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    TOMDF   IL0011392375

TODOS MEDICAL LTD.

(TOMDF)
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TODOS MEDICAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

04/21/2021 | 05:38pm EDT
The following discussion and analysis should be read in conjunction with our
financial statements and related notes included elsewhere in 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 in the United States.



Overview



Todos Medical Ltd., is a medical diagnostics company engaged in the development
and commercialization of blood tests for the detection of immune-related
diseases, beginning with cancer, and the provider of turnkey COVID-19 automated
testing solutions for laboratories, including the distribution of testing
supplies.



Our core proprietary diagnostics technology centers on testing blood cells using
an FTIR spectrometer 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. Our ultimate vision is to develop a single, simple and
cost-effective blood test that can identify any cancer at its earliest stages of
formation, and then use emerging methods such as liquid biopsy to monitor
patient responses to treatment.



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
COGS 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 BGU and Soroka, whose intellectual
property has been licensed to us. We have received a CE Mark in the European
Union authorizing the commercial use of the TBIA platform in the diagnosis of
breast cancer and colon cancer. We have been issued patents in the United
States, Europe and other international jurisdictions covering the use of TBIA to
detect solid tumors. Our academic partners at BGU have also published research
suggesting FTIR has the potential to be used to identify the presence of viral
and bacterial infections, and the Company is currently evaluating how best to
pursue its technology in these areas in light of increased commercial interest
for viral detection methods in light of the outbreak of novel Coronavirus
(SARS-CoV-2, or COVID-19) worldwide.



Because of the novelty and highly disruptive nature of TBIA analysis using FTIR
to diagnose disease, we believe the best path forward to bring Todos' core
technology to market in the United States is to demonstrate comparability with
blood tests that are built on technology platforms that are in widespread use.
Due to the relative scarcity of commercial blood tests in areas such as cancer
and Alzheimer's disease, we have pursued a strategy of acquiring proprietary
blood tests in those therapeutic indications in order to gain a foothold in the
marketplace and fine tune our FTIR platform while fully commercializing these
more advanced tests in the United States.



Toward that end, we chose to expand into Alzheimer's disease because we view
Alzheimer's as cancer of neuronal cells that are incapable of completing cell
division due to their post-mitotic nature. Through an acquisition in 2019, we
acquired exclusive worldwide rights to the Alzheimer's blood test called the
Lymphocyte Proliferation Test (LymPro Test™). Taken together with our core TBIA
FTIR-based platform, we believe Todos is positioned to become the worldwide
leader in the field of immune-based diagnostics. The Company formed the
subsidiary Todos Medical Singapore Ltd. for the purpose of advancing clinical
trials of the Company's core technology for breast cancer in Southeast Asia.
Additionally, in 2020 our Board of Directors and shareholders approved our
planned acquisition of Provista Laboratories. We expect to close on this
acquisition in the second quarter of 2021. The Provista acquisition will enable
us to gain exclusive worldwide rights to the commercial-stage breast cancer test
Videssa ™, further broadening our position in cancer blood testing and creating
additional opportunities for our TBIA FTIR-based platform.



In view of our status as a leader in the field of immune-based diagnostics, we
made the strategic corporate decision to enter the field of COVID-19 testing
services in the first half of 2020. Similar, to our strategy in cancer and
Alzheimer's where we felt more traditional, advanced technologies would serve as
the basis for market entry before bringing our proprietary FTIR-based TBIA
platform forward, we decided to enter the COVID-19 space by gaining rights to
existing technologies developed by other companies. The Company believes that by
identifying key areas of inefficiency in the COVID-19 testing space, and
addressing those bottlenecks, whether they be scientific, technical or
logistical, we can capture market share in a new and rapidly growing medical
testing industry. 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 and digital PCR reagents so as to be able 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 began generating revenue from the distribution of
products to support laboratory COVID testing through automated machinery we
provided. We intend to continue the expansion of this business, including the
utilization of our automation services for other diagnostic testing where we can
distribute additional supplies and leverage the use of our equipment.



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Additionally, the Company has entered into a joint venture with NLC Pharma to
bring to market a unique development-stage viral protease-based saliva point of
care cell phone enabled diagnostic device that allows for the rapid detection of
the presence of SARS-CoV-2 full length RNA in saliva which has the unique
benefit of also indicating when viral replication has slowed or ceased. 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. We believe this strategy has the
potential to help accelerate our commercial distribution channels as we begin to
commercialize our core technology, and the technologies we have acquired are
currently acquiring via the Provista. We also secured the rights to distribute
AditxtScore™ for COVID-19 to monitor immunity against SARS-CoV-2. Blood samples
will be collected by Todos and/or its network of partners and sent to Aditxt's
CLIA accredited AditxtScore™ Center for processing.



We believe that as we continue to grow our automation services business, we are
creating a natural distribution base for Provista's Videssa should we complete
that acquisition, as well as for the eventual commercialization of our
proprietary TBIA platform tests and diagnostics developed with NCL 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 year ended December 31, 2020 we have generated revenues of $5,207,142 through our U.S. subsidiary, Corona Diagnostics, LLC.



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 (in 2019, we had
no revenues):



                                             Year ended December 31
                                                 2020             2019
              Materials and other costs   $        3,749,901      $   -
              Depreciation                            68,340          -
              Total                       $        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
                                                        2020            2019
      Salaries and related expenses                 $      27,270     $

291,606

      Stock-based compensation                             60,449       

230,908

      Professional fees                                    47,000        

65,506

IPR&D acquired as part of asset acquisition 8,157,000

-

      Laboratory and materials                          1,535,073        35,472
      Patent expenses                                           -        51,491
      Rent and maintenance                                  6,221        32,895
      Depreciation                                         28,121        29,643
      Insurance and other expenses                          2,569        18,178
      Total                                         $   9,863,703     $ 755,699




33


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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
                                               2020            2019

                Stock Based Compensation   $   1,517,240     $ 420,000
                Professional Fees              1,540,854       246,872
                Total                      $   3,058,094     $ 666,872




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
                                                    2020            2019

          Salaries and related expenses          $   166,741     $   325,879
          Stock-based compensation                 1,113,488         602,541
          Communication and investor relations        44,624         106,886
          Professional fees                        1,331,707         943,175
          Insurance and other expenses                72,000         114,164
          Total                                  $ 2,728,560     $
2,092,645



Comparison of the year ended December 31, 2020 to the year ended December 31, 2019:




Results of Operations



Research and Development Expenses. Our research and development expenses for the
year ended December 31, 2020 were $9,863,703 compared to $755,699 for the year
ended December 31, 2019, representing a net increase of $9,108,004, or 1,205%.
The increase is primarily due to an increase in professional fees and other
research and development costs in connection with providing Covid testing
services, offset by a decrease in salaries and related expenses and stock-based
compensation used for continued development of our products.



Marketing Expenses. Our marketing expenses increased from $666,872 in 2019 to
$3,058,094 in 2020, providing an increase of $2,728,560 or 359%. This increase
was principally due to increase in stock-based compensation and marketing
efforts related to our anticipated uplisting.



General and Administrative Expenses. Our general and administrative expenses for
the year ended December 31, 2020 were $2,756,681, compared to $2,092,645 for the
year ended December 31, 2019, providing an increase of $635,915 or 30%. The
increase is primarily due to the increase in stock-based compensation and
professional services which consists mainly of legal and other fees relating our
anticipated uplisting.


Finance (Income) Expenses, Net. Our net finance expenses for the year ended
December 31, 2020 was $14,312,413 compared to net finance expenses of $5,333,875
for the year ended December 31, 2019, providing an increase of $8,978,538 or
168%. The increase is primarily due to change in fair value of warrants
liability, loss from extinguishment of loans from shareholders and amortization
of discounts and accrued interest on convertible bridge loans.



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
decreased from $2,965,801 in 2019 to $1,199,619 in 2020, providing a decrease of
$1,766,182 or 60%. This decrease was principally due to impairment of investment
in affiliated company and expiration of right to obtain control over affiliated
company.



Net Loss. Our net loss for the year ended December 31, 2020 was $29,772,633,
compared to $11,814,515 for the year ended December 31, 2019, providing an
increase of $17,958,118 or 152%. The increase is primarily due to the changes as
mentioned above.



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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 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.



35


  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 FLOWS



U.S. dollars in thousands



                                                                Year ended
                                                                December 31
                                                          2020              2019
Cash flows from operating activities:
Net loss                                              $     (29,773 )   $     (11,815 )
Adjustments required to reconcile net loss to net
cash used in operating activities:
Depreciation                                                     96        

30

Liability for minimum royalties                                  53        

50

Interest and royalty expenses related to
receivables financing facility                                1,006        

-

Stock-based compensation                                      2,612        

1,254

Impairment of investment in affiliated company                2,718        

1,345

Revaluation of investment in affiliated company to
fair value                                                   (1,623 )      

-

Impairment of intangible IPR&D, net of taxes                  8,157        

-

Expiration of call options to acquire potential
acquiree                                                      3,000        

-

Share in losses of affiliated company                           105        

448

Expiration of right to obtain control over
affiliated company                                                -        

1,173

Modification of terms relating to loans from
shareholders                                                      -        

1,423

Modification of convertible bridge loans
transactions                                                 (3,375 )      

-

Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions

                                        55         

-

Exchange differences relating to loans from
shareholders                                                     40        

48

Change in fair value of convertible bridge loans              8,973        

2,322

Amortization of discounts and accrued interest on
convertible bridge loans                                      1,655        

-

Amortization of discounts and accrued interest on
straight loans                                                1,170        

959

Direct and incremental issuance costs allocated to First Warrant related to convertible bridge loans transactions paid with Warrants

                                   -         

11

Issuance of shares as a settlement in excess of the carrying amount of financial liabilities

                        487         

-

Change in fair value of derivative warrants
liability and fair value of warrants expired                    927        

500

Change in fair value of liability related to
conversion feature of convertible bridge loans                 (568 )      

-

Increase in trade receivables                                  (537 )
Increase in inventories                                        (378 )
Decrease (increase) in other current assets                    (385 )      
       24
Increase in accounts payables                                 1,405               364
Increase in deferred revenues                                   844                 -
Increase in other current liabilities                           778        

588

Net cash used in operating activities                        (2,558 )      

(1,276 )


Cash flows from investing activities:
Loans granted to affiliated company                               -              (448 )
Purchase of property and equipment                           (2,030 )              (1 )
Purchase of intangible IPR&D                                   (450 )      

-

Investment in affiliated companies                             (911 )      

-

Investment in other company                                    (225 )      

-

Net cash used in investing activities                        (3,616 )      

(449 )


Cash flows from financing activities:
Proceeds from Receivables financing facility                  2,617        

-

Repayment of Receivables financing facility                  (2,317 )      

-

Proceeds from issuance of units consisting of
straight loans and stock warrants                             2,035        

1,374

Proceeds from issuance of units consisting of
convertible bridge loans, stock warrants and
shares, net                                                   2,390        

-

Proceeds from issuance of units consisting of
ordinary shares and stock warrants                               30        

295

Proceeds from issuance of ordinary shares through
equity line                                                   2,339        

-

Proceeds from exercise of stock warrants into
ordinary shares on cash basis                                     -        

-

Net cash provided by financing activities                     7,092        

1,669


Change in cash, cash equivalents and restricted
cash                                                            918               (56 )
Cash, cash equivalents and restricted cash at
beginning of year                                                17        

73

Cash, cash equivalents and restricted cash at end
of year                                               $         935     $          17




36


  Table of Contents




Operating Activities


Net cash used in operating activities for the year ended December 31, 2020 was
$2,558,000 compared to $1,276,239 in the year ended December 31, 2019. The
increase in the cash flow used in operating activities in 2020 compared to 2019
is primarily due to increase from operating loss less stock-based compensation,
impairment of investment in affiliated company, Impairment of intangible IPR&D,
net of taxes, expiration of call options to acquire potential acquiree, change
in fair value of convertible bridge loans, amortization of discounts and accrued
interest on convertible bridge loans and change in fair value of derivative
warrants liability and fair value of warrants expired less revaluation of
investment in affiliated company and modification of convertible bridge loans
transactions.



Investing Activities

Net cash used in investing activities for the for the year ended December 31,
2020 was $3,616,000, compared to net cash used in the year ended December 31,
2019 of $448,694. The primary reason for the increase in investing activities
was due to purchase on laboratory equipment by our U.S. subsidiary, Corona
Diagnostics, LLC and due to loans granted by us to our joint venture,
Breakthrough Diagnostics, Inc., for operating its ongoing activities.



Financing Activities



Net cash provided by financing activities for the year ended December 31, 2020
was $7,092,000, compared to net cash provided by financing activities for the
year ended December 31, 2019 of $1,669,470. This increase is primarily due to a
cash received from Proceeds from Receivables financing facility, proceeds from
issuance of units consisting of straight loans and stock warrants, Proceeds from
issuance of units consisting of convertible bridge loans, stock warrants and
shares, net and proceeds from issuance of ordinary shares through equity line
offset by repayment of Receivables financing facility.



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. 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 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.



37


  Table of Contents



Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements.



Contractual Obligations



The following table summarizes our contractual obligations as of December 31,
2020:



                         Payments due
                           by period
                             (US$)         Less than 1                                           More than 5
                             Total             year           1-3 years         3-5 years           years

Shareholders' loans
(1)                            310,477          310,477                 -                 -                 -
Convertible bridge
loans, net                   1,669,776        1,669,776
Royalties to BGU (2)           423,000          235,000                                               188,000

Total (3)                    2,403,253        2,215,253                 -                 -           188,000




(1) Between the years 2011 and 2014, we received loans from two shareholders.
The loans were denominated in NIS, matured on December 31, 2019 and bore no
interest. The loans were linked to the Israeli CPI as of January 1, 2015. In May
2020, we repaid the loans by issuing 8,750,000 of our ordinary shares having a
market value of $350,000 at issuance.



(2) This balance was measured based on the future cash payments discounted using
an interest rate of 21%, which represents, according to management's estimate,
the applicable rate of risk for us.



(3) This does not include the repayment of approximately $272,000 of grants we
received from the IIA and interest thereon, which shall be repaid as royalties
upon the commercialization of our products.



38


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© Edgar Online, source Glimpses

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Financials (USD)
Sales 2020 5,21  - -
Net income 2020 -29,8 M - -
Net Debt 2020 10,5 M - -
P/E ratio 2020 -0,65x
Yield 2020 -
Capitalization 25,2 M 25,2 M -
EV / Sales 2019 -
EV / Sales 2020 7 726 750x
Nbr of Employees 7
Free-Float 73,5%
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NameTitle
Gerald E. Commissiong President, Chief Executive Officer & Director
Daniel Hirsch Chief Financial Officer & Director
Herman Weiss Chairman
Elise Brownell Vice President-Research & Development
Jorge Leon Chief Medical & Scientific Officer
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