| GENERAL |
NOTE
1 - GENERAL
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.
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 six months ended June 30, 2021, all of the revenue resulted from sales of COVID-19 related products. Through June 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 Share Purchase Agreement (“SPA”) Provista Diagnostics, Inc. (the “Agreement
to Purchase”) with Strategic Investment Holdings, LLC, Ascenda BioSciences LLC (“SIH”, “Ascenda” and together
referring as “Sellers”, respectively) and Provista Diagnostics, Inc. (“Provista”). Ascenda was the sole owner
of the outstanding securities of Provista and SIH is the sole owner of all the outstanding securities of Ascenda. Provista is a medical
diagnostics company based in Alpharetta, Georgia that owns the intellectual property rights to the proprietary breast cancer blood test,
Videssa®, and has a diagnostic testing laboratory currently performing COVID-19 PCR testing, primarily for the medical and entertainment
industries.
Subject
to the terms and conditions of the SPA, the Company shall purchase from the Sellers 3,599 shares of Preferred Stock and 1,581 shares
of Ordinary Stock (collectively the “Provista Shares”) representing 100% of Provista’ s securities outstanding, for
an aggregate purchase price of $7,500 subject to the following terms:
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1. |
On
or before April 19, 2021, (the “First Closing Date”), the Company shall deliver to Sellers a non-refundable deposit of
$1,250 (the “Cash Deposit”). The Cash Deposit was delivered at April 21, 2021. |
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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 0.01, (the “Todos Deposit Shares”) with a fair market value of $1,500, as
defined in the SPA. |
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3. |
On
or before July 1, 2021 (the “Second Closing Date”), the Company shall deliver to the Sellers a second payment of $1,250
(the “Second Cash Payment”). |
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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 $250 (the “Extension Payment”) on or before the Second Closing Date. If the Extension Payment is received by
Sellers on or before the Second Closing Date, then the Company shall deliver the Convertible Note on the Second Closing Date and
the Second Cash Payment on or before July 15, 2021. In the event the Company completes the Second Cash Payment, the aforesaid Extension
Payment shall be credited towards the Second Cash Payment. |
TODOS
MEDICAL LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
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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 $3,500, payable by the Company to the Sellers (the “Note”). At any time or times on or after the issuance sate
of the Note, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount into fully paid
and nonassessable shares of common stock over a period commencing October 20, 2021 through April 8, 2025 (the “Maturity Date”),
at the conversion price equal to the lesser of (i) $0.05 or (ii) the volume weighted average price of the last 20 trading days for
the common shares prior to the conversion date (the “Fair Market Value”). |
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In
the event the Sellers deliver a conversion notice to the Company at a per share price less than $0.05, the Company shall have the
right to immediately notify the Sellers of its intention to pay the conversion amount in cash within 3 business days of receipt of
the conversion notice (i.e. before Sellers would take possession of shares converted under the conversion notice). If, at any time
between October 20, 2021 and April 20, 2022, the average of the lowest bid and closing sale price is below $0.05, the Company has
the option to buy out all or any portion of the Note (the “Buyback Option”). In the event the Company exercises the Buyback
Option for an amount equal to or greater than $1,170 (the “Buyback Amount”), the Sellers shall not submit any conversions
below $0.05 for 90-days period from receipt of the Buyback Amount (the “90-Days Period”). The Company may exercise a
second Buyback Option at the end of the 90-Days Period under the same terms. The Company must provide 30-days’ notice to the
Sellers prior to exercising any Buyback Option or notify the Sellers of its intention to pay the Buyback Amount upon receipt of a
conversion notice below $0.05 and pay the Buyback Amount within 3 business days of receipt of such notice. |
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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) $0.05,
(ii) the opening price on the day of the uplisting provides there is no transaction associated with the uplisting or (iii) the deal
price of an uplisting transaction (the “Mandatory Conversion”). |
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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”). |
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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. |
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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 100% of the Provista Shares. In such an event, the Company will have absolutely no rights, claims or interest of any type
in connection with the Provista Shares, Cash Deposit or Todos Deposit Shares or this transaction, regardless of any alleged conduct
by Seller or anyone else. Further, in such event the Company irrevocably will be deemed to have canceled this Agreement and relinquished
all rights in and to the Provista Shares, Cash Deposit and Todos Deposit Shares. |
The
consummation of the transactions contemplated by the SPA have been taken place as of April 19, 2021.
TODOS
MEDICAL LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
| C. |
Purchase
price allocation |
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1. |
Non-refundable
shares of its ordinary stock - As agreed in the SPA, the Company committed to issue non-refundable 29,296,875 ordinary stock, par
value NIS 0.01. 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 $1,699. |
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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, 90% probability for the Mandatory Conversion and 10% probability for the Optional
/ Maturity Conversion. |
The
Optional / Maturity Conversion (scenario 1) was estimated by the appraiser using the Monte Carlo Simulation Model based on the
following parameters:
SCHEDULE OF
PURCHASES PRICE ALLOCATION OF CONVERSION
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|
April 19, 2021 |
|
| Risk-free interest rate |
|
|
0.54 |
% |
| Expected term (years) |
|
|
3.94 |
|
| Volatility |
|
|
164.02 |
% |
| Share price |
|
|
0.058 |
|
| Conversion price |
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* |
|
| Fair value |
|
$ |
5,101 |
|
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● |
The
lower of (i) 0.05 (ii) the volume weighted average price (VWAP) of the last 20 trading days for the Ordinary Stock as reported in
the OTC market prior to the conversion. |
The
Mandatory Conversion (scenario 2) was estimated by the appraiser using the Monte Carlo Simulation Model based on the following
parameters:
SCHEDULE OF
PURCHASES PRICE ALLOCATION OF CONVERSION
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|
April 19, 2021 |
|
| Risk-free interest rate |
|
|
0.54 |
% |
| Expected term (years) |
|
|
0.04 |
|
| Volatility |
|
|
112.1 |
% |
| Share price |
|
|
0.058 |
|
| Conversion price |
|
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* |
|
| Fair value |
|
$ |
4,976 |
|
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● |
The
lower of (i) 0.05 (ii) the volume weighted average price (VWAP) of the last 20 trading days for the Ordinary Stock as reported in
the OTC market prior to the conversion. |
The
fair value of the convertible component was estimated by the third-party appraiser after giving effect to the weighted average of the
two possible scenarios as of issuance dates was $4,989.
The
following table summarizes the total purchase price and purchase price allocation:
SCHEDULE
OF PURCHASE PRICE ALLOCATION
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|
U.S. dollars in thousands |
|
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| Cash payment |
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2,500 |
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| Consideration in Shares |
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1,699 |
|
| Fair value of convertible promissory note |
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4,989 |
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| Total purchase price |
|
|
9,188 |
|
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| Cash and cash equivalents |
|
|
73 |
|
| Trade receivables |
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|
66 |
|
| Property and equipment, net |
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183 |
|
| Security deposit |
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3 |
|
| Technology intangible asset |
|
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1,500 |
|
| Total identifiable assets |
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1,825 |
|
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| Accounts payable |
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(82 |
) |
| Deferred tax liability |
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(315 |
) |
| Due to related party |
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(1 |
) |
| Total liability assumed |
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(398 |
) |
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| Total goodwill |
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7,761 |
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Unaudited
pro forma results of operations for the six months ended June 30, 2021 and for the year ended December 31, 2020 are included below as
if the acquisition of the Provista’s business occurred on January 1, 2020. This summary of the unaudited pro forma results of operations
is not necessarily indicative of what the Company’s results of operations would have been had the Provista Business been acquired
at the beginning of 2020, nor does it purport to represent results of operations for any future periods.
SCHEDULE
OF UNAUDITED PRO FORMA RESULTS OF OPERATION
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2021 |
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2020 |
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Six months ended June 30, |
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Year ended December 31, |
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2021 |
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2020 |
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(unaudited, except per share amounts) |
|
| Revenues |
|
$ |
6,896 |
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$ |
5,164 |
|
| Net loss |
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(14,172 |
) |
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(17,603 |
) |
| Basic and diluted net loss per share |
|
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(0.02 |
) |
|
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(0.04 |
) |
TODOS
MEDICAL LTD.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
| D. |
Foreign
operations |
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1. |
Todos
Medical (Singapore) Pte Ltd |
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On
January 27, 2016, the Company incorporated a wholly owned subsidiary in Singapore under the name of Todos Medical (Singapore) Pte
Ltd. (“Todos Singapore”) for the purpose of purpose of advancing clinical trials of the Company’s core technology
for breast cancer in Southeast Asia. As of June 30, 2021, Todos Singapore has not yet commenced its business operations. |
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2. |
Todos
Medical USA |
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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. |
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3. |
Corona
Diagnostics, LLC |
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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. |
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4. |
Breakthrough
Diagnostics, Inc. |
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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 19.99% of the issued and outstanding common stock of Breakthrough
Diagnostics, Inc. (“Breakthrough”) for entering into the field of early detection of Alzheimer’s disease. On July
28, 2020, the Company entered into Amendment No. 1 to the Shares Purchase and Assignment of License Agreement with Amarantus, pursuant
to which the Company completed the purchasing of the remaining 80.01% of the issued and outstanding common stock of Breakthrough
for consideration that was based on the Company’s shares. |
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5. |
Other
entities |
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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. |
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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 June 30,
2021, Bio Imagery has not yet commenced its business operations. |
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The
Company and its entities herein considered as the “Group”. |
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6. |
Provista
Diagnostics, Inc |
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See
note 1B and 1C above.
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
| 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 June 30, 2021, the Company has incurred accumulated losses of $61,448. As of June 30, 2021, the Company’s
current liabilities exceed its current assets by $4,166, and there is a shareholders’ deficit of $8,999. The Company has generated
negative operating cash flow for all periods. Management has considered the significance of such condition in relation to the Company’s
ability to meet its current obligations and to achieve its business targets and determined that these conditions raise substantial doubt
about the Company’s ability to continue as a going concern. The Company plans to finance its operations through the sale of equity
and to the extent available, short term and long-term loans (including through issuance of convertible loans together with other financial
instruments) and also through revenues from sales of corona testing related products. There can be no assurance that the Company will
succeed in obtaining the necessary financing or generating revenues from product sales to continue its operations as a going concern.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
During
the year ended December 31, 2020, the Company raised net amounts of $10,685 through receivables financing facility, straight loans, private
placement transactions (including equity line), and convertible bridge loans transactions. During the period of six months ended June
30, 2021, the Company raised net amounts of $10,312, through straight loans, convertible bridge loans transactions and private placement
transaction.
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
On
March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all of the regions
in which the Company does business, and governmental authorities around the world have implemented numerous measures attempting to contain
and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shutdowns, limitations or
closures of non-essential businesses, and social distancing requirements.
The
global spread of COVID-19 and actions taken in response have caused and may continue to cause disruptions and/or delays in our supply
chain and shipments and caused significant economic and business disruption to the Company’s customers and vendors.
The
COVID-19 pandemic has created and may continue to create significant opportunity under the uncertainty in macroeconomic conditions, which
may cause further demand for the Company’s core business related to PCR testing kits and related materials and supplies as already
reflected by recognized revenues of $5,031 and $6,763 during the year ended December 31, 2020 and the period of six months ended June
30, 2021, respectively, substantially all of which was generated after July 2020. However, the Company may face uncertainties around
its estimates of revenue collectability and accounts receivable credit losses and its expectation to receive funds from external sources
for financing its operations. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on
the duration and degree of impact associated with the COVID-19 pandemic. The Company estimates may change as new events occur and additional
information emerges, and such changes are recognized or disclosed in the Company’s consolidated financial statements.
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