TODOS MEDICAL LTD. The following discussion and analysis should be read in conjunction with our financial statements and related notes, which have been publicly filed with theSecurities Exchange Commission and are included with this annual report on Form 10-K. This discussion and other parts of this annual report on Form 10-K contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under "Risk Factors" and elsewhere in this annual report on Form 10-K. We report financial information under US GAAP and our financial statements were prepared in accordance with generally accepted accounting principles inthe United States . OverviewTodos Medical is an in-vitro-diagnostic ("IVD") firm engaging in the development and commercialization of a series of patient-friendly blood tests that enable screening of a variety of cancers. Detecting cancer at an early stage may lead to more effective treatment and possible better survival rate. Our goal is to establish our name in the cancer detection industry worldwide. Our cancer tests are still in the development phase, have not yet been approved by the FDA and are not yet being marketed. Screening tests for cancer, specifically breast, colon and lung cancers, have compliance shortcomings due to their scientific limitations, invasive procedures, and expensive nature of more accurate diagnostic methods. More importantly, many of the most effective diagnostic methods remain too expensive for adoption as screening tests for all those at risk are used too rarely and not quickly enough to allow for the most effective treatment. Blood based tests are the future of cancer screening.
Our
Diagnostic testing helps health care providers screen for or monitor specific diseases or conditions. It also helps assess patient health to make clinical decisions for patient care. OurProvista Diagnostics Laboratory is approved under the Clinical Laboratory Improvement Amendments (CLIA). The Clinical Laboratory Improvement Amendments (CLIA) regulate laboratory testing and require clinical laboratories to be certified by theCenter for Medicare and Medicaid Services (CMS) before they can accept human samples for diagnostic testing. Laboratories can obtain multiple types of CLIA certificates, based on the kinds of diagnostic tests they conduct.
We have also focused our COVID-19 diagnostic testing efforts at
This expansion into testing services allows us to diversify our business into higher margin revenue in the COVID-19 space, as well as help us to expand our business development opportunities with the labs we work with by providing reference lab testing services as we increaseProvista's automated testing capabilities. The Company intends to buildProvista into a highly automated lab capable of running multiple platforms in parallel in order to offer clients comprehensive testing solutions that meet their needs, especially in cancer, infectious disease, immune monitoring and Alzheimer's disease. The Company is also a developer and distributor of immune support products and antivirals that target the inhibition of 3CL protease for the treatment of Covid-19. Todos has acquired exclusive rights to the dietary supplement Tollovid™ through its purchase of a controlling interest in 3CLSciences Ltd. , an Israeli corporation. Tollovid is a powerful proprietary blend of plant extracts that help support healthy immune function for today's challenges. Todos is also developing a more concentrated version of Tollovid for COVID-19 infected patients, using a proprietary blend of botanical extracts with an active chemical ingredient that limits replication of coronaviruses. Todos is currently supporting randomized, placebo-controlled clinical trials managed by joint venture partner NLC Pharma inIsrael . Tollovir is the result of over 15 years of development and an investment of over$18 million to date. 36 Table of ContentsVidessa Breast Current methods of breast cancer detection have known limitations, particularly in women with abnormal or difficult-to-interpret imaging findings. While clinical examination and imaging technologies are critical elements for detecting breast cancer, the high rate of false positive and false negative results from these approaches can significantly impact patient care. In an effort to improve the accuracy of early breast cancer detection, complementary blood-based approaches are being developed to help address the current limitations of breast imaging. By utilizing new detection strategies, healthcare providers will be able to improve the accuracy of breast cancer detection and minimize the consequences of false positive and false negative results. To help address the diagnostic challenges in breast cancer, we developedVidessa Breast -the first blood test of its kind to detect the presence or absence of breast cancer in women with abnormal or difficult-to-interpret imaging findings. When combined with imaging,Videssa Breast improves diagnostic accuracy and provides greater confidence and clarity when clinical assessment is challenging.Videssa Breast was developed to provide physicians with actionable information regarding breast cancer risk in women following an inconclusive mammogram result (BI-RADS III or IV), which primarily occurs in women with dense breasts. The data provided from the test, which has demonstrated specificity of ~99% in both women over and under 50 years of age, arms physicians with a powerful tool to help guide decisions of whether to continue to monitor a low-risk patient intermittently, or whether to advance an at-risk patient immediately into a more expensive and invasive diagnostic assessment that likely includes a breast biopsy. With Videssa as the proprietary centerpiece of our cancer diagnostic strategy, we will be looking to offer highly advanced, comprehensive cancer testing solutions to OB-GYNs, general practitioners and other stakeholders in the medical community who will ultimately be managing patients likely to be strong candidates for Videssa.Videssa Breast combines multiple Serum Protein Biomarkers (SPBs) and Tumor-Associated Autoantibodies (TAAbs), along with patient clinical data, to generate a unique protein signature for breast cancer. As these protein biomarkers are released into the bloodstream, they act as biological cues for the presence of a malignancy, providing a snapshot of what's going on inside of a woman's body to complement the anatomical features visible on imaging. Unlike genetic testing which determines the future risk of developing breast cancer,Videssa Breast is designed to detect real-time disease status. By identifying early biochemical warning signals of breast cancer in the bloodstream, such as "protein biomarkers,"Videssa Breast provides information not detectable through imaging technologies, allowing for a more comprehensive assessment. LymPro Test™: The Lymphocyte Proliferation (LymPro) Test™ measures markers of immune cells present in the blood as a surrogate for loss of nerve cell function and the toxic accumulation of beta-amyloid plaques in the brain, which is a hallmark of Alzheimer's disease. Based on differences observed in the response of cells from patients with Alzheimer's disease as compared with age-matched controls and patients with other dementias, it appears that the test has high potential as an adjunctive diagnostic for Alzheimer's disease. LymPro exploits the fact that abnormalities in replication (or the cell cycle) seem to extend to immune cells in the blood. The test specifically measures the alterations in cell cycle activity in blood lymphocytes (a type of immune cell) as a biomarker of neuronal damage, for the early identification and screening of Alzheimer's. Areas for deployment include initial Investigational Use Only ("IUO") testing followed by full diagnostic testing for patients with mild cognitive impairment ("MCI") and dementia for differential diagnosis. Todos owns the exclusive worldwide rights to this Alzheimer's blood test as a result of its acquisition of Breakthrough from Amarantus as follows. OnFebruary 27, 2019 , we entered into a joint venture agreement with Amarantus, pursuant to which we issued Ordinary Share representing 19.99% of our then outstanding Ordinary Shares to Amarantus, in exchange for Amarantus transferring to us 19.99% of Breakthrough, then a wholly-owned subsidiary of Amarantus, and for Amarantus assigning the license for the LymPro test to Breakthrough. As part of the transaction, we agreed to provide working capital to Breakthrough to support Breakthrough's operations. As part of the Breakthrough joint venture, we were granted an exclusive option to acquire the remaining 80.01% of Breakthrough from Amarantus. At our 2019 annual meeting of shareholders, our shareholders approved a resolution authorizing us to exercise our option to acquire the remaining 80.01% of Breakthrough from Amarantus in exchange for an additional 30% of our then issued and outstanding Ordinary Shares. We closed the acquisition of Breakthrough inJuly 2020 . There are a few blood-based approaches to Alzheimer's, most of which focus on identifying canonical Alzheimer's markers - Amyloid or Tau. The rationale for these tests is that they serve as a proxy for brain concentration Amyloid and Tau-based imaging. Given the failure of these two mechanisms to demonstrate improvement across hundreds of clinical trials, we believe that looking upstream from Amyloid and Tau is where both true diagnostic and therapeutic avenues exist. LymPro captures both Amyloid and Tau-based information by proxy. Given the expectation that the Alzheimer's therapeutic market could reach$13.57 billion by 20272, we believe LymPro could also help drive mid-term value for Todos as progress is made. Taken together with our core patented Todos Biochemical Infrared Analyses ("TBIA"), which uses a platform based upon a highly sensitive mid infrared equipment called fourier transform infrared spectrometers ("FTIR"), we believe Todos is positioned to become a worldwide leader in the field of immune-based diagnostics.
2https://www.medgadget.com/2021/01/alzheimers-therapeutics-market-to-reach-usd-13-57-billion-by-2027-size-share-
industry-analysis-and-global-forecast-to-2027.html
37 Table of Contents
We provide advanced technologies addressing bottlenecks, whether they be scientific, technical or logistical, to enable laboratories to rapidly expand testing capacity while reducing operational costs. To forward this business, we entered into distribution agreements with multiple companies (such as 3D Biomedicine Science and Technology Col. Ltd.,Meridian Health Services Network, Inc. , and PCL Inc.) to gain rights to rapid IgM/IgG COVID-19 antibody test kits, RNA extraction machines, RNA extraction reagents, qPCR reagents, digital PCR reagents and automated liquid handler machines, in order to offer a comprehensive suite of solutions to laboratories worldwide. In the second quarter of 2020, we began marketing a turnkey automation services solution to laboratories seeking to expand their COVID-19 testing capabilities and started generating revenue from the distribution of products to support laboratory COVID testing through the automated machinery we provided. OurProvista Diagnostics Laboratory serves as a hub for our diagnostic development programs, including our flagship Videssa blood test, as well as support for our automation solutions customers. We have focused our COVID-19 diagnostic testing efforts atProvista to prioritize delivering diagnostic services, including PCR and neutralizing antibody testing, becoming a direct provider to healthcare professionals. We have partnered with Fosun Pharma to offer the first neutralizing antibody test, cPass™ SARS-CoV-2 Neutralizing Antibody Detection Kit, which has received Emergency Use Authorization ("EUA") from theUS FDA for the detection of SARS-CoV-2 receptor binding domain ("RBD" or "neutralizing") antibodies. We believe this test can serve as a key marker for physicians, businesses and schools to access Covid-19 immunity risk among their populations. This expansion into testing services allows us to diversify our business into higher margin revenue in the COVID-19 space, as well as help us to expand our business development opportunities with the labs we work with by providing reference lab testing services as we increaseProvista's automated testing capabilities. The Company intends to buildProvista into a highly automated lab capable of running multiple platforms in parallel in order to offer clients comprehensive testing solutions that meet their needs, especially in cancer, infectious disease, immune monitoring and Alzheimer's disease. With the Delta variant posing a significant risk for breakthrough infections, we see neutralizing antibody testing becoming critical for informed decision making to assess who may be best suited for booster shots, as well as at what point someone previously infected with COVID begins to show waning immunity and may decide to receive vaccination as a result. We see a large market opportunity developing for the cPass™ SARS-CoV-2 Neutralizing Antibody Detection Kit that we believe will begin to encroach on the COVID-19 PCR testing market. The cPass test will enable individuals to take charge of their health by making data-driven decisions to protect themselves beyond vaccination, such as masking or avoiding certain higher-risk activities when armed with this crucial information. A key differentiator for this novel cPass test is that it detects neutralizing antibodies in patient samples without the use of live virus and with very fast turnaround times, as compared to the conventional method of measuring neutralizing antibodies in patient samples, which requires the use of live cells. We believe immune monitoring will be the primary driver of COVID-19 testing growth going forward. As time advances, and more individuals are several months from their initial vaccine dose, it will become increasingly important for individuals and healthcare providers to assess and monitor neutralizing antibody levels in order to make data-driven decisions with respect to booster shots and behavioral changes. We are currently in the process of automating the cPass test at our laboratory,Provista Diagnostics , to add high-capacity neutralizing antibody testing to its test menu.Provista plans to offer cPass as a testing service to other CLIA labs on a reference basis, as well as directly to the public through healthcare professionals. We intend to focus on ways of leveraging our existing testing business and our client base to deliver actionable high value testing that will improve outcomes while lowering cost of care. We believe that our establishment of a strong commercial infrastructure is the key to unlocking the value of our intellectual property portfolio for our Company and its shareholders. 38 Table of Contents TBIA PlatformTodos Medical's TBIA platform represents a cost effective, scalable, and patient-friendly screening method for cancer screening. Todos has developed the "Total Biochemical Infrared Analysis" (TBIA) method, a proprietary method for screening of solid tumors using peripheral blood spectroscopy analysis. The process involves observing the immune system's response to tumor presence rather than looking for the tumor cells themselves or specific markers. TBIA analyzes the entire biochemical signatures spectrum (including proteins, lipids, nucleic acids and carbohydrates) of affected immune cells from peripheral blood, using infrared spectroscopy. ? Advances in mid infrared spectroscopy using fourier transform infrared spectrometers (FTIR) open new diagnostic frontiers ? Immune system changes detected in plasma and mononuclear cells via FTIR ? Immune response acts as body's sensor for cancer
? FTIR allows observation of distinct immune response to breast, colorectal,
lung and other cancer types
The test offered under our TBIA method could help reduce false positives and
improve detection rate by reporting to the physician the probability of the
presence/absence of cancer prior to more expensive tests. A large, underserved
population of unscreened and inadequately screened patients represents a
significant opportunity for a patient friendly screening test. Furthermore,
traditional tests are more likely to expose patients to radiation and other
risks inherent in those tests, our products offer may become a viable solution
for these patients, as it is a simple blood test.
Each of the existing screening diagnosis methods have at least one of the following significant drawbacks:
- Expensive - Low sensitivity or specificity - Uncomfortable to use - Not accessible to the general public - Require specialists for results interpretation - Possible medical side effects from radiation and invasive tests Many patients who need to be checked regularly for cancer, avoid undertaking periodic examinations due to one or more of the above disadvantages. The objective of our Company is to provide a more reliable alternative to the current methods of testing and to thereby overcome patients' fear of regular cancer checkups, leveraging our proprietary technology in TBIA. Despite the various indications of the positive potential of our products, in order to establish our product in the market we still need to conduct larger and more focused blind trials and we need to invest in a large-scale validation blind trial on the same cancer to confirm these preliminary results. Our test is for cancer screening and cannot be regarded as a final diagnosis. However, it only requires a simple blood test causing minor risk and pain (as below diagram demonstrates). Following the results of the test for positive or negative for specific cancer, the physician will refer the patient for additional screenings such as colonoscopy for further examination of cancer presence. 39 Table of Contents
Immune Support Products and 3CL Protease Inhibiting Antivirals
OnMarch 11, 2022 , the Company entered into a Share Purchase Agreement (the "SPA") with 3CLSciences Ltd. ("3CL"), an Israeli corporation, andNLC Pharma Ltd. ("NLC"), an Israeli corporation, pursuant to which 3CL Sciences will purchase all therapeutic, diagnostic, dietary supplement and pharmaceutical assets from NLC that relate to 3CL protease biology from NLC. The Company owns a controlling interest in 3CL. 3CL is working to advance a theragnostic program targeting the 3CL protease, a key enzyme required for coronaviruses to replicate and infect other cells. We have funded the development of a novel enzymatic 3CL protease diagnostic test that determines whether a coronavirus is actively replicating vs. inactively being cleared from the body by the immune system, as well as 3CL protease inhibitors that aim to slow the replication of the virus in order to be able to further support the body's ability to be able to overcome a potential coronavirus exposure or infection. Tollovir: Furthermore, through 3CL, we are in the development phase of our own antiviral, Tollovir™, a potent 3CL protease inhibitor for the treatment of hospitalized COVID-19 patients, which is currently undergoing a Phase 2 clinical trial inIsrael with plans to expand the clinical development program toIndia . In light of the emerging delta variant circulating widely worldwide, there is now a clear need for novel COVID-19 anti-viral therapies to protect the unvaccinated and those for whom authorized vaccines do not confer immunity, which includes a large portion of the elderly and those taking immune suppressants, against COVID-19 infection. Inthe United States , the Biden administration recently underscored this need by pledging to invest$3.2 billion into research for COVID-19 anti-viral therapies, similar to theUS Government's investments into COVID-19 vaccines in 2020 at the beginning of the pandemic. We believe this government recognition of the need for antivirals will provide a significant tailwind for the development of our Tollovir™ anti-viral that is currently undergoing a Phase 2 clinical trial inIsrael with plans progressing rapidly to expand the clinical development program toIndia . As part of the ongoing scientific effort to further elucidate the mechanisms that have enabled Tollovir to achieve its very positive early clinical results, NLC Pharma identified an anti-inflammatory mechanism of action of Tollovir to complement its 3CL protease inhibiting mechanism. This dual mechanism of action helps explain the significant reduction in symptoms and the biomarker C Reactive Protein (CRP) that was documented in the earliest clinical COVID-19 data sets produced inIsrael , which could not be explained by a reduction in viral load alone likely caused by Tollovir's 3CL protease inhibiting mechanism. As a result of these quite complementary 3CL protease inhibiting and anti-inflammatory mechanisms, given that we are in a race with Pfizer to get to market with the first 3CL protease inhibiting COVID-19 antiviral for which therapeutic claims could be made, we believe it is critical to rapidly expand our clinical development programs to gather additional data in multiple clinical settings to demonstrate Tollovir's ability to help patients suffering from COVID-19. As part of that effort, ourIsrael -based Principal Investigators have introduced us to physician clinical collaborators inIndia who work with a highly-respected local Clinical Research Organization (CRO) with extensive experience in running COVID-19 clinical trials. This CRO has near-immediate access to 6 clinical sites that have previously enrolled patients into clinical trials for hospitalized COVID-19 patients and 5 clinical sites that have previously enrolled patients into clinical trials for non-hospitalized COVID-19 patients. We believe this CRO relationship will allow for the rapid expansion of enrollment for Tollovir's clinical data acquisition, and allow us to quickly prepare for a Phase 3 international clinical development program to support regulatory approval under Emergency Use Authorization. Tollovid: The Company's 3CL protease inhibitor botanical product, Tollovid, is a dietary supplement that helps to support and maintain healthy immune function. This technology will potentially have a significant impact for the development of virus targeting therapeutic development strategies, as well as clearance for return to life activities post-infection. 40 Table of Contents We are very pleased that the Company's dietary supplement Tollovid, which provides immune support as a protease inhibitor, received FDA authorization for a new 5-day dosing regimen inApril 2021 . We believe this authorization underscores the emerging need in the marketplace for immune support supplements supported by strong scientific and safety data, as well as provides international regulatory authorities with a high degree of comfort of Tollovid's safety profile. Going forward, the Company sees two critical areas of expansion in the advancement of Tollovid:
1) International distribution partnerships in jurisdictions where high value
dietary supplements are distributed by reputable pharmacies and other
high-end wellness stores that can engage with consumers directly on the value
and underlying science of their products; and
2) US marketing campaign to dramatically expand awareness of Tollovid for
consumers and distribution partners who are looking for products to further
support immune function.
We believe that as we continue to grow our automation services business, we are
creating a natural distribution base for the Videssa test, as well as for the
eventual commercialization of our proprietary TBIA platform tests and
diagnostics developed with NLC Pharma. We intend to seek out additional
opportunities to leverage our expanding base of laboratory partners in the
coming years.
Operating Results
Revenues
During the years ended December 31, 2021 and 2020 we have generated revenues of
$12,229,280 and $5,207,142 , respectively, by the Company and through our U.S.
subsidiaries, Corona Diagnostics, LLC and Provista Diagnostics, Inc.
Operating Expenses
Our current operating expenses consist of four components - cost of revenues, research and development expenses, marketing expenses and general and administrative expenses.
Cost of revenues
Our cost of revenues consists primarily of materials, depreciation and other related cost of revenues expenses.
The following table discloses the breakdown of cost of revenues:
Year ended December 31
2021 2020
Materials and other costs $ 7,112,578 $ 3,749,901
Depreciation 734,214 68,340
Total $ 7,846,792 $ 3,818,241 Research and Development Expenses
Our research and development expenses consist primarily of salaries and related
personnel expenses, subcontracted work and consulting, liabilities for royalties
and other related research and development expenses.
The following table discloses the breakdown of research and development
expenses:
Year ended December 31
2021 2020
Salaries and related expenses $ - $ 27,270
Stock-based compensation - 60,449
Professional fees 202,728 47,000
IPR&D acquired as part of asset acquisition 450,000 8,157,000
Laboratory and materials 127,041 1,535,073
Patent expenses - -
Rent and maintenance 15,004 6,221
Depreciation 29,061 28,121
Insurance and other expenses - 2,569
Total $ 823,834 $ 9,863,703
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Table of Contents
We expect that our research and development expenses will materially increase as
we plan to rapidly recruit more employees in order to accelerate our research
and development efforts.
Marketing expenses
Marketing expenses consist primarily of salaries and share-based compensation expense.
The following table discloses the breakdown of marketing expenses:
Year ended December 31
2021 2020
Stock Based Compensation $ 265,687 $ 1,517,240
Professional Fees 3,215,620 1,540,854
Total $ 3,481,307 $ 3,058,094
General and administrative
General and administrative expenses consist primarily of salaries, share-based
compensation expense, professional service fees (for accounting, legal,
bookkeeping, intellectual property and facilities), directors fee and insurance
and other general and administrative expenses.
The following table discloses the breakdown of general and administrative
expenses:
Year ended December 31
2021 2020
Salaries and related expenses
893,124 1,113,488
Rent and maintenance 330,104 -
Communication and investor relations 108,582 44,624
Bad debts 2,533,727 -
Professional fees 4,809,844 1,331,707
Insurance and other expenses 166,079 72,000
Total $ 9,363,632 $ 2,728,560 Comparison of the year ended
Results of Operations Research and Development Expenses. Our research and development expenses for the year endedDecember 31, 2021 were$823,833 compared to$9,863,703 for the year endedDecember 31, 2020 , representing a net decrease of$9,039,870 , or 92%. The decrease is primarily due to the decrease in research and development costs and decrease in impairment of IPR&D costs associated with the purchase of our subsidiary, offset by an increase in professional fees incurred in connection with providing Covid testing services. Marketing Expenses. Our marketing expenses increased from$3,058,094 in 2020 to$3,481,307 in 2021, providing an increase of$423,213 or 14%. This increase was principally due to increase in marketing efforts related to our anticipated uplisting offset by a decrease in stock-based compensation. General and Administrative Expenses. Our general and administrative expenses for the year endedDecember 31, 2021 were$9,363,632 , compared to$2,728,560 for the year endedDecember 31, 2020 , providing an increase of$6,635,072 or 243%. The increase is primarily due to the increase in professional services which consists mainly of legal and other fees relating our anticipated uplisting, bad debts and salaries and related expenses.
Finance (Income) Expenses, Net. Our net finance expenses for the year ended
Share in losses of affiliated company is accounted for under the equity method. Our share in losses of affiliated company accounted for under the equity method increased from$1,199,619 in 2020 to$1,658,452 in 2021, providing a decrease of$458,833 or 38%. This decrease was principally due to impairment of investment in affiliated companies. Net Loss. Our net loss for the year endedDecember 31, 2021 was$43,314,134 , compared to$29,772,633 for the year endedDecember 31, 2020 , providing an increase of$13,541,501 or 45%. The increase is primarily due to the changes as mentioned above. 42 Table of Contents We prepare our financial statements in accordance with US GAAP. At the time of the preparation of the financial statements, our management is required to use estimates, evaluations, and assumptions which affect the application of the accounting policy and the amounts reported for assets, obligations and expenses. Any estimates and assumptions are continually reviewed. The changes to the accounting estimates are credited during the period in which the change to the estimate is made. Subject to certain conditions set forth in the JOBS Act, as an "emerging growth company," we elected to rely on other exemptions, including without limitation, (i) providing an auditor's attestation report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis). These exemptions applied until the last day of the 2021 fiscal year (the end of the fifth year after the first sale of our ordinary shares pursuant to an effective registration statement under the Securities Act). Going Concern Uncertainty Until 2020, we devoted substantially all of our efforts to research and development and raising capital. In 2020, we raised significant capital, but we also generated revenues for the first time as a result of our activities related to Covid-19. There is no certainty as to the continuance of our revenues related to Covid-19. The development and commercialization of our other products, which are necessary for our long term financial health, are expected to require substantial further expenditures. We remain dependent upon external sources for financing our operations. Since inception, we have incurred substantial accumulated losses, negative working capital, and negative operating cash flow, and have a significant shareholders' deficit. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. We plan to finance our operations through the sale of equity and, to the extent available, short term and long-term loans. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations. 43 Table of Contents
Liquidity and Capital Resources
Overview To date, we have funded our operations primarily with convertible bridge loans, grants from the IIA, and issuing Ordinary Shares and stock warrants (including warrants' exercise).
The table below presents our cash flows:
STATEMENTS OF CASH FLOWSU.S. dollars in thousands Year ended December 31 2021 2020 Cash flows from operating activities: Net loss (43,314 )$ (29,773 )$ Adjustments required to reconcile net loss to net cash used in operating activities: Depreciation and amortization 763
96
Impairment of property and equipment 485
-
Impairment of goodwill 1,545
-
Liability for minimum royalties 82
53
Interest and royalty expenses related to receivables financing facility 375
1,006
Stock-based compensation 1,234
2,612
Impairment of investment in affiliated company 1,658
2,718
Revaluation of investment in affiliated company to fair value - (1,623 ) Impairment of intangible IPR&D, net of taxes 450
8,157
Expiration of call options to acquire potential acquire -
3,000
Issuance of ordinary shares as part of joint ventures agreements -
-
Share in losses of affiliated company -
105
Modification of terms relating to straight loan transaction 88
-
Modification of convertible bridge loans transactions - (3,375 ) Exchange differences relating to loans from shareholders -
40
Change in fair value, amortization of discounts and accrued interest on convertible bridge loans 25,575
11,196
Amortization of discounts and accrued interest on straight loans 2,657
1,170
Issuance of shares as a settlement in excess of the carrying amount of financial liabilities 870
487
Change in fair value of derivative warrants liability and fair value of warrants expired (301 )
201
Change in fair value of liability related to conversion feature of convertible bridge loans (2,180 ) (355 ) Increase in trade receivables (2,076 ) (537 ) Increase in inventories (1,066 ) (378 ) Decrease (increase) in other current assets 791 (385 ) Increase in accounts payables (100 )
1,405
Increase (decrease) in deferred revenues (844 )
844
Increase in other current liabilities 2,106
778
Operating lease liabilities (22 )
778
Net cash used in operating activities (11,224 )
(2,558 )
Cash flows from investing activities: Purchase of property and equipment (1,097 ) (2,030 ) Cash used in purchased of subsidiary consolidated for the first time (2,426 )
-
Purchase of intangible IPR&D - (450 ) Investment in affiliated companies - (911 ) Investment in other company (1,183 ) (225 ) Net cash used in investing activities (4,956 )
(3,616 )
Cash flows from financing activities: Proceeds from Receivables financing facility and straight loans 2,486
2,617
Repayment of loans (3,557 ) (2,317 ) Proceeds from issuance of units consisting of straight loans and stock warrants -
2,033
Proceeds from issuance of units consisting of convertible bridge loans, stock warrants and shares, net 16,000
2,390
Proceeds from issuance of units consisting of ordinary shares and stock warrants -
30
Proceeds from issuance of ordinary shares through equity line 255
2,339
Net cash provided by financing activities 15,184
7,092
Change in cash, cash equivalents and restricted cash (746 )
918
Cash, cash equivalents and restricted cash at beginning of year 935
17
Cash, cash equivalents and restricted cash at end of year 189 $ 935$ 44 Table of Contents Operating Activities Net cash used in operating activities for the year endedDecember 31, 2021 was$11,224,000 compared to$2,558,000 in the year endedDecember 31, 2020 . The increase in the cash flow used in operating activities in 2021 compared to 2020 is primarily due to increase from operating loss less stock-based compensation, share in losses of affiliated company, Impairment of goodwill, amortization of discounts and accrued interest on convertible bridge loans and change in fair value of derivative warrants liability plus change in fair value of liability related to conversion feature of convertible bridge loans, and increase in trade receivables and inventories. Investing Activities Net cash used in investing activities for the for the year endedDecember 31, 2021 was$4,956,000 , compared to net cash used in the year endedDecember 31, 2020 of$3,616,000 . The primary reason for the increase in investing activities was due to increase in in Cash used in purchased ofProvista Diagnostics, Inc and in other companies offset by purchase on laboratory equipment by ourU.S. subsidiaries. Financing Activities Net cash provided by financing activities for the year endedDecember 31, 2021 was$15,184,000 compared to net cash provided by financing activities for the year endedDecember 31, 2020 of$7,092,000 . This increase is primarily due to a cash received from proceeds from issuance of units consisting of convertible bridge loans, stock warrants and shares, net offset by decrease in proceeds from issuance of units consisting of straight loans and stock warrants and proceeds from issuance of ordinary shares through equity line. Current Outlook We cannot assure that our cancer detection kits will be commercialized, work as indicated, or that they will receive regulatory approval and that we will earn revenues sufficient to support our operations or that we will ever be profitable. We also cannot assure that our Tollovir antiviral treatment for Covid-19 will ever receive regulatory approval or be profitable. Furthermore, since we have no committed source of financing, we cannot assure that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to curtail, or even to cease, our operations. We have limited experience with IVD. As such, these budget estimates may not be accurate. In addition, the actual work to be performed is not known at this time, other than a broad outline, as is normal with any scientific work. As further work is performed, additional work may become necessary or change in plans or workload may occur. Such changes may have an adverse impact on our estimated budget. Such changes may also have an adverse impact on our projected timeline of drug development.
We are currently distributing COVID-19 testing kits and marketing and distributing Tollovid for the treatment of Covid-19 as a means of funding our operations.
If we are unable to raise additional funds, we will need to do one or more of the following:
? delay, scale-back or eliminate some or all of our research and product
development programs;? provide licenses to third parties to develop and commercialize products or
technologies that we would otherwise seek to develop and commercialize
ourselves;
? seek strategic alliances or business combinations;
? attempt to sell our Company;
? cease operations; or
? declare bankruptcy.
Any debt financing secured by us in the future could involve restrictive
covenants relating to our capital raising activities and other financial and
operational matters, which may make it more difficult for us to obtain
additional capital and to pursue business opportunities, including potential
acquisitions. We may not be able to secure additional debt or equity financing
in a timely manner, or at all, which could require us to scale back our business
plan and operations.
The above conditions raise substantial doubt about our ability to continue as a
going concern. The financial statements included elsewhere herein were prepared
under the assumption that we would continue our operations as a going concern.
Our financial statements do not include any adjustments that may result from the
outcome of this uncertainty. Without additional funds from debt or equity
financing, sales of our intellectual property or technologies, or from a
business combination or a similar transaction, we will soon exhaust our
resources and will be unable to continue operations. If we cannot continue as a
viable entity, our shareholders may lose some or all of their investment in us.
Our management intends to attempt to secure additional required funding
primarily through additional equity or debt financings. We may also seek to
secure required funding through sales or out-licensing of intellectual property
assets, seeking partnerships with other pharmaceutical companies or third
parties to co-develop and fund research and development efforts, or similar
transactions. However, there can be no assurance that we will be able to obtain
required funding. If we are unsuccessful in securing funding from any of these
sources, we will defer, reduce or eliminate certain planned expenditures in our
research protocols. If we do not have sufficient funds to continue operations,
we could be required to seek bankruptcy protection or other alternatives that
could result in our shareholders losing some or all of their investment in us.
We currently do not have any off-balance sheet arrangements.
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