained at 10%.

 

On April 7, 2022 the Company issued 1,500,000 ordinary shares (with fair value of $25) as additional interest.

 

As of September 30, 2022, the Company utilized the full credit facility.

 

The Company has estimated the fair value of the 10% portion of shares of Provista on March 14, 2022 at $710. The carrying value sold to non-controlling interests as of March 14, 2022 was $635, accordingly $75 was recognized in additional paid in capital. The fair value of the 10% ownership in Provista which is the cost associated with obtaining the revolving line of credit, was amortized to interest expenses as the entire credit facility was utilized.

 

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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 1,500,000 ordinary shares to a service provider of which 1,250,000 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 49,620,690 ordinary shares as partial conversion of $1,804 of principal and accrued interest, out of a convertible note in the principal amount of $3,500, issued in the acquisition of Provista Diagnostic, Inc.
     
  3. On March 17, 2022, the Company issued 16,000,000 ordinary shares – see 3B above.
     
  4. On April 8, 2022 the Company issued 11,160,714 ordinary shares as part of its April 7, 2022 settlement agreement – see 3E below.
     
  5. On April 7, 2022 the Company issued 24,000,000 ordinary shares to increase its interest in Bio Imagery. see note 1B6 above.
     
  6. On April 7, 2022 the Company issued 512,821 ordinary shares to a service provider in consideration for his annual investor relations services.
     
  7. On April 7, 2022 the Company issued 1,500,000 ordinary shares (with fair value of $25) as additional interest under its Revolving Line of Credit Agreement (see note 3C above).
     
  8. On August 8, 2022 the Company issued 10,000,000 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 $2,330 (with fair value of $7,735) have been converted into 264,430,525 ordinary shares.

 

E.Settlement Agreement with Toledo Advisors LLC

 

On April 7, 2022, the Company and Toledo Advisors LLC (“Toledo”) signed a Settlement Agreement pursuant to which upon execution of the agreement the Company shall pay Toledo $130 and shall issue to Toledo $200 worth of ordinary shares. Upon delivery of the cash payment and shares the parties shall file and discontinue the compliant file by Toledo on January 7, 2022 and Toledo irrevocably and unconditionally, release and discharge the Company from its June 19, 2020 Financing Agreement and the July 28, 2020 Royalty Agreement. The company recorded an income of $153 in the second quarter of 2022, as a result of the cancelation of prior agreements.

 

F. Former employee motion

 

On September 4, 2022, a former employee of the Company filed a motion with the Tel Aviv District Court against the Company for unpaid severance pay, unpaid salary, various social benefits and relates claims totaling NIS 1,256 (approximately $360). In addition the former employee asserts that he is entitled to receive Company’s options. On October 26, 2022, the Company filed a response in which it denied substantially all of the allegations. Subsequently the Company and the Applicant have, through counsel, engaged in discussions with a view towards engaging in a formal mediation process. No mediator has been selected, and no date for a mediation has been scheduled. The Tel Aviv District Court set a hearing in connection with the motion for January 2023.

 

Although management cannot estimate the outcomes of such motion at this early stage it believes that the current accruals in the financial statement in respect of the former employee are adequate.

 

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TODOS MEDICAL LTD.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

 

NOTE 4 - OTHER CURRENT LIABILITIES

 

   2022   2021 
  

As of

September 30,

  

As of

December 31,

 
   2022   2021 
   Unaudited 
Accrued payroll and related taxes  $184   $208 
Provision for vacation   60    67 
Management and directors   2,007    1,752 
Accrued expenses and other accounts payables   1,510    2,257 
 Other current liabilities  $3,761   $4,284 

 

NOTE 5 - STOCK BASED COMPENSATION

 

Stock-based compensation expenses incurred for employees (and directors) and non-employees for the period of nine and three months ended September 30, 2022, amounted to $2,752 and $633, 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 6,000,000 options to purchase ordinary shares subject to adjustments set in the 2015 Plan. As of September 30, 2022, there were 2,338,838 ordinary shares available for future issuance under the 2015 Plan.

 

The following table presents the Company’s stock option activity for employees and directors of the Company during the periods of nine months ended September 30, 2022 and 2021:

 

  

Number of

Options

  

Weighted Average

Exercise Price

 
   Unaudited   Unaudited 
Outstanding as of January 1, 2022   16,295,083    0.040 
Granted   -    - 
Forfeited or expired   -    - 
Outstanding as of March 31, 2022   16,295,083    0.040 
Granted   -    -  
Forfeited or expired   -    -  
Outstanding as of June 30, 2022   16,295,083    0.040 
Granted   -    -
Forfeited or expired   -    - 
Outstanding as of September 30, 2022   16,295,083    0.040 
Exercisable as of September 30, 2022   3,768,033    0.050 
           
Outstanding as of January 1, 2021   3,682,818    0.663 
Granted   -    - 
Forfeited or expired   (1,137,735)   0.003 
Outstanding as of March 31, 2021   2,545,083    0.095 
Granted   -    -  
Forfeited or expired   -    -  
Outstanding as of June 30, 2021   2,545,083    0.095 
Granted   13,750,000    0.030
Forfeited or expired   -    -  
Outstanding as of September 30, 2021   16,295,083    0.040 

 

As of September 30, 2022, the aggregate intrinsic value for the stock options outstanding and exercisable according to $0.018 price per share is $0, with a weighted average remaining contractual life of 4.3 years.

 

 

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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   41,967,152 
Granted   10,000,000 
Vested   (3,782,699)
Forfeited or expired   - 
Outstanding as of March 31, 2022   48,184,453 
Granted   - 
Vested   (7,220,199)
Outstanding as of June 30, 2022   40,964,254 
Granted   14,000,000 
Vested   (8,845,199)
Outstanding as of September 30, 2022   46,119,055 
Weighted average grant date fair value of restricted stock awards granted during the period   0.022 
      
Outstanding as of January 1, 2021   9,687,500 
Granted   - 
Vested   (1,562,500)
Forfeited or expired   - 
Outstanding as of March 31, 2021   8,125,000 
Granted   - 
Vested   (1,562,500)
Forfeited or expired   - 
Outstanding as of June 30, 2021   6,562,500 
Granted   31,034,483 
Vested   (1,562,500)
Forfeited or expired   - 
Outstanding as of June 30, 2021   36,034,483 

 

Weighted average grant date fair value of restricted stock awards granted during the nine months period ended September 30, 2022 was $0.022.

 

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TODOS MEDICAL LTD.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

 

NOTE 6 - FINANCING EXPENSES , NET

 

   2022   2021   2022   2021 
  

Nine months period ended

September 30,

  

Three months period ended

September 30,

 
   2022   2021   2022   2021 
   Unaudited   Unaudited   Unaudited   Unaudited 
                 
Modification of terms relating to straight loan transaction  $-   $88   $-   $- 
Amortization of discounts and accrued interest on convertible bridge loans   13,076    18,080    3,297    4,432 
Amortization of discounts and accrued interest on straight loans   633    2,290    -    1,637 
Change in fair value of derivative warrants liability and fair value of warrants expired   -    (299)   -    (5)
Change in fair value of liability related to conversion feature of convertible bridge loans   (3,651)   (3,777)   (37)   530 
Settlement in cash of prepayment obligation related to convertible bridge loan   -    182    -    182 
Interest and related royalties under receivables financing facility   (153)   546    -    495 
Amortization of prepaid expenses related to revolving line of credit agreement   1,036    293    314    293 
Exchange rate differences and other finance expenses   794    (43)   285    (689)
 Financing expenses, net  $11,735   $17,360   $3,859   $6,875

 

NOTE 7 - TAXES ON INCOME

 

A.Deferred income taxes reflect the net tax effects of net operating loss and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:

 

   2022   2021 
  

As of

September 30,

 
   2022   2021 
Composition of deferred tax assets:  Unaudited   Unaudited 
Net operating loss carry-forward  $8,817   $6,330 
Research and development credits   -    1,879 
Allowance for Bad Debt   -    90 
Others   -    - 
Net deferred tax asset before deferred tax liabilities and valuation allowance   8,817    8,299 
           
Composition of deferred tax liabilities:          
Intangible assets upon acquisition of subsidiary   (315)   (315)
Depreciation costs   (120)   (128)
Net deferred tax asset before valuation allowance   8,383    7,856 
           
Valuation allowance   (8,067)   7,541 
Net deferred tax assets   (315)   (315)

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuation allowance as of September 30, 2022.

 

B.For the period of nine months ended September 30, 2022, the following table reconciles the statutory income tax rate to the effective income tax rate:

 

   2022   2021 
   Nine months ended September 30, 
   2022   2021 
   Unaudited   Unaudited 
         
Tax rate   23%   23%
           
Tax expense (benefit) at statutory rate  $(4,640)  $(5,646)
Tax rate differential   53    31 
Permanent differences with respect to stock-based compensation   630    146 
Permanent differences with respect to derivative warrants liabilities, bifurcated conversion feature and convertible loans   1,334    3,605 
Loss carryforwards and others   2,623    1,864 
Income tax expense (benefit)  $-   $- 

 

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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   Alzheimer   Testing and related products  

Un-allocated

   Total 
   Unaudited 
Nine months ended September 30, 2022                    
Revenues   -    -    6,292    -    6,292 
Operating gain (loss)   (1,352)   -    1,061    (7,639)   (7,930)
Unallocated amounts:              </