The following discussion and analysis should be read in conjunction with our
financial statements and related notes included elsewhere in this quarterly
report on Form 10-Q. This discussion and other parts of this quarterly report on
Form 10-Q 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 quarterly report on Form 10-Q.
We report financial information under US GAAP and our financial statements were
prepared in accordance with generally accepted accounting principles in
Overview
Diagnostics
Our medical diagnostics business is primarily engaged in the development and commercialization of blood tests for the early detection of primary breast cancer and recurrences, the diagnosis and management of SARS-COV-2 infections and immunity in response to vaccinations and natural or breakthrough infections, and the early detection of Alzheimer's Disease.
Videssa Breast
Current methods of breast cancer detection have known limitations, particularly
in women with abnormal imaging findings. Our proprietary breast cancer test,
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 IUO testing followed by full diagnostic testing for patients with MCI and dementia for differential diagnosis.
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Our
TBIA Platform
From a research and development perspective, our proprietary diagnostics
technology centers on testing blood cells using a fourier transform infrared
spectrometer (FTIR) to turn biological information into data, and then using our
patented Total Biochemical Infrared Analysis (TBIA) deep learning data analytics
platform to mine the data in order to develop algorithms that are indicative of
the presence of cancer, and the tissue of origin in the body where the cancer is
located. The TBIA detection method is based on cancer's influence on the immune
system that triggers biochemical changes in peripheral blood. The primary
advantages of the TBIA platform are the high accuracy (sensitivity and
specificity) and low-cost structure due to the biological information being
captured using spectroscopy versus biological antibody capture methods that
require the manufacture of multiple antibodies to capture a biological
signature. TBIA is based upon technology originally invented by the researchers
at
Because of the novelty and highly disruptive nature of TBIA analysis using FTIR
to diagnose disease, we believe the best path forward to bring our core
technology to market in
Covid-19 Automated Testing Solutions and Distribution
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 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. 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.
Immune Support Products and 3CL Protease Inhibiting Antivirals
We entered into a joint venture with Israeli-based biotech company, NLC Pharma,
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. Furthermore, the partnership is 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 in
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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 nine and three months ended
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:
Nine Months Ended Three Months Ended September 30, September 30, U.S. dollars 2021 2020 2021 2020 Salaries and related expenses$ 355,000 $ -$ 290,000 $ - Materials and other costs 4,354,000 894,000 581,000 883,000 Depreciation 482,000 - 172,000 - Total$ 5,191,000 $ 894,000 $ 1,043,000 $ 883,000
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.
6 Table of Contents The following table discloses the breakdown of research and development expenses: Nine Months Ended Three Months Ended September 30, September 30, U.S. dollars 2021 2020 2021 2020 Stock-based compensation $ -$ 60,000 $ - $ - Professional fees 165,000 800,000 41,000 365,000 IPR&D acquired as part of asset acquisition - 8,157,000 - 8,157,000 Laboratory and materials 646,000 572,000 144,000 511,000 Depreciation 22,000 38,000 7,000 25,000 Insurance and other expenses 2,000 28,000 - 28,000 Total$ 835,000 $ 9,655,000 $ 192,000 $ 9,086,000
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.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of salaries and share-based compensation expense.
The following table discloses the breakdown of sales and marketing expenses:
Nine Months Ended Three Months Ended September 30, September 30, U.S. dollars 2021 2020 2021 2020 Salaries and related expenses$ 496,000 $ -$ 243,000 $ - Share Based Compensation 45,000 1,463,000 - 33,000 Professional Fees 1,846,000 724,000 186,000 724,000 Total$ 2,387,000 $ 2,187,000 $ 429,000 $ 757,000 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 fees and insurance and other general and administrative expenses.
The following table discloses the breakdown of general and administrative expenses: Nine Months Ended Three Months Ended September 30, September 30, U.S. dollars 2021 2020 2021 2020
Salaries and related expenses
513,000 712,000 148,000 398,000 Professional fees 3,533,000 826,000 1,418,000 342,000 Insurance and other expenses 875,000 68,000 234,000 21,000 Total$ 5,048,000 $ 1,729,000 $ 1,843,000 $ 804,000 7 Table of Contents
Comparison of the Three and Nine Months Ended
Results of Operations
Revenues. Our revenues for the three months ended
Our revenues for the nine months ended
The increase in our revenues is a result of the sales of our COVID-19 testing
products through our
Cost of revenues. Our cost of revenues for the three months ended
Research and Development Expenses. Our research and development expenses for the
three months ended
Sales and Marketing Expenses. Our sales and marketing expenses increased from
General and Administrative Expenses. Our general and administrative expenses for
the three months ended
Finance Expenses, Net. Our net finance expenses for the three months 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
amounted to
Net Loss. Our net loss for the three months ended
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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, revenues 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 will apply until on or before the last day of the 2021 fiscal year (the fifth anniversary of the date of the first sale of our common equity securities 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.
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Liquidity and Capital Resources
Overview
To date, we have funded our operations primarily through revenue and 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:
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