TODOS MEDICAL LTD. 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
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
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
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
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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.
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 via the
We believe that as we continue to grow our automation services business, we are
creating a natural distribution base for
Todos has acquired exclusive distribution rights to the dietary supplement
Tollovid™?, a proprietary blend of botanical extracts with active ingredient
inhibiting the 3CL Protease, a critical protease required for certain viruses to
replicate. A Certificate of Free Sale was granted by the FDA in
Operating Results Revenues
During the 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 (in the first three months of 2020, we had no revenues):
Three Months Ended
March 31
2021 2020
Materials and other costs $ 3,086,314 $ -
Depreciation 148,815 -
Total $ 3,235,129 $ -
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.
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The following table discloses the breakdown of research and development
expenses:
Three Months Ended
March 31
2021 2020
$ - -
Stock-based compensation - 36,191
Professional fees 100,234 -
Laboratory and materials 602,567 61,026
Depreciation 7,425 6,524
Insurance and other expenses 2,380
Total $ 712,606 103,741
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:
Three Months Ended
March 31
2021 2020
Share Based Compensation $ 44,771 750,000
Professional Fees 1,313,466 -
Total $ 1,358,237 750,000
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 fee and insurance and other general and administrative expenses.
The following table discloses the breakdown of general and administrative
expenses:
Three Months Ended
March 31
2021 2020
Salaries and related expenses $ 40,066 37,189
Share-based compensation 200,539 45,333
Communication and investor relations -
Professional fees 989,742 222,777
Insurance and other expenses 329,830 25,000
-
Total $ 1,562,177 330,229
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Comparison of the three months ended
Results of Operations
Revenues. Our revenues for the three months ended
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 (Income) 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 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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