NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S.
dollars in thousands)
NOTE
1 - GENERAL
Todos
Medical Ltd. (the “Company” or “Todos”) was incorporated under the laws of the State of Israel and commenced
its operations on April 22, 2010. The Company engineers life-saving diagnostic solutions for the early detection of a variety of cancers.
The Company’s patented Todos Biochemical Infrared Analyses (TBIA) is a proprietary cancer-screening technology using peripheral
blood analysis that deploys deep examination into cancer’s influence on the immune system, looking for biochemical changes in blood
mononuclear cells and plasma. Todos’ two internally developed cancer-screening tests, TMB-1 and TMB-2, have received a CE mark
in Europe.
Todos
is also developing blood tests for the early detection of neurodegenerative disorders, such as Alzheimer’s disease. The Lymphocyte
Proliferation Test (LymPro Test™) is a diagnostic blood test that determines the ability of peripheral blood lymphocytes (PBLs)
and monocytes to withstand an exogenous mitogenic stimulation that induces them to enter the cell cycle. LymPro is unique in the use
of peripheral blood lymphocytes as a surrogate for neuronal cell function, suggesting a common relationship between PBLs and neurons
in the brain.
Additionally,
commencing 2020, the Company through its U.S. subsidiary (Corona Diagnostics, LLC) has entered into several distribution agreements with
other companies to distribute certain novel coronavirus (COVID-19) test kits. The agreements cover multiple international suppliers of
PCR testing kits and related materials and supplies, as well as antibody testing kits from multiple third-party manufacturers after completing
validation of said testing kits and supplies in certified laboratory in the United States. Additionally, upon completion of the Share
Purchase Agreement for the purchase of Provista Diagnostics, Inc. (see Note 3 below), the Company, through Provista Diagnostics, Inc.
provide diagnostic testing laboratory currently performing COVID-19 PCR testing, primarily for the medical and entertainment industries.
In
December 2020, the Company announced the commercial launch of its proprietary 3CL protease inhibitor dietary supplement Tollovid™.
Tollovid, a mix of botanical extracts, is being targeted to support healthy immune function against circulating coronaviruses. Tollovid
was granted a Certificate of Free Sale by the US Food and Drug Administration (FDA) in August 2020, allowing its commercial sale anywhere
in the United States. In May 2021, the FDA granted the Company a new Certificate of Free Sale for a second dosing regimen for Tollovid™
as a dietary supplement, under which the Company is authorized to market Tollovid with a dosing regimen of 60 pills over a five-day period,
equivalent to 12 pills per day.
Revenues
of the year ended December 31, 2021, resulted from sales of COVID-19 related products, testing kits and dietary supplement, Tollovid™
. Through December 31, 2021, the Company has not yet generated any revenue from its developed cancer-screening tests TMB-1 and TMB-2
or LymPro Test™.
At
an extraordinary general meeting of Company’s shareholders held on July 26, 2021, the shareholders voted to approve a reverse share
split of the Company’s ordinary shares within a range of 1:2 to 1:500, to be effective at the ratio and on a date to be determined
by the Board of Directors of the Company (the “Reverse Split”). Although Company’s shareholders approved the Reverse
Split, all per share amounts and calculations in this annual report on Form 10-K and the accompanying financial statements do not reflect
the effects of the Reverse Split, as the Board of Directors has not determined the ratio or the effective date of the Reverse Split.
At its next general meeting, Todos’ shareholders will be asked to approve an extension of the deadline for the Reverse Split.
| 1. | Todos
Medical (Singapore) Pte Ltd |
On
January 27, 2016, the Company incorporated a wholly owned subsidiary in Singapore under the name of Todos Medical (Singapore) Pte Ltd.
(“Todos Singapore”) for the purpose of advancing clinical trials of the Company’s core technology for breast
cancer in Southeast Asia. As of December 31, 2021, Todos Singapore has not yet commenced its business operations.
In
January 2020, the Company incorporated a U.S. subsidiary named Todos Medical USA (“Todos U.S.”) for the purpose of conducting
business as medical importer and distributor focused on the distribution of the Company’s testing products and services
to customers in the North America and Latin America.
| 3. | Corona
Diagnostics, LLC |
In
April 2020, the Company incorporated a U.S. subsidiary named Corona Diagnostics, LLC (“Corona Diagnostics”) for the purpose
of marketing COVID-19 related products in the United States to validate potential products the Company is contemplating distributing
and creating marketing materials for the testing products based upon those validations.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S.
dollars in thousands)
NOTE 1 - GENERAL
(CONT.)
| 4. | Breakthrough
Diagnostics, Inc. |
On
February 27, 2019, the Company entered into Shares Purchase and Assignment of License Agreement with Amarantus Bioscience Holdings, Inc.
(“Amarantus”), under which the Company purchased 19.99% of the issued and outstanding common stock of Breakthrough Diagnostics,
Inc. (“Breakthrough”) for entering into the field of early detection of Alzheimer’s disease. On July 28, 2020, the
Company entered into Amendment No. 1 to the Shares Purchase and Assignment of License Agreement with Amarantus, pursuant to which the
Company completed the purchasing of the remaining 80.01% of the issued and outstanding common stock of Breakthrough for consideration
that was based on the Company’s shares. See also Note 5A.
At
the Closing Date, Breakthrough was determined to be excluding substantive process as required under the definition of business in accordance
with the provisions of ASC Topic 805 “Business Combination”. In addition, it was determined that the License represents IPR&D
had no alternative future use and therefore the entire purchase price allocated to the acquired IPR&D was charged to expense
at the acquisition date as part of “Research and Development expenses” line in operations in the accompanying consolidated
statement of operations for the year ended December 31, 2020.
| 5. | Provista
Diagnostics, Inc |
On
April 19, 2021, the Company entered into a Share Purchase Agreement (“SPA”) with Strategic Investment Holdings, LLC, Ascenda
BioSciences LLC (“SIH”, “Ascenda” and together referring as “Sellers”, respectively) and Provista
Diagnostics, Inc. (“Provista”). Ascenda was the sole owner of the outstanding securities of Provista and SIH is the sole
owner of all the outstanding securities of Ascenda. Provista is a medical diagnostics company based in Alpharetta, Georgia that owns
the intellectual property rights to the proprietary breast cancer blood test, Videssa®, and has a diagnostic testing laboratory currently
performing COVID-19 PCR testing, primarily for the medical and entertainment industries. See also Note 3.
| A. | In
June 2020, the Company entered into agreement with NLC Pharma Ltd., under which Antigen COVID
Test Killer was formed for the purpose of development diagnostic candidate Antigen Killer
and product commercialize through the Company’s sales channels. See also Note 5B and
Note 24 for subsequent events. |
| B. | In
August 2020, the Company entered into agreement with Care GB Plus Ltd, under which Bio Imagery
Ltd. (“Bio Imagery”) has been incorporated for the purpose of developing, marketing
and commercializing the Products and all the Intellectual Property of the Company (“Todos
Cancer Assets”) and to develop new Intellectual Property, products and services, and
pursue the business based on the Todos Cancer Assets and on new intellectual property that
will be developed by Bio Imagery. As of December 31, 2021, Bio Imagery has not yet commenced
its business operations and the Company wrote off its investment in the amount of $618. See
also Note 5C. |
The
Company and its entities herein considered as the “Group”.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
1 - GENERAL (CONT.)
C. | Going
concern uncertainty |
The
Company has devoted substantially all of its efforts to research and development of its products and raising capital to fund this development.
The development and commercialization of the Company’s products are expected to require substantial further expenditures. To date,
the Company has not yet generated sufficient revenues from operations to support its activities, and therefore it is dependent upon external
sources for financing its operations. Since inception through December 31, 2021, the Company has incurred accumulated losses of $90,595.
As of December 31, 2021, the Company’s current
liabilities exceed its current assets by $4,244,
and there is a shareholders’ deficit of $24,212.
The Company has generated negative operating cash
flow for all periods. As of March 31, 2022 (date of approval of these financial statements), the total cash and cash equivalent
balance (individual restricted cash) is approximately $31.
Management has considered the significance of such
condition in relation to the Company’s ability to meet its current obligations and to achieve its business targets and determined
that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to
finance its operations through the sale of equity and to the extent available, short-term and long-term loans and also through revenues
from sales of corona testing related products. There can be no assurance that the Company will succeed in obtaining the necessary financing
to continue its operations as a going concern. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
On
March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The outbreak has reached all of the regions
in which the Company does business, and governmental authorities around the world have implemented numerous measures attempting to contain
and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shutdowns, limitations or
closures of non-essential businesses, and social distancing requirements.
The
global spread of COVID-19 and actions taken in response have caused and may continue to cause disruptions and/or delays in our supply
chain and shipments and caused significant economic and business disruption to the Company’s customers and vendors.
The
COVID-19 pandemic has created and may continue to create significant opportunity under the uncertainty in macroeconomic conditions, which
may cause further demand for the Company’s core business related to PCR testing kits and related materials and supplies as already
reflected by recognized revenues of $12,230
and $5,207
during the years ended December 31, 2021 and
2020, respectively, substantially all of which was generated after July 2020. However, the Company may face uncertainties around its
estimates of revenue collectability and accounts receivable credit losses and its expectation to receive funds from external sources
for financing its operations. The Company expects uncertainties around its key accounting estimates to continue to evolve depending on
the duration and degree of impact associated with the COVID-19 pandemic. The Company estimates may change as new events occur and additional
information emerges, and such changes are recognized or disclosed in the Company’s consolidated financial statements.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES
The
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US
GAAP).
A. | Use
of estimates in the preparation of financial statements |
The
preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial
statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. As applicable
to these financial statements, the most significant estimates and assumptions include (i) identification of and measurement of financial
instruments in funding transactions; (ii) Initial measurement of investment in affiliated companies and subsequent equity method implications;
(iii) determination whether an acquired company or formed entities represents a ‘business’; (iv) determination whether acquired
or formed entities are considered Variable Interest Entity (VIE) and if so, whether the Group is its Primary Beneficiary (PB) (v)
deferred income taxes and (vi) measurement
of the fair value of equity awards.
The
functional currency of the Company and all of its subsidiaries is the US dollar (“$” or “dollar”), as the dollar
is the primary currency of the economic environment in which the Company and its subsidiaries have operated and expects to continue to
operate in the foreseeable future. The Company’s operations are currently conducted in Israel and most of the Israeli expenses
are currently paid in new Israeli shekels (“NIS”); however, most of the expenses are denominated and determined in dollar.
Financing and investing activities including loans, equity transactions and cash investments, are made in dollar.
In
accordance with ASC 830, “Foreign Currency Matters”, balances denominated in or linked to foreign currency are stated on
the basis of the exchange rates prevailing at the applicable balance sheet date. For foreign currency transactions included in the statement
of operations, the exchange rates applicable on the relevant transaction dates are used. Gains or losses arising from changes in the
exchange rates used in the translation of such transactions are presented within financing income or expenses.
C. | Principles
of Consolidation |
The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and when applicable its majority
owned entities that were determined to be VIE and that the Group was determined as their Primary Beneficiary (PB). Intercompany transactions
and balances have been eliminated upon consolidation.
D. | Variable
Interest Entities |
ASC
810-10, “Consolidation”, provides a framework for identifying variable interest entities (“VIEs”) and determining
when a company should include the assets, liabilities, non-controlling interests and results of activities of a VIE in its consolidated
financial statements. According to ASC 810-10, the Company consolidates a VIE when it has both (i) the power to direct the economically
significant activities of the entity and (ii) the obligation to absorb losses of, or the right to receive benefits from, the entity that
could potentially be significant to the VIE.
The
Company’s assessment of whether an entity is a VIE and the determination of the primary beneficiary is judgmental in nature and
involves the use of significant estimates and assumptions. The determination of whether the Company should consolidate a VIE is evaluated
continuously as existing relationships change or future transactions occur.
The
significant factors and judgments that the Company considers in making the determination as to whether an entity is a VIE include, among
others: the design of the entity, including the nature of its risks and the purpose for which the entity was created; the nature
of the Company’s involvement with the entity; whether there is sufficient equity investment at risk to finance its current
activities, until it reaches profitability, without additional subordinated financial support; whether parties other than the equity
holders have the obligation to absorb expected losses or the right to receive residual returns.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
D. | Variable
Interest Entities (Cont.) |
Unconsolidated
Variable Interest Entity
| 1. | The
Company has determined that Antigen COVID Test Killer (“CATK”), 15%-held
entity as of December 31, 2020, is considered a VIE, as CATK was formed to develop diagnostic
candidate Antigen Killer and commercialize the product through the Company’s sales
channels, as it does not have sufficient resources to carry out its principal activities
without additional financial support (see also Note 5B). |
The
Company has determined that it is not the primary beneficiary of CATK due to the Company’s lacked the ability to direct the activities
that most significantly impact the economic performance of CATK. However, the Company determined that it has the ability to exercise
significant influence over CATK operations through its obligation to supply the investee financial support and accordingly, the investment
is accounted for under the equity method.
| 2. | The
Company has determined that Bio Imagery Ltd. (“Bio Imagery”), 33%-held
entity as of December 31, 2020, is considered as VIE, as Bio Imagery was formed to (i) develop,
market and commercialize the Company’s Products and all the Company’s Intellectual
Property (“Todos Cancer Assets”) and (ii) develop new Intellectual Property,
products and services, and peruse the business based on Todos Cancer Assets, as it does not
have sufficient resources to carry out its principal activities without additional financial
support (see also Note 5C). |
The
Company has determined that it is not the primary beneficiary of Bio Imagery as the Company lacked the ability to direct
the activities that most significantly impact the economic performance of Bio Imagery. However, the Company determined that it has the
ability to exercise significant influence over Bio Imagery operations through board representation and voting power and accordingly,
the investment is accounted for under the equity method.
As
of December 31, 2021, there were no consolidated variable interest entities.
E. | Cash
and cash equivalents |
Cash
equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit),
that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the
date acquired.
F. | Allowance
for doubtful accounts |
The
allowance for doubtful accounts is determined with respect to amounts the Group has determined to be doubtful of collection. In determining
the allowance for doubtful accounts, the Company considers, among other things, its past experience with customers, the length of time
that the balance is past due, the customer’s current ability to pay and available information about the credit risk on such customers.
During the year ended December 31, 2021 and 2020, the Company recorded allowance in respect of accounts receivable in the amounts
of $2,534 and
$0,
respectively.
Inventories
consist of related equipment, reagents and testing supplies. Inventories are stated at the lower of cost or net realizable value. Cost
of finished products is mainly determined on the basis of the moving average method. Other method which is utilized for determining
the value of inventories is the moving average. The Group regularly reviews its inventories for obsolescence and other impairment risks
and reserves are established when necessary.
Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. When an asset is retired or otherwise disposed of, the related cost and accumulated depreciation
are removed from the respective accounts and the net difference less any amount realized from disposition is reflected in the statements
of operations.
SCHEDULE OF PROPERTY PLANT AND
EQUIPMENT DEPRECIATION RATE
Rate of depreciation | |
% | |
| |
| |
Laboratory equipment | |
| 20-33 | |
Furniture and equipment | |
| 7-15 | |
Computers | |
| 33 | |
Vehicle | |
| 15 | |
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
I. | Impairment
of long-lived assets |
The
Company’s long-lived assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment”,
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to
be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the asset exceeds its fair value. During the years end December 31, 2021 and 2020 the Company recorded
$485 and $0, respectively, of impairment losses.
J. | Investment
in other companies |
Equity
investments without readily determinable fair values are measured at cost, less impairment, and plus or minus subsequent adjustments
for observable price changes. Periodic changes in the basis of these equity investments are reported in current earnings. In
addition, at each reporting period a qualitative assessment is performed to identify impairment. When a qualitative assessment
indicates an impairment exists, the Company estimates the fair value of the investment and recognize in current earnings an
impairment loss equal to the difference between the fair value and the carrying amount of the equity investment. During the years
ended December 31, 2021 and 2020, the Company has not
incurred impairment losses.
K. | Investment
in affiliated companies |
Affiliated
company is company held to the extent of 20% or more (which are not subsidiary), or company less than 20% held, which the Company can
exercise significant influence over operating and financial policy of the affiliate.
The
investment in affiliated company is accounted for by the equity method under ASC Subtopic 323-30, “Investments - Equity Method
and Joint Ventures: Partnerships, Joint Ventures, and Limited Liability Entities”. Upon initial recognition, the cost of investment
is based on the direct costs of acquiring the investment including amounts incurred on behalf of the investee.
Following
the acquisition, the Company recognizes its proportionate share of the affiliated company’s net income or loss after the date of
investment. When previous losses have reduced the common stock investment account to zero, the Company continues to report its share
of equity method losses in its statement of operations to the extent of and as an adjustment to other investments in the investee such
as debt securities, long term loans or advances, if any. Such additional equity method losses are applied to the other investments based
on the seniority of the other investments (priority in liquidation) and the percentage ownership interest in each type of other investment
the Company holds (the ‘relative holdings approach’).
When
the Company achieves control on an affiliated company, the Previously Held Equity Interests (PHEI) in the affiliated company is remeasured
to its fair value immediately prior to the asset acquisition.
When
the affiliated company is not considered a business as no substantive process is identified, amounts allocated to any In-Process Research
and Development (IPR&D) to be used in research and development projects which have been determined not to have an alternative future
use are charged to expenses as of the acquisition date.
The
Company’s consolidated financial statements include the operations of acquired businesses from the date of the acquisition’s
consummation. Acquired businesses are accounted for using the acquisition method of accounting, which requires, among other things, that
most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date and that the fair
value of acquired in process research and development be recorded on the balance sheet. Transaction costs are expensed as incurred. Any
excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill.
When
the Company acquires net assets that do not constitute a business, as defined under ASU 2017-01 Business Combinations (Topic 805) Clarifying
the Definition of a Business (such when there is no substantive process in the acquired entity), no goodwill is recognized and acquired
In-Process Research and Development intangible asset (“IPR&D”) to be used in research and development projects which
have been determined not to have alternative future use, is expensed immediately. Accordingly, when the purchase price (i.e. cash consideration,
fair value of PHEI and the fair value of the equity interests issued) is fully attributed to such acquired IPR&D to be used in a
research and development project which were determined not to have an alternative future use, the entire purchase price allocated to
the acquired IPR&D and related deferred tax liability are charged to expense at the acquisition date as part of “Research and
Development expenses” and “Tax benefit” lines, respectively, in operations in the accompanying consolidated statement
of operations for the year ended December 31, 2020 (see also Note 5A3).
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
M. | Goodwill
and intangible assets |
Goodwill
represents the excess of the purchase price over the fair value of the identifiable net assets acquired in business combinations accounted
for in accordance with the “purchase method” and is allocated to reporting units at acquisition. Goodwill is not amortized
but rather tested for impairment at least annually in accordance with the provisions of ASC Topic 350, “Intangibles - Goodwill
and Other”. The Company performs its goodwill annual impairment test for the reporting units at December 31 of each year, or more
often if indicators of impairment are present.
Intangible
assets with finite lives are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic
benefits of the intangible assets are consumed or otherwise used up (See Note 3).
During the years end December 31,
2021 and 2020 the Company recorded $1,545 and $0, respectively, of impairment losses.
N. | Right
to obtain control over affiliated company and right to acquire shares of other companies |
The
Company accounted for the right to obtain control over affiliated company and the right to acquire shares of other companies, as a non-current
financial derivative asset according to the provisions of ASC 815-10, “Derivatives and Hedging - Overall” (“ASC 815-10”).
Upon initial recognition and in subsequent periods such asset is measured at fair value by using the Black-Scholes Option Pricing Model,
which requires inputs such as the underlying share asset value and share price volatility. These assumptions are reviewed on a regular
basis and changes in the estimated fair value of the outstanding right to obtain control over affiliated company and the right to acquire
shares of other companies were recognized each reporting period as part of in the “Share in Losses of Affiliated Company”
line or “Finance Expenses” line, as applicable in operations in the accompanying consolidated statement of operations, until
such rights are exercised or expired (see also Note 5A).
The
Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes”. Accordingly, deferred income taxes are
determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting
and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the enacted tax rates
expected to be in effect when these differences reverse. Valuation allowance in respect of deferred tax assets are provided for, if necessary,
to reduce deferred tax assets is amounts more likely than not to be realized.
The
Company accounts for uncertain tax positions in accordance with ASC Topic 740-10, which prescribes detailed guidance for the financial
statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements.
According to ASC Topic 740-10, tax positions must meet a more-likely-than-not recognition threshold. The Company’s accounting policy
is to classify interest and penalties relating to uncertain tax positions under income taxes, however the Company did not recognize such
items in its fiscal 2021 and 2020 financial statements and did not recognize any liability with respect to an unrecognized tax position
in its balance sheets.
P. | Liability
for employee rights upon retirement |
The
Company’s liability for severance pay to its Israeli employees is pursuant to Section 14 of the Israeli Severance Compensation
Act, 1963 (“Section 14”), pursuant to which all the Company’s employees are included under Section 14, and are entitled
only to monthly deposits, at a rate of 8.33% of their monthly salary, made in the employee’s name with insurance companies. Under
Israeli employment law, payments in accordance with Section 14 release the Company from any future severance payments in respect of those
employees. The fund is made available to the employee at the time the employer-employee relationship is terminated, regardless of cause
of termination. The severance pay liabilities and deposits under Section 14 have been irrevocably transferred to the severance funds.
As a result of the implementation of Section 14, as described above, the liability is covered by the amounts deposited, including accumulated
income thereon, as well as by the unfunded provision.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Q. | Concentrations
of credit risk |
Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted
cash and trade receivables as well as certain other current assets that do not amount to a significant amount. Cash and cash equivalents,
which are primarily held in Dollars and New Israeli Shekels, are deposited with major banks in Israel. Management believes that such
financial institutions are financially sound and, accordingly, minimal credit risk exists with respect to these financial instruments.
The Company does not have any significant off-balance-sheet concentration of credit risk, such as foreign exchange contracts, option
contracts or other foreign hedging arrangements. Most of the Group’s sales are made in United States to a small number of customers.
Management periodically evaluates the collectability of the trade receivables to determine the amounts that are doubtful of collection
and determine a proper allowance for doubtful accounts. Accordingly, management believes that the Group’s trade receivables do
not represent a substantial concentration of credit risk.
The
Company and its subsidiaries are involved in certain legal proceedings and certain business relationships that arise from time to time
in the ordinary course of their business and in connection with certain agreements with third parties (such as with respect to certain
royalty agreements). Except for income tax contingencies, the Company applies the provisions of ASC Topic 450, Contingencies. Thus, the
Company records accruals for contingencies to the extent that the management concludes that the occurrence is probable and that the related
liabilities are estimable. Legal expenses associated with contingencies are expensed as incurred.
In
February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02. The guidance establishes
a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for
all leases with a term longer than 12 months. The Company determines if an arrangement is or contains a lease at contract inception.
The
Company is a lessee in certain operating leases primarily for office space and transportation.. Operating leases are included in operating
lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance
sheets.
ROU
assets represent Company’s right to use an underlying asset for the lease term and lease liabilities represent Company’s
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date
based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, the Company
generally uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term
of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives.
Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise
that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The
Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results
in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless
doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that
would result in a negative ROU asset balance is recorded in the statement of comprehensive loss.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
T. | Fair
Value Measurements |
The
Company measures and discloses fair value in accordance with the ASC Topic 820, Fair Value Measurements and Disclosures which defines
fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about
fair value measurements. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement
that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering
such assumptions there exists a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level
1 - unadjusted quoted prices are available in active markets for identical assets or liabilities that the Company has the ability to
access as of the measurement date.
Level
2 - pricing inputs are other than quoted prices in active markets that are directly observable for the asset or liability or indirectly
observable through corroboration with observable market data.
Level
3 - pricing inputs are unobservable for the non-financial asset or liability and only used when there is little, if any, market activity
for the non-financial asset or liability at the measurement date. The inputs into the determination of fair value require significant
management judgment or estimation. Level 3 inputs are considered as the lowest priority within the fair value hierarchy. The valuation
of the right to obtain control over affiliated company, right to acquire shares of other companies, contingent consideration to be paid
upon achieving of performance milestone, certain convertible bridge loans (following the maturity date and thereafter) and certain freestanding
stock warrants and bifurcated convertible feature of convertible bridge loans issued to the units’ owners, fall under this category.
This
hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining
fair value.
The
fair value of cash and cash equivalents is based on its demand value, which is equal to its carrying value. Additionally, the carrying
value of all other short-term monetary assets and liabilities are estimated to be equal to their fair value due to the short-term nature
of these instruments.
U. | Research
and development expenses |
Research
and development expenses are charged to operations as incurred.
Royalty-bearing
grants from the Israeli Innovation Authority of the Ministry of Industry, Trade and Labor (the “IIA”) for funding approved
research and development projects are recognized at the time the Company is entitled to such grants (i.e. at the time that there is reasonable
assurance that the Company will comply with the conditions attached to the grant and that there is reasonable assurance that the grant
will be received), on the basis of the costs incurred and reduce research and development costs (see also Note 14B1). The cumulative
research and development grants received by the Company from inception through December 2021 and 2020, amounted to $272.
As
of December 31, 2021, and 2021, the Company did not accrue for or pay any royalties to the IIA as no revenue related to the funded projects
has yet been generated.
W. | Basic
and diluted net loss per ordinary share |
The
Company computes net loss per share in accordance with ASC 260, “Earning per Share”, which requires presentation of both
basic and diluted loss per share on the face of the statement of operations.
Basic
net loss per ordinary share is computed by dividing the net loss for the period applicable to ordinary shareholders, by the weighted
average number of ordinary shares outstanding during the period. Diluted loss per share gives effect to all potentially dilutive common
shares outstanding during the year using the treasury stock method with respect to stock options and certain stock warrants and using
the if-converted method with respect to convertible bridge loans and certain stock warrants. In computing diluted loss per share, the
average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options
or warrants. During the years ended December 31, 2021 and 2020 the total weighted average number of ordinary shares related to outstanding
stock options, stock warrants and convertible bridge loans excluded from the calculation of the diluted loss per share was 450,033,661
and 112,508,547,
respectively.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
On
January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) which supersedes the existing
revenue recognition accounting rules. Under the new guidance the Company determines revenue recognition through the following five steps:
| ■ | Identification
of the contract, or contracts, with a customer; |
| | |
| ■ | Identification
of the performance obligations in the contract; |
| | |
| ■ | Determination
of the transaction price; |
| | |
| ■ | Allocation
of the transaction price to the performance obligations in the contract; and |
| | |
| ■ | Recognition
of revenue when, or as, the Company satisfies a performance obligation. |
For
each type of contract at inception, the Company assesses the goods or service promised in a contract with a customer and identifies the
performance obligations.
When
contract for the sale of goods or service includes option that provides the customer with free or discounted goods or services to be
provided by the Company in the future, the company assess whether such right represent a material right. When it is determined that such
right is considered to be material the Company accounts for such a promise as a separate performance obligation.
With
respect to contracts that are determined to have multiple performance obligations (such as goods and a material right to free or discounted
goods to be provided in the future), the Company allocates the contract’s transaction price to each performance obligation using
its best estimate of the relative standalone selling price of each distinct good or service in the contract. In assessing whether to
allocate variable consideration to a specific part of the contract, the Company considers the nature of variable payment (if any) and
whether it relates specifically to its efforts to satisfy a specific part of the contract.
Revenues
are recognized when, or as, control of services or products is transferred to the customers at a point in time or over time, as applicable
to each performance obligation.
Revenues
are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations upon
transfer of control to the customer, excluding amounts collected on behalf of other third parties and sales taxes.
The
Company does not adjust the amount of consideration for the effects of a significant financing component since the Company expects, at
contract inception, that the period between the time of transfer of the promised goods or services to the customer and the time the customer
pays for these goods or services to be generally one year or less, based on the practical expedient. The Company’s credit terms
to customers are, on average, between thirty and ninety days.
When
another party is involved in providing goods or services to the customer, the Company examines whether the nature of its promise is a
performance obligation to provide the defined goods or services itself, which means the Company is a principal and therefore recognizes
revenue in the gross amount of the consideration, or to arrange that another party provide the goods or services which means the Company
is an agent and therefore recognizes revenue in the amount of the net commission. Such determination is performed separately for each
specified good or service promised to a customer.
In
making that evaluation, the Company considers whether it controls the promised good or service before transferring that good or service
to the customer. The Company considers indicators such as whether the Company is the primary obligor for fulfilling the promises in the
contract and assumes risks and rewards as a principal or an agent, including the credit risks; the Company has inventory risk before
the goods or services are transferred to the customer; and the Company has discretion in setting prices of the goods or services and
selecting its suppliers.
Generally,
in cases in which the Company is primarily obligated in a transaction, is subject to risk, involved in the determination of the product
(or the service) specifications, separately negotiates each revenue service agreement and has inventory risk, revenue is recorded on
a gross basis.
Commencing
2020, the Company generated revenues from commercial sale of COVID-19 related equipment, reagents and testing supplies through sub-distribution
agreement with unrelated distribution companies with clients who are seeking comprehensive testing solutions for return-to-work programs.
Deferred
revenue includes unearned amounts received and amounts received from customers (mostly advances from customers for COVID-19 related products)
but not yet recognized as revenues as the performance obligation has not been fulfilled by the Company.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Y. | Convertible
Bridge Loans and Notes |
Upon
initial recognition of Convertible loans, Convertible Notes and similar instruments, the Company considers the provisions of ASC 815-40,
“Derivatives and Hedging - Contracts in Entity’s Own Equity” (“ASC 815-40”) in order to determine whether
the embedded conversion feature within the convertible instrument should be separated from the host instrument.
Host
contract is not convertible upon issuance
When
it is determined that the embedded conversion feature should not be bifurcated from the host instrument, as at the initial investment
date the loan was considered as straight loan with maturity term which is under the control of the Company, the bridge loan was recognized
based on the amount allocated as described in Note 2Z less the applicable issuance cost. The difference between the face value
of the bridge loan to such allocated process (after allocation of the proceeds received to detachable freestanding financial instrument
(i.e. detachable warrants) that were granted to lenders), represents a discount which is amortized as finance expense to profit or loss
by using effective interest method over the term of the bridge loan until its stated maturity. Following the maturity date and subject
to the Company’s discrete decision not to repay the loan for cash, the bridge loan became subject to the provision of ASC 480 “Distinguishing
Liabilities from Equity” as it represents an obligation to issue a variable number of shares (share-settled obligation). Thus,
upon the lapse of the Company’s right to repay the bridge loan for cash, the bridge loan is measured at fair value through profit
or loss with changes presented within financing income or expense, as applicable.
Host
contract is convertible upon issuance
When
it is determined that the embedded conversion feature does not qualify for equity classification, the Company recognized the embedded
conversion feature as a separate derivative liability upon initial recognition and on subsequent periods at fair value by using the Black-Scholes
Option Pricing Model. The remaining consideration amount received or allocated to the entire convertible instrument is allocated to the
host debt instrument. The difference between the face value of the host and such allocated amount represents a discount which is amortized
as finance expense to profit or loss by using effective interest method over the term of the loan until its stated maturity.
When
it is determined that the embedded conversion feature qualifies for equity classification (such when the embedded conversion option,
if it were freestanding, does not qualify as a derivative in accordance with the provisions of ASC 815-10, “Derivatives
and Hedging” since its terms did not require or permit net settlement or when the embedded conversion option is indexed to the
company’s own stock), the conversion option is not bifurcated. When bifurcation is not required, the Company applies ASC 470-20,
“Debt - Debt with Conversion and Other Options” (“ASC 470-20”) which clarifies the accounting for instruments
with Beneficial Conversion Feature (BCF) or contingently adjustable conversion ratios, to determine whether the conversion feature is
beneficial to the lender.
BCF
was calculated by allocating the proceeds received to the convertible instrument and to any detachable freestanding financial instrument
(such as detachable warrants) included in the transaction (or any other embedded feature that was required bifurcation from the host)
and by measuring the intrinsic value of the conversion option based on the effective conversion price as a result of the allocated proceed.
The intrinsic value of the conversion option, if any, is recorded as a discount with respect to the loan, with a corresponding amount
credited directly to equity as additional paid-in capital. After the initial recognition, the discount is amortized as interest expense
over the contractual term of the Loan (before its modification) by using the effective interest method.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Z. | Allocation
of proceeds and related issuance costs |
When
multiple instruments are issued in a single transaction (package issuance), the total net proceeds from the transaction are allocated
among the individual freestanding instruments identified. The allocation occurs after identifying all the freestanding instruments and
the subsequent measurement basis for those instruments.
Financial
instruments that are required to be subsequently measured at fair value (i.e. derivative warrants liability and derivative liability
related to bifurcated embedded conversion feature) are measured at fair value and the remaining consideration is allocated to other financial
instruments that are not required to be subsequently measured at fair value (i.e. certain convertible bridge loans, warrants eligible
for equity classification) and common stock, based on the relative fair value basis for such instruments.
The
allocation of issuance costs to freestanding instruments was based on an approach that is consistent with the allocation of the proceeds,
as described above.
Issuance
costs allocated to the derivative warrant liability or bifurcated embedded conversion feature were immediately expensed, as discussed
above. Issuance costs allocated to warrants stock classified as equity component were recorded as a reduction of additional paid-in capital.
Issuance costs allocated to convertible bridge loan (or to the host component of convertible bridge loan if bifurcation was applied)
are recorded as a discount of the host component and accreted over the contractual term of loans up to face value of such loans using
the effective interest method.
Certain
warrants that were granted by the Company for lenders through convertible bridge loans transactions and stock warrants that were granted
as result of modification of terms of certain convertible bridge loans transactions (see also Note 10) are classified as a component
of permanent equity since they are freestanding financial instruments that are legally detachable and separately exercisable, do not
embody an obligation for the Company to repurchase its own shares, and permit the holders to receive a fixed number of shares of common
stock upon exercise for a fixed exercise price and thus, are considered as indexed to the Company’s own stock. In addition, the
warrants must require physical settlement and may not provide any guarantee of value or return. Such warrants were initially recognized
based on the allocation method described in Note 2X above as an increase to additional paid-in capital. When applicable, direct issuance
expenses that were allocated to the above warrants were deducted from additional paid-in capital.
BB. | Derivative
Warrants Liability |
The
Company accounts for certain warrants to purchase Ordinary Shares in connection with certain private placement transactions and convertible
bridge loans transactions, held by investors and/or lenders, that include a fundamental transaction feature pursuant to which such warrants
could be required to be settled in cash upon certain events which some of them are not considered solely within the control of the Company,
as a non-current liability according to the provisions of ASC 815-40, “Derivatives and Hedging - Contracts in Entity’s Own
Equity” (“ASC 815-40”). The Company accounted for these warrants as a financial liability measured upon initial recognition
and on subsequent periods at fair value by using the Black-Scholes Option Pricing Model.
Certain
warrants that were granted by the Company for lenders through convertible bridge loans transactions (see also Note 10) entitle
the lenders to exercise the warrants for a variable number of shares and/or for a variable exercise price and thus the fixed-for-fixed
criteria is not met. Accordingly, the warrants were classified as a non-current liability according to the provisions of ASC 815-40,
“Derivatives and Hedging - Contracts in Entity’s Own Equity” (“ASC 815-40”). The Company accounted for
these warrants as a financial derivative liability measured upon initial recognition and on subsequent periods at fair value by using
the Black-Scholes Option Pricing Model.
The
fair value of the aforesaid warrants derivative liability is estimated using the Black-Scholes Model which requires inputs such as the
expected term of the warrants, share price volatility and risk-free interest rate. These assumptions are reviewed on a regular basis
and changes in the estimated fair value of the outstanding warrants are recognized each reporting period as part of in the “Financing
(income) expenses, net” line in operations in the accompanying consolidated statement of net loss, until such warrants are exercised
or expired. When applicable, direct issuance expenses that were allocated to the above warrants were expensed as incurred.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
CC. | Stock-based
compensation |
The
Company measures and recognizes the compensation expense for all equity-based payments to employees based on their estimated fair
values in accordance with ASC 718, “Compensation-Stock Compensation”. Share-based payments including grants of share
options are recognized in the statement of operations as an operating expense based on the fair value of the award at the grant
date. The fair value of share options granted is estimated using the Black-Scholes option-pricing model. The inputs for the
valuation analysis of the share options include several assumptions, of which the most significant are the expected stock price
volatility and the expected option term. Expected volatility was calculated based upon historical volatility of peer companies in
the same industry on weekly basis since the marketability of the Company is considered low. The expected option term represents the
period that the Company’s stock options are expected to be outstanding and is determined based on the simplified method until
sufficient historical exercise data will support using expected life assumptions. The risk-free interest rate is based on the yield
from U.S. treasury bonds with an equivalent term. The expected dividend yield assumption is based on the Company’s historical
experience and expectation of no future dividend payouts. The Company has historically not paid cash dividends and has no
foreseeable plans to pay cash dividends in the future. The Company has expensed compensation costs, net of forfeitures as they
occur, applying the accelerated vesting method, over the requisite service period or over the implicit service period when a
performance condition affects the vesting, and it is considered probable that the performance condition will be achieved.
Until
December 31, 2018, Share-based payments awarded to consultants (non-employees) were accounted for in accordance with ASC Topic 505-50,
“Equity-Based Payments to Non-Employees”. Commencing January 1, 2019, following the adoption of ASU 2018-07 which aligns
the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees
(with certain exceptions), share-based payments to non-employees are accounted in accordance with ASC 718.
A
modification to the terms and/or conditions of an award (i.e. a change of award’s fair value, vesting conditions or classification
as an equity or a liability instrument) is accounted for as an exchange of the original award for a new award resulting in total compensation
cost equal to the grant-date fair value of the original award, plus the incremental value of the modification to the award. The calculation
of the incremental value is based on the excess of the fair value of the modified award based following the modification over the fair
value of the original award measured immediately before its terms were modified.
DD. | Modifications
or exchanges |
Modifications
to, or exchanges of, financial instruments such as convertible loans, are accounted for as a modification or an extinguishment, following
to provisions of ASC 470-50, “Debt- Modification and Extinguishments”, under which modifications or exchanges are generally
considered extinguishments with gains or losses recognized in current earnings if the terms of the new debt and original instrument are
substantially different. Such an assessment is done by management either quantitatively (i.e. when the present value of the cash flows
under the new debt instrument terms is at least 10% different from the present value of the remaining cash flows under the original instrument
terms) or qualitatively based on the facts and circumstances of each transaction.
If
the terms of a debt instrument are changed or modified and the present value of the cash flows under the terms of the new debt instrument
is less than 10%, the debt instruments are not considered to be substantially different, except in the following two circumstances (i)
the transaction significantly affects the terms of an embedded conversion option, such that the change in the fair value of the embedded
conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after
the modification or exchange) is at least 10% of the carrying amount of the original debt instrument immediately before the modification
or exchange or (ii) the transaction adds a substantive conversion option or eliminates a conversion option that was substantive at the
date of the modification or exchange.
If
the original and new debt instruments are considered as “substantially different”, the original debt is derecognized and
the new debt is initially recorded at fair value, with the difference recognized as an extinguishment gain or loss under financial expense
or income as applicable.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
EE. | Recent
Accounting Pronouncements |
Recently
Adopted Accounting Pronouncements
On
January 1, 2021, the Company adopted Accounting Standards Update (ASU) No. 2020-01, Investments—Equity Securities (Topic 321),
Investments— Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies
the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and
the accounting for certain forward contracts and purchased options in Topic 815. The adoption of this new standard did not have a material
impact on our consolidated financial statements..
On
October 1, 2021, the Company early adopted ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for convertible instruments by reducing the number of accounting
models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings
per share for convertible instruments and requires the use of the if-converted method. The new standard was effective for us beginning
January 1, 2022, with early adoption permitted. The adoption of this new standard did not have a material impact on our consolidated
financial statements..
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in
this ASU simplify the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies
certain aspects of the current guidance to improve consistent application among reporting entities. ASU 2019-12 is effective for fiscal
years beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022, though early adoption
is permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company is currently
evaluating the effect the adoption of ASU 2019-12 will have on its consolidated financial statements.
Other
new pronouncements issued but not effective as of December 31, 2021 are not expected to have a material impact on the Company’s
consolidated financial statements.
Accounting
Pronouncements Not Yet Adopted
In
October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers (ASU 2021-08), which clarifies that an acquirer of a business should recognize and measure contract assets
and contract liabilities in a business combination in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from
Contracts with Customers (Topic 606). This guidance will be effective for us in the first quarter of 2023 on a prospective basis, with
early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.
In
November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance
(ASU 2021-10), which improves the transparency of government assistance received by most business entities by requiring the disclosure
of:
the
types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s
financial statements. This guidance will be effective for us in the year ended December 31, 2022, with early adoption permitted. We are
currently evaluating the impact of the new guidance on our consolidated financial statements.
Other
new pronouncements issued but not effective as of December 31, 2021 are not expected to have a material impact on the Company’s
consolidated financial statements.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
3 – INVESTMENT PROVISTA DIAGNOSTIC, INC
On
April 19, 2021, the Company entered into a Share Purchase Agreement (“SPA”) with Strategic Investment Holdings, LLC, Ascenda
BioSciences LLC (“SIH”, “Ascenda” and together referring as “Sellers”, respectively) and Provista
Diagnostics, Inc. (“Provista”). Ascenda was the sole owner of the outstanding securities of Provista and SIH is the sole
owner of all the outstanding securities of Ascenda. Provista is a medical diagnostics company based in Alpharetta, Georgia that owns
the intellectual property rights to the proprietary breast cancer blood test, Videssa®, and has a diagnostic testing laboratory currently
performing COVID-19 PCR testing, primarily for the medical and entertainment industries.
Subject
to the terms and conditions of the SPA, the Company shall purchase from the Sellers 3,599 shares of Preferred Stock and 1,581 shares
of Ordinary Stock (collectively the “Provista Shares”) representing 100% of Provista’ s securities outstanding, for
an aggregate purchase price of $7,500 subject to the following terms:
| 1. | On
or before April 19, 2021, (the “First Closing Date”), the Company shall deliver
to Sellers a non-refundable deposit of $1,250 (the “Cash Deposit”). The Cash
Deposit was delivered at April 21, 2021. |
| 2. | On
or before the First Closing Date, the Company shall deliver to Sellers or Sellers’
designees such number of non-refundable shares of its ordinary stock, par value NIS 0.01,
(the “Todos Deposit Shares”) with a fair market value of $1,500, as defined in
the SPA. 25,862,069 ordinary shares were delivered in August 2021. |
| 3. | On
or before July 1, 2021 (the “Second Closing Date”), the Company shall deliver
to the Sellers a second payment of $1,250 (the “Second Cash Payment”). The second
payment was made during July 2021. |
| 4. | The
Company shall have the option of extending the payment of the Second Cash Payment until July
15, 2021, by paying the Sellers an additional amount of $250 (the “Extension Payment”)
on or before the Second Closing Date. If the Extension Payment is received by Sellers on
or before the Second Closing Date, then the Company shall deliver the Convertible Note on
the Second Closing Date and the Second Cash Payment on or before July 15, 2021. In the event
the Company completes the Second Cash Payment, the aforesaid Extension Payment shall be credited
towards the Second Cash Payment. |
| 5. | On
or before the Second Closing Date, the Company shall deliver to Sellers or their designees
the Convertible Note in the principal amount of $3,500, payable by the Company to the Sellers
(the “Note”). At any time or times on or after the issuance sate of the Note,
the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion
Amount into fully paid and nonassessable shares of common stock over a period commencing
October 20, 2021 through April 8, 2025 (the “Maturity Date”), at the conversion
price equal to the lesser of (i) $0.05 or (ii) the volume weighted average price of the last
20 trading days for the common shares prior to the conversion date (the “Fair Market
Value”). |
In
the event the Sellers deliver a conversion notice to the Company at a per share price less than $0.05, the Company shall have the right
to immediately notify the Sellers of its intention to pay the conversion amount in cash within 3 business days of receipt of the conversion
notice (i.e. before Sellers would take possession of shares converted under the conversion notice). If, at any time between October 20,
2021 and April 20, 2022, the average of the lowest bid and closing sale price is below $0.05, the Company has the option to buy out all
or any portion of the Note (the “Buyback Option”). In the event the Company exercises the Buyback Option for an amount equal
to or greater than $1,170 (the “Buyback Amount”), the Sellers shall not submit any conversions below $0.05 for 90-days period
from receipt of the Buyback Amount (the “90-Days Period”). The Company may exercise a second Buyback Option at the end of
the 90-Days Period under the same terms. The Company must provide 30-days’ notice to the Sellers prior to exercising any Buyback
Option or notify the Sellers of its intention to pay the Buyback Amount upon receipt of a conversion notice below $0.05 and pay the Buyback
Amount within 3 business days of receipt of such notice.
In
the event that the Company uplists its shares of common stock to a national securities exchange, the Note shall automatically be exchanged
into preferred stock (the “Series B Preferred Stock”) with a conversion price equal to the lesser of (i) $0.05, (ii) the
opening price on the day of the uplisting provides there is no transaction associated with the uplisting or (iii) the deal price of an
uplisting transaction (the “Mandatory Conversion”).
If,
at any time while this Note is outstanding, (i) the Company effects a Fundamental Transaction, , as defined in the SPA, then, upon any
subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable
upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash
or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of one share of common stock (the “Alternate Consideration”).
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
3 – INVESTMENT PROVISTA DIAGNOSTIC, INC (continue)
|
6. |
The
Company’s obligation to deliver the Second Cash Payment and the Convertible Note to the Seller at the Second Closing shall
be secured by the Provista Shares to be held and released in accordance with the Escrow Agreement and all of Provista’s assets
(the “Assets”) pursuant to the terms of the Security Agreement. |
|
|
|
|
7. |
At
the First Closing, the Sellers shall hold full right, title, and interest in and to the Cash Deposit, and the Todos Deposit Shares
paid to the Sellers or their designees and/or assignees on the First Closing Date free and clear of all rights, liens and encumbrances,
without limitation. Additionally, should the Company fail to deliver the Second Cash Payment and/or the Convertible Note by the Second
Closing Date, the Escrow Agent shall return the Provista Shares to the Sellers, and the Sellers shall become the sole owners. The
Company further agrees and understands that in the event that the Company fails to deliver the Second Cash Payment and/or the Convertible
Note to the Sellers at the Second Closing, the Cash Deposit and the Todos Deposit Shares shall be the property of the Sellers, and
the Sellers shall retain and hold full right, title, and interest in and be the sole owners of the Cash Deposit, the Todos Deposit
Shares and 100% of the Provista Shares. In such an event, the Company will have absolutely no rights, claims or interest of any type
in connection with the Provista Shares, Cash Deposit or Todos Deposit Shares or this transaction, regardless of any alleged conduct
by Seller or anyone else. Further, in such event the Company irrevocably will be deemed to have canceled this Agreement and relinquished
all rights in and to the Provista Shares, Cash Deposit and Todos Deposit Shares. |
The
consummation of the transactions contemplated by the SPA have been taken place as of April 19, 2021.
Purchase
price allocation
|
1. |
Non-refundable
shares of its ordinary stock - As agreed in the SPA, the Company committed to issue non-refundable 29,296,875 ordinary stock, par
value NIS 0.01. The fair value of the non-refundable shares was estimated as of the Closing Date based on the Company’s share
price as quoted in the OTC as of the Closing Date at $1,699. |
|
|
|
|
2. |
The
fair value of the convertible note was estimated by third party appraiser as weighted average of the two possible scenarios of the
total loan amount conversion as of April 19, 2021, 90% probability for the Mandatory Conversion and 10% probability for the Optional
/ Maturity Conversion. |
The
Optional / Maturity Conversion was estimated by the appraiser using the Monte Carlo Simulation Model based on the following
parameters:
SCHEDULE
OF DEBT CONVERSION OF ASSUMPTION TABLE
| |
April 19, 2021 | |
Risk-free interest rate | |
| 0.54 | % |
Expected term (years) | |
| 3.94 | |
Volatility | |
| 164.02 | % |
Share price | |
| 0.058 | |
Conversion price | |
| * | |
Fair value | |
$ | 5,101 | |
|
● |
The
lower of (i) 0.05 (ii) the volume weighted average price (VWAP) of the last 20 trading days for the Ordinary Stock as reported in
the OTC market prior to the conversion. |
The
Mandatory Conversion was estimated by the appraiser using the Monte Carlo Simulation Model based on the following parameters:
SCHEDULE
OF DEBT CONVERSION OF ASSUMPTION TABLE
| |
April 19, 2021 | |
Risk-free interest rate | |
| 0.54 | % |
Expected term (years) | |
| 0.04 | |
Volatility | |
| 112.1 | % |
Share price | |
| 0.058 | |
Conversion price | |
| * | |
Fair value | |
$ | 4,976 | |
|
● |
The
lower of (i) 0.05 (ii) the volume weighted average price (VWAP) of the last 20 trading days for the Ordinary Stock as reported in
the OTC market prior to the conversion. |
The
fair value of the convertible component was estimated by the third-party appraiser after giving effect to the weighted average of the
two possible scenarios as of issuance dates was $4,989.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
3 – INVESTMENT PROVISTA DIAGNOSTIC, INC (continue)
The
following table summarizes the total purchase price and purchase price allocation:
SCHEDULE
OF TOTAL PURCHASE PRICE AND PURCHASE PRICE ALLOCATION
| |
U.S. dollars in thousands | |
| |
Unaudited | |
| |
| |
Cash payment | |
$ | 2,500 | |
Consideration in Shares | |
| 1,699 | |
Fair value of convertible promissory note | |
| 4,989 | |
Total purchase price | |
$ | 9,188 | |
| |
| | |
Cash and cash equivalents | |
$ | 73 | |
Trade receivables | |
| 66 | |
Property and equipment, net | |
| 183 | |
Security deposit | |
| 3 | |
Technology intangible asset (*) | |
| 1,500 | |
Total identifiable assets | |
| 1,825 | |
| |
| | |
Accounts payable | |
| (82 | ) |
Deferred tax liability | |
| (315 | ) |
Due to related party | |
| (1 | ) |
Total liability assumed | |
| (398 | ) |
| |
| | |
Total goodwill (**) | |
$ | 7,761 | |
(*) | Technology intangible asset is amortized using “Relief from Royalty” method
over the expected future use (2031). During the year ended December 31, 2021, the Company has not recorded amortization expenses related
to the intangible assets. |
(**) | Goodwill is tested for impairment using a third party appraiser as of each balance sheet
date. During the year ended December 31, 2021 the Company recorded $1,545 of impairment losses. |
Unaudited
pro forma results of operations for years ended December 31, 2021 and 2020 are included below as if the acquisition of the Provista’s
business occurred on January 1, 2020. This summary of the unaudited pro forma results of operations is not necessarily indicative of
what the Company’s results of operations would have been had the Provista Business been acquired at the beginning of 2020, nor
does it purport to represent results of operations for any future periods.
SCHEDULE
OF UNAUDITED PRO FORMA IN OPERATIONS
| |
Year ended December 31, | | |
Year ended December 31, | |
| |
2021 | | |
2020 | |
| |
(unaudited) | | |
(unaudited) | |
Revenues | |
$ | 12,410 | | |
$ | 5,164 | |
Net loss | |
| (40,671 | ) | |
| (17,603 | ) |
Basic and diluted net loss per share | |
| (0.06 | ) | |
| (0.04 | ) |
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
4 - OTHER CURRENT ASSETS
SCHEDULE
OF OTHER CURRENT ASSETS
| |
| | |
| |
| |
As of December 31, | |
| |
2021 | | |
2020 | |
Governmental institutions | |
$ | 31 | | |
$ | 62 | |
Prepaid expenses | |
| 373 | | |
| 539 | |
Total other current assets | |
$ | 404 | | |
$ | 601 | |
NOTE
5 - INVESTMENT IN AFFILIATD COMPANIES, NET
|
A. |
Breakthrough
Diagnostics, Inc. |
|
1. |
On
February 27, 2019 (the “Effective Date”), following execution of the Convertible bridge loan transactions, the Company
signed a Definitive Joint Venture Agreement (the “Joint Venture Agreement”) and closed the Joint Venture Transaction,
pursuant to which the Company issued 19.99% of its outstanding ordinary shares to Amarantus Bioscience Holdings, Inc. (“Amarantus”),
a biotechnology holding company, in exchange for 19.99% of Breakthrough Diagnostics, Inc., a wholly-owned subsidiary of Amarantus
(“Breakthrough”), and Amarantus assigned to Breakthrough exclusive license to develop and commercialize the LymPro Test®,
an immune-based neurodiagnostic blood test for the detection of Alzheimer’s disease (the “License”). The transaction
was consummated as of February 27, 2019 (the “Closing Date”) in which the Company issued to Amarantus 17,986,999 ordinary
shares (the “Equity Consideration”) valued at $2,518. |
In
addition, Amarantus granted the Company an exclusive option, in effect for 60-days from the Closing Date (the “Expiration Date”),
to acquire the remaining 80.01% of Breakthrough Diagnostics in exchange for an additional 30.01% of the Company’s outstanding shares
(the “Option Transaction”). Upon exercise of the Option Transaction, the Company would own 100% of the Subsidiary and Amarantus
would own 49.99% of the Company. The Company was required to notify Amarantus in writing of its intention to exercise the Option, and
the closing of the Option transaction shall take place within fourteen days of Amarantus’ receipt of such notice.
Under
ASC Subtopic 323-30, “Investments - Equity Method and Joint Ventures: Partnerships, Joint Ventures, and Limited Liability Entities”,
and following the effective date the management determined that the Company had the ability to exercise significant influence over operating
and financial policies of Breakthrough and therefore the equity method was applied at the Closing Date at residual amount of $1,345,
which was the difference between the fair value of the total Equity Consideration that was paid by the Company in total amount of $2,518
less the fair value of the Option Transaction of $1,173, as was determined by the management using the assistance of third-party appraiser.
At
the Closing Date, Breakthrough was determined to be excluding substantive process as required under the definition of business in accordance
with the provisions of ASC Topic 805 “Business Combination”. In addition, it was determined that the License represents IPR&D
with no alternative future use. Consequently, the Company expensed immediately the allocated amount to the investment in affiliated company
in amount of $1,345. Following the Closing Date and through its Expiration Date, the Company did exercise the Option Transaction and
consequently the Option Transaction amounting to $1,173 was expensed at the Expiration Date.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
5 - INVESTMENT IN AFFILIATD COMPANIES, NET (CONT.)
|
A. |
Breakthrough
Diagnostics, Inc. (Cont.) |
|
2. |
The
changes in Level 3 asset associated with Option Transaction to obtain control over affiliated company were measured at fair value
on a recurring basis (until the option expiration). |
The
following tabular presentation reflects the Investment in affiliated company:
SCHEDULE
OF INVESTMENT IN AFFILIATED COMPANY
| |
Investment in
Affiliated
Company | |
As of January 1, 2020 | |
$ | (448 | ) |
Revaluation of investment in affiliated company to its fair value upon obtaining control | |
| 1,623 | |
Amount classified to the cost of subsidiary in acquisition achieved in stages upon obtaining control | |
| (1,623 | ) |
As of December 31, 2021 and 2020 | |
$ | - | |
|
3. |
In
July 2020, the Company entered into Amendment No. 1 to the Joint Venture Agreement with Amarantus pursuant to which the parties agreed
to amend the Joint Venture Agreement as follows: |
|
A. |
In
exchange for the remaining 80.1% equity interest of Breakthrough, the Company will issue 49.9% of its ordinary shares (which including
19.9%
ordinary shares that were already issued) based on the capitalization table of the Company on regular basis as of December 31, 2019.
On July 16, 2020, the Company achieved control over Breakthrough by issuance of 67,599,796
ordinary shares to Amarantus valued at
$6,084 (which reflected as additional 30.01%
of the equity of the Company as of that date), representing the Company’s right to purchase the remaining 80.1%
of the equity interest of Breakthrough (the “Equity Consideration”). |
|
|
|
|
B. |
Subject
to the approval of the Company’s Board of Directors, Amarantus will be entitled to royalty fee in a rate of 10% from the gross
profit of any products selling which are based on LymPro intellectual property (the “Royalty Fee”). During the period
commencing the Completion Date through December 31, 2021, the Company has no obligation with respect to the aforesaid Royalty
Fee as no revenues from the LymPro intellectual property were recognized. |
|
|
|
|
C. |
The
Company will exercise its best efforts and diligence in developing and commercializing LymPro and in undertaking investigations and
actions required to obtain regulatory approvals necessary to market LymPro. In the event the Company fails to use best efforts and
due diligence as required, then Amarantus may, in its sole discretion terminate the LymPro license or convert the License from exclusive
to non-exclusive. As of December 31, 2021, the License is still deemed as non-exclusive. |
|
|
|
|
D. |
The
Company will pay to Amarantus an amount of $450 in cash (the “Cash Consideration”). |
At
the Completion Date, Breakthrough was determined to be excluding substantive process as required under the definition of business in
accordance with the provisions of ASC Topic 805 “Business Combination”. Accordingly, the transaction was accounted for as
an asset acquisition transaction.
At
the Completion Date, management has chosen to remeasure its Previous Held Equity Interest (PHEI) in Breakthrough to its fair value immediately
prior to the asset acquisition in total amount of $1,623 which was recorded as part of “Share in Losses of Affiliated Company”
line. Consequently, the Company’s carrying amount of the PHEI at the Completion Date amounted to $1,623, along with the fair value
of the equity consideration amounted to $6,084 and cash consideration paid amounted to $450 have been determined as cost to be allocated
to the asset acquired (IPR&D), net of related deferred tax liability.
However,
it was determined that the LymPro License represents IPR&D with no alternative future use. Consequently, the Company expensed immediately
the entire purchase price allocated to the acquired IPR&D and related deferred tax liability amounted to $10,325 and $2,168 were
charged to expense at the acquisition date as part of “Research and Development expenses” and “Tax benefit” lines,
respectively, in operations in the accompanying consolidated statement of operations for the year ended December 31, 2020.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
5 - INVESTMENT IN AFFILIATD COMPANIES, NET (CONT.)
|
B. |
Antigen
COVID Test Killer |
On
June 14, 2020 (the “Effective Date”), the Company entered into joint venture agreement with NLC Pharma Ltd. (“NLC”)
as was amended as of September 12, 2020, under which Antigen COVID Test Killer (the “CATK”) was formed for the purpose of
development diagnostic candidate Antigen Killer (as defined below) and commercialize the product through the Company’s sales channels.
Under the terms of the joint venture agreement the following have been determined between the parties:
During
the Term of the joint venture agreement and based on license agreement executed between NLC and CATK as of June 14, 2020, NLC will grant
to CATK an irrevocable, exclusive, non-transferable, royalty-bearing worldwide license (the “License”) of its 3C Protease
Coronavirus testing platform (“Viral Testing” or “Antigen Killer”). NLC will further contribute the expertise
and know-how to CATK necessary to validate and receive the products approved in various jurisdictions worldwide for distribution, especially
the United States and China.
CATK
shall pay NLC a license fee to secure the exclusive license pursuant to the license agreement by issuing to NLC 80% of the equity of
CATK upon execution of the license agreement.
|
A. |
NLC
shall grant an exclusive worldwide distribution rights to Antigen Killer via distribution agreement. |
|
|
|
|
B. |
The
Company shall contribute capital for CATK up to amount of $1,550 to be used for development and clinical trials of the Covid Nutraceutical
products owned by NLC (the “Funding Commitment”). |
|
|
|
|
C. |
The
Company or NLC shall not be entitled to withdraw any of their capital contributions from CATK. |
|
|
|
|
D. |
Any
grants received for the development, marketing and studies of Antigen Killer, shall be considered a contribution to CATK. |
|
A. |
CATK’s
equity shall be 10% owned by the Company, 80% owned by NLC and 10% shall be owned by Zegal and Ross Capital, LLC. |
|
|
|
|
B. |
Upon
achieving milestone proof of concept that includes (i) conducting successful test within the environment and (ii) initiation
of a multicenter clinical trial (the “Performance Milestone”), the Company shall acquire during a period of one year
after achieving the Performance Milestone an additional 5% of CATK from NLC for a sum of $250
to
be paid for in shares of the Company based on market value of the shares at the closing price of a day prior to share issuance. The
Performance Milestone has been achieved at July 12, 2020, and 2,688,172
Company’s
shares were issued to NLC. |
|
|
|
|
C. |
Upon
gross sales of the product reaching to an amount of $20,000, the Company shall be obligated to purchase an additional 15% of CATK
from NLC for a sum of $1,650 to be paid in cash or shares. If payment is made by shares, the share price will be calculated at the
closing price of the Company’s shares on the day prior to closing (the “Contingent Consideration”). |
|
|
|
|
D. |
NLC
shall maintain its right to develop, market and sell products derived from its technology as it relates to Viral Testing (excluding
Covid-19) throughout the term of the agreement. |
Distributions
from CATK to the Company and NLC shall be made on a semi-annual basis in a percentage set opposite on the name of the Company and NLC.
NLC
has marketing rights to use the Antigen Killer technology for all viruses and is legally free and clear to license the rights to Antigen
Killer to CATK.
All
decisions in regard to the therapeutic candidate Antigen Killer, the hiring and firing of program and project managers and other contractors
and certain consultants, selection of sites for clinical trial, pre-clinical trials and manufacturing, and sublicense and sales brokers,
in the sole responsibility of NLC. However, any change to the budget of CATK must be approved by the Company.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
5 - INVESTMENT IN AFFILIATD COMPANIES, NET (CONT.)
|
B. |
Antigen
COVID Test Killer (Cont.) |
The
Company will have Covid Nutraceutical distribution rights worldwide except for Israel according to the following terms:
|
A. |
CATK
will receive royalties fee in a rate of 8% (“Royalty”) from the net sales of every nutraceutical product sold whether
it was sold directly or by the Company of through the Company’s agent. |
|
|
|
|
B. |
If
the Company will grant distribution rights to any related or non-related party of the Company, it will be the obligation of the Company
to pay the abovementioned Royalty to CATK. |
|
|
|
|
C. |
Upon
event that the Company surrenders the distribution rights then the Company’s share of CATK will be increased from 10% to 22%. |
|
8. |
Upon
market launch of minimum sales of 25,000 bottles of the Nutraceutical product for Covid-19 or other viruses by the Company, the Company
shall grant NLC shares of the Company in a value of $1,500 based on the share price on the closing date of the amendment. Through
December 31, 2020, market launch of sales of bottles of the Nutraceutical product for Covid-19 has not been commenced. |
In
addition, if CATK sales will be in excess of $32,500 and the Company will complete an uplisting to Nasdaq within one year of signing
the amendment, then the Company will fully acquire CATK in a share exchange transaction based on value of $65,000 and NLC shall transfer
the IP regarding Viral Testing to the Joint Venture and NLC will have the right to appoint one member of the Company’s Board of
Directors. Upon event that the Company is not yet listed on the Nasdaq market until September 12, 2021, then the Company will surrender
its distribution rights from CATK.
Management,
using the assistance of third-party appraiser has determined that due to the low probability of the aforesaid contingent trigger events
the fair value of such potential obligation as of the effective date (and as of December 31, 2020) was insignificant.
The
joint venture agreement shall be terminated on the earlier of (i) lapse of 25 years from the Effective Date (ii) mutual agreement of
both parties to dissolve or (iii) the Company does not comply with section 3B and 3C above (the “Term”). Upon termination,
the license between NLC and CATK shall be terminated.
The
Company has determined that CATK is considered as VIE since CATK does not have sufficient resources to carry out its principal activities
without additional financial support. In addition, the Company has determined that it is not the primary beneficiary of CATK due to the
Company’s lacked to direct the activities that most significantly impact the economic performance of CATK. However, the Company
determined that it has the ability to exercise significant influence over CATK operations through its liquidity resources and accordingly,
the investment is accounted for under the equity method.
At
the closing date the purchase price that was paid in investment in CATK is as follows:
SCHEDULE
OF PAID IN INVESTMENT
Funding Commitment (*) | |
$ | 1,550 | |
Fair value of shares upon achieving Performance Milestone | |
| 250 | |
Direct costs incurred (**) | |
| 100 | |
Contingent Consideration (***) | |
| 1,050 | |
Total consideration | |
$ | 2,950 | |
|
(*) |
An
amount of $911 out of the Funding commitment was wired through December 31, 2020 and the remaining funding commitment was wired during
2021. |
|
|
|
|
(**) |
Number
of 2,164,502
shares of common stock
have been issued as a finder fee in connection with the agreement (see also note 15B3). |
|
|
|
|
(***) |
Was
determined by the management by using the assistance of third-party appraiser. As the Company’s obligation under such Contingent
Consideration provision represent a potential liability to issue a fixed number of its common stock, the obligation was classified
within shareholder deficit. The shares were issued on October 4, 2021 – see below. |
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
5 - INVESTMENT IN AFFILIATD COMPANIES, NET (CONT.)
|
B. |
Antigen
COVID Test Killer (Cont.) |
At
the Closing Date, CATK was determined to be excluding substantive process as required under the definition of business in accordance
with the provisions of ASC Topic 805 “Business Combination”. In addition, it was determined that the License represents IPR&D
with no alternative future use. Consequently, the Company expensed immediately the allocated amount to the investment in affiliated company
in amount of $2,718. In addition, following the Closing Date and through December 31, 2020, an amount of $105 representing the Company’s
share in the losses of CATK. Both amounts were recorded as part of “Share in Losses of Affiliated Company” line in operations
in the accompanying consolidated statement of operations for the year ended December 31, 2020.
On
October 4, 2021, and upon achieving market launch, the Company issued 39,473,684 shares of common stock to cover its Contingent Consideration
as detailed above. The value of the shares was calculated on the share price on the closing date of the amendment at $1,500, and a results
recorded additional $450 as part of financing expenses in the accompanying consolidated statement of operations for the year ended December
31, 2021.
In
August 2020 (the “Effective Date”), the Company entered into an agreement with CARE GB Plus Ltd (“CARE GB”),
under which the parties agreed conjointly to incorporate Bio Imagery Ltd. (“Bio Imagery”) for the purpose of developing,
marketing and commercializing the Company’s Products and all the Company’s Intellectual Property (“Todos Cancer Assets”)
and to develop new Intellectual Property, products and services, and peruse the business based on the Todos Cancer Assets and on the
new intellectual property developed by Bio Imagery.
In
addition, it was agreed inter alia that (i) interest in Bio Imagery shall be 67% owned and controlled by CARE GB and 33% owned and controlled
by the Company; (ii) the Company will grant Bio Imagery an irrevocable, perpetual, worldwide license to distribute, market and sale of
the Products and new products in Israel, Europe and Africa (the “Territories”). Distribution, marketing and sale in other
Territories (except China) are authorized by the Company’s written and in advance approval; (iii) the Board of Managers will initially
consist of five board members: three members shall be appointed by CARE GB and two members shall be appointed by the Company; (iv) Upon
signing the agreement, the Company will issue Bio Imagery 6,000,000 restricted ordinary shares (locked up for a period of one year) for
payment to different suppliers and developers. Any further cash expenses required for ongoing activities shall be borne by Care GB; (v)
Care GB will grant up to 15% of its shares in Bio Imagery to senior executives in Bio Imagery, as a form in exchange for their work.
On
November 2, 2020, the 6,000,000
ordinary shares have been issued by the Company
valued at $618.
The
Company has determined that Bio Imagery is considered as a VIE due to Bio Imagery does not have sufficient resources to carry out its
principal activities without additional financial support. In addition, the Company has determined that it is not the primary beneficiary
of Bio Imagery due to the Company’s lacked the ability to direct the activities that most significantly impact the economic performance
of Bio Imagery.
However,
the Company determined that it has the ability to exercise significant influence over Bio Imagery operations through board representation
and voting power and accordingly, the investment is accounted for under the equity method. Consequently, as of December 31, 2020 the
Company’s investment in Bio Imagery has amounted to $618,
representing the above issuance of 6,000,000
ordinary shares multiply by the Company’s
share price at issuance date. Moreover, through December 31, 2021, Bio Imagery has not yet commenced its business operations,
consequently the entire investment amounting to $618 was written off.
NOTE
6 - INVESTMENT IN OTHER COMPANY
On
August 14, 2020, Todos Singapore entered into subscription agreement with Pathnova Laboratories PTE Ltd (“Pathnova”) under
which Todos Singapore has agreed to invest in Pathnova up to SGD3,000 based on the investment payments schedule as determined in the
subscription agreement, for subscribing up to 4,615,385 subscription shares of Pathnova.
On
December 31, 2020, 461,538 ordinary shares of Pathnova have been issued to Todos Singapore for total investment amount of SGD300 (approximately
$224), representing percentage shareholding of 4.38% on regular basis. On January 25, 2021, additional 461,539 ordinary shares of Pathnova
have been issued to Todos Singapore for total investment amount of SGD300 (approximately $231), representing percentage shareholding
of additional 4.38% on regular basis.
Management
has determined that its holding in Pathnova does not entitle the Company significant influence over Pathnova and accordingly the Company
accounted for its investment in Pathnova in accordance with the provisions of ASC Topic 321 “Investment-Equity Securities”,
as equity investment without readily determinable fair value.
The
following tabular presentation reflects the Investment in other company:
SCHEDULE OF INVESTMENT IN OTHER COMPANY
| |
Investment in other Company | |
As of January 1, 2020 | |
$ | - | |
Issuance of shares as investment in Equity Securities | |
| 224 | |
Cash investment | |
| 231 | |
As of December 31, 2020 | |
$ | 224 | |
Cash investment | |
| 231 | |
As of December 31, 2021 | |
$ | 455 | |
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
7 - PROPERTY AND EQUIPMENT, NET
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
| |
2021 | | |
2020 | |
| |
As of December 31, | |
| |
2021 | | |
2020 | |
Laboratory equipment and others | |
$ | 3,514 | | |
$ | 2,180 | |
Computers | |
| 10 | | |
| 8 | |
Vehicle | |
| 5 | | |
| 5 | |
Furniture and equipment | |
| 27 | | |
| 15 | |
Property and equipment gross | |
| 3,556 | | |
| 2,208 | |
Less - accumulated depreciation | |
| (1,026 | ) | |
| (209 | ) |
Less- Impairment
of property and equipment | |
| (485 | ) | |
| - | |
Total property and equipment, net | |
$ | 2,045 | | |
$ | 1,999 | |
Total
depreciation expenses for the years ended December 31 ,2021 and 2021 were $817
and $96,
respectively.
Impairment losses for
the years ended December 31 ,2021 and 2021 were $485 and $0, respectively.
NOTE
8 - LOANS, NET
A. |
The
following tabular presentation reflects the reconciliation of the carrying amount of straight loans and similar instruments during
the year ended December 31, 2021 and 2020: |
SCHEDULE
OF RECONCILIATION STRAIGHT LOANS AND SIMILAR INSTRUMENTS
| |
| | |
| |
| |
As of December 31, | |
| |
2021 | | |
2020 | |
Opening balance | |
$ | 1,672 | | |
$ | 113 | |
Plus: Net consideration received | |
| 2,486 | | |
| 2,035 | |
Less: Principal amounts paid | |
| (1,614 | ) | |
| - | |
Less: Conversions into shares | |
| (2,810 | ) | |
| - | |
Less: Fair value of detachable instruments accounted for as equity component | |
| - | | |
| (461 | ) |
Plus: Amortization of discounts and accrued interest expenses | |
| 3,453 | | |
| 1,170 | |
Less: straight loans reclassified to convertible loans upon change of terms (*) | |
| (1,164 | ) | |
| (1,185 | ) |
Closing balance | |
$ | 2,023 | | |
$ | 1,672 | |
(*) | loans that have
been reclassified to convertible bridge loans upon default events in which the Company has not paid the net principal amount at the stated
maturity date. |
B. |
Secured
Convertible Equipment Loan Agreements |
|
|
On
November 4, 2020 (the “Effective Date”), the Company entered into Secured Convertible Equipment Loan Agreement with a
private lender (the “Lender”), under which at the Effective Date and for the purpose for purchasing two Liquid Handler
Machines (the “Collateral”) to be placed in the laboratory of a Company’s client, the Company received from the
Lender a net cash amount of $450 which is including an original issue discount at the rate of 41.4% valued at $320, representing
a face value of $770 for the loan (the “Aggregate Loan Principal Amount”). |
The
Aggregate Loan Principal Amount shall be repaid within 120 days of receipt date (the “Maturity Date”).
Subject
to the Company’s discrete decision not to repay the Aggregate Loan Principal Amount in cash by the Maturity Date, the Lenders shall
have the right to convert 200% of the Aggregate Loan Principal Amount, less any amount that has been repaid, at a default conversion
price equal to 35% of the lowest closing price of the Company’s ordinary shares in the 10 days prior to the conversion as quoted
by Bloomberg, LP.
In
the event the Company receives gross proceeds from any equity financing in the amount of $5,000 or more, the Aggregate Loan Principal
Amount will be immediately due and payables.
The
Aggregate Loan Principal Amount shall be secured by the Collateral. The Lender shall have the right to take possession of the Collateral
if repayment is not made in full by the Maturity Date. Upon default, the Lender shall have the right to take possession of the Collateral
and sell them. All proceeds from such sale will be ducted from the Aggregate Loan Principal Amount on a pro rata basis.
As
the secured loan upon their original terms do not include conversion feature (such feature will only become applicable as a penalty,
upon the Company’s failure to repay the Aggregate Loan Principal Amount by the Maturity Date), the liability was accounted for
using the effective interest method over the term of the loans until their stated Maturity Date.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
8 - LOANS, NET (continue)
in
March 2021, the Company entered into First Amendment (the “Amendment”) to the Secured Convertible Equipment Loan Agreement,
under which the parties agreed as follows:
|
1. |
On
or before May 1, 2021, the Company shall repay to the lender the Aggregate Loan Principal Amount of $450 in cash, without interest. |
|
|
|
|
2. |
On
or before May 1, 2021, the Company shall repay to the lender, or contribute to a charity designated by the lender, the original initial
discount in the amount of $320, plus an additional $100 as compensation for the lender agreeing to postpone repayment of the Aggregate
Principal Amount. |
|
|
|
|
3. |
Upon
execution of the Amendment, the Company shall issue to the lender, or contribute to a charity designated by the lender, 2,000,000
restricted ordinary shares of the Company, nominal value NIS 0.0001 per share, as additional compensation to the lender for its agreement
to defer repayment of the Aggregate Loan Principal Amount. |
As
of December 31, 2020, the Aggregate Loan Principal Amount amounted to $580, which represented discount amortization expenses of $130
and was recorded as part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations
for the year ended December 31, 2020.
In
March 2021, the Company entered into First Amendment to Secured Convertible Equipment Loan Agreement (the “Amendment”), under
which the parties agreed (i) on or before May 1, 2021, the Company shall repay to the lender the Aggregate Loan Principal Amount of $450
in cash, without interest, (ii) on or before May 1, 2021, the Company shall repay to the lender, or contribute to a charity designated
by the lender, the original initial discount in the amount of $320, plus an additional $100 as compensation for the lender agreeing to
postpone repayment of the Aggregate Principal Amount and (iii) upon the execution of the Amendment, the Company shall issue to the lender,
or contribute to a charity designated by the lender, 2,000,000 restricted ordinary shares of the Company, nominal value NIS 0.0001 per
share with fair value of $88, as additional compensation to the lender for its agreement to defer repayment of the Aggregate Loan Principal
Amount.
The
management has determined mainly based on the qualitative terms of the amendment that the terms of the amended instruments considered
as substantially different. Consequently, the original convertible bridge loans were derecognized, the new loans were initially recorded
at fair value as current financial liability and the shares were initially recorded at fair value as an increase of additional paid-in
capital. As of December 31, 2021, the loan was repaid in full. Consequently, the Company recorded expenses amounting to $378 as part
of the “finance expenses” line in operations in the accompanying consolidated statement of operations for the year ended December
31, 2021.
|
C. |
On
November 4, 2020 (the “Effective Date”), the Company entered into Secured Convertible Equipment Loan Agreement with a
private lender (the “Lender”), whereby at the Effective Date and for the purpose for purchasing certain two Liquid Handler
Machines to be placed in the laboratory of a Company’s client, the Company received from the Lender a net cash amount of $750
which is including an original issue discount at the rate of 40% valued at $500, representing a face value of $1,250 for the loan
(the “Aggregate Loan Principal Amount”). |
The
Aggregate Loan Principal Amount shall be repaid within 120 days of receipt date (the “Maturity Date”).
Subject
to the Company’s discrete decision not to repay the Aggregate Loan Principal Amount in cash by the Maturity Date, the Lenders shall
have the right to convert 200% of the Aggregate Loan Principal Amount, less any amount that has been repaid, at a default conversion
price equal to 35% of the lowest closing price of the Company’s ordinary shares in the 10 days prior to the conversion as quoted
by Bloomberg, LP.
The
Company agrees it will issue 20,000,000 ordinary shares (the “Collateral Shares”) to the Lender within two days of the Effective
Date. In the event of default occurs and is not cured withing 15 days, the Lender may take such Collateral Shares and dispose of them
as wish. The aforesaid shares have been issued at November 4, 2020.
As
the secured loan upon their original terms do not include conversion feature (such feature will only become applicable as a penalty,
upon the Company’s failure to repay the Aggregate Loan Principal Amount by the Maturity Date), the liability was accounted for
using the effective interest method over the term of the loans until their stated Maturity Date.
As
of December 31, 2020, the Aggregate Loan Amount amounted to $954,
which represented discount amortization expenses of $204
as was recorded as part of “Finance Expenses”
line in operations in the accompanying consolidated statement of operations for the year ended December 31, 2020.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
8 - LOANS, NET (continue)
As
of December 31, 2021, upon the occurrence of an Event of Default in which the Note was not repaid before or at the Maturity Date, the
loan become subject to the provisions of ASC 480, “Distinguishing Liabilities and Equity” as it become an obligation that
will be settled by issuance of a variable number of shares (stock settle obligation) and as such is measured at fair value through profit
or loss. Consequently, the Company recorded expenses amounted to $4,306 related to remeasurement of the Loan as part of the “finance
expenses” line in operations in the accompanying consolidated statement of operations for the year ended December 31, 2021.
During
2021, the Company issued the Lender 178,525,619
ordinary shares of the Company valued at $4,282
as a result of the default event and recorded additional expenses amounted to $2,983
related to remeasurement of the Loan as part
of the “finance expenses” line in operations in the accompanying consolidated statement of operations for the year ended
December 31, 2021.
As
of December 31, 2021, the Aggregate Loan Amount was $2,997.
D. |
Secured
Promissory Note |
On
July 19, 2021, the Company entered into Secured Promissory Note (the “Note”) with a lender (the “Lender”), pursuant
to which the Company has agreed to issue a Note to the Lender in the principal amount of $1,666,666 for proceeds of $1,000,000 (the “Transaction”).
The Note has a maturity date of 180 days from the date of issuance.
As of December 31, 2021
the balance of the loan was estimated at $1,597. The Company recorded expenses amounting to $597 as part of the “finance expenses”
line in operations in the accompanying consolidated statement of operations for the year ended December 31, 2021.
E. |
Revenue
Purchase Agreement |
On
December 22, 2020, Corona Diagnostics entered into revenue purchase agreement with a private lender (the “Lender”), under
which, the Company will sell, assign and transfer to Lender (making the Lender the absolute owner) in consideration of the Purchase Price
of $138, the Purchased Percentage at a rate of 7% of all of the Company’s future accounts, contract rights and other entitlements
arising from or relating to the payment of monies from the Company’s customers’ and/or other third party payors, for the
payments due to the Company as a result of the Company’s sale of goods and/or services (the “Transactions”) until the
Purchased Amount has been delivered by or on behalf of the Company to Lender. The revenue purchase agreement shall remain in full force
and effect until the entire Purchased Amount and any other amounts due are received by Lender as per the terms of the revenue purchase
agreement. During 2021 the Company repaid the loan in full.
F. |
Assignment
of Receivable Agreements |
During
the year ended December 31, 2021, Corona Diagnostics (the “Assignor”) entered into several Assignment of Receivable Agreements
under which the Assignor assigned to the Assignee all of its right, title and interest in portion of receivable related to invoices for
certain purchase orders with a discount in a rate of 10%. The Assignor is obligated to repurchase the PO in the event that payment is
not received by the Assignee within 60-days period from the singing of the Assignment of Receivable Agreements.
During
the year ended December 31, 2021, the Assignor received total amount of $1,485 under the Assignment of Receivable Agreements and repaid
$592. In addition, the Company incurred finance expenses with respect to the applicable discount Interest under the Assignment of Receivable
Agreements amounted to $152. As of December 31, 2021, an amounts of $426 has not been repaid.
|
On
June 19, 2020, the Company and its subsidiaries, Todos Medical USA and Corona Diagnostics, LLC (“Corona”) entered into a
Receivables Financing Agreement with Toledo Advisors, LLC (“Toledo”) for up to $25,000 in
a revolving receivables financing facility (the “Facility”). The availability of the Facility shall terminate on the earlier
of June 19, 2025 and the date on which more
than $25,000 has
been advanced. The financing is secured by all of the assets of the Company’s wholly-owned subsidiary Todos Medical USA, Inc.
In addition, Todos Medical USA pledged all of the outstanding equity of Corona to the Lender. The initial draw under the Facility
was on June 19, 2020 for $165 which
was due on the earlier to occur of (i) ninety days following the date the draw was made by the Lender and (ii) the date the
receivable, for which the draw was made, is paid. The Facility has since been repaid as of December 31, 2020. In November
2020, the parties agreed to amend the Facility to reduce the cost of funding to Todos Medical USA, and to make the relationship
between Corona and Toledo nonexclusive in exchange for Toledo being granted a percentage of Corona’s revenues from diagnostic
testing. See also note 14B6. |
NOTE
9 - OTHER CURRENT LIABILITIES
SCHEDULE OF OTHER CURRENT LIABILITIES
| |
| | |
| |
| |
As of December 31, | |
| |
2021 | | |
2020 | |
Accrued payroll and related taxes | |
$ | 208 | | |
$ | 140 | |
Provision for vacation | |
| 67 | | |
| 50 | |
Management and directors | |
| 1,752 | | |
| 230 | |
Accrued expenses and other accounts payables | |
| 2,257 | | |
| 1,896 | |
Other current liabilities | |
$ | 4,284 | | |
$ | 2,316 | |
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET
A. |
The
following tabular presentation reflects the reconciliation of the carrying amount of the convertible bridge loans, notes and similar
instruments during the year ended December 31, 2021 and 2020: |
SCHEDULE OF CARRYING AMOUNT OF CONVERTIBLE BRIDGE LOANS
| |
| | |
| |
| |
As of December 31, | |
| |
2021 | | |
2020 | |
Opening balance | |
$ | 5,965 | | |
$ | 3,427 | |
Plus: Net cash consideration received | |
| 16,000 | | |
| 2,390 | |
Plus: Consideration in purchase of subsidiary | |
| 4,989 | | |
| - | |
Less: Repayments of convertible bridge loans | |
| (1,027 | ) | |
| - | |
Less: Recognition of liability related to conversion feature of convertible bridge loans | |
| (7,420 | ) | |
| (2,893 | ) |
Less: Fair value of detachable instruments accounted for as equity component | |
| (5,422 | ) | |
| (758 | ) |
Plus: Changes in terms of straight loans to convertible loans | |
| 1,164 | | |
| 1,185 | |
Less: Partial conversion of convertible bridge loans into equity | |
| (17,111 | ) | |
| (4,639 | ) |
Less: Modification of convertible bridge loans transactions | |
| 3,384 | | |
| (3,375 | ) |
Less: Issuance of shares as collateral as result of repayment default | |
| (870 | ) | |
| - | |
Plus: Amortization of discounts and accrued interest expenses | |
| 7,335 | | |
| 1,655 | |
Plus: Change in fair value of convertible bridge loans | |
| 18,419 | | |
| 8,973 | |
Closing balance | |
$ | 25,406 | | |
$ | 5,965 | |
During
the year ended December 31, 2021, Principal Amount and unpaid Interest in total amount of $17,111 have been converted into 379,378,296
Ordinary shares.
During
the year ended December 31, 2020, Principal Amount and unpaid Interest in total amount of $4,639 have been converted into 64,630,113
Ordinary shares.
B. |
During
the years ended December 31, 2019 and 2018, the Company entered into certain Convertible Bridge Loan Agreements (the “2019
and 2018 Loan Agreements”), under which the Company obtained an aggregate net cash amount of $1,443 and $27, respectively,
(which represented 90% of the gross Principal Amount of the loans) (the “Net Principal Amount”) from several private
lenders (the “Lenders”). |
The
Principal Amount has been originally issued with 10% discount of aggregated amount of $163, bear interest at a flat rate of 10% (the
“Interest”) and have a maturity date of 6-months period after receipt of the Loans funds (the “Maturity Date”).
The Company will be required to pay 10% penalty upon repayment of the Principal Amount prior to the Maturity Date. Upon the Maturity
Date of the loans, the Company will be required to repay the Principal Amount of the Loan and unpaid Interest for cash. From the initial
recognition and until the Maturity Date, the loans were presented as current liability. Subject to the Company’s discrete decision
not to repay the Principal Amount and unpaid Interest for cash, the Principal Amount and the unpaid Interest shall become convertible
into the Company’s Ordinary Shares following the Maturity Date and thereafter at a conversion price equal to 70% of the average
closing bid price of the Company’s Ordinary Shares in the 5-days prior to the conversion date. In the event the Company’s
defaults under the Agreements, the conversion price shall be reduced to 60% of the average closing bid price of the Company’s Ordinary
Shares in the 15-days prior to the conversion date. Following the Maturity Date, the convertible loans were reclassified to non-current
liability.
C. |
Amendments
to 2019 and 2018 Loan Agreements: |
|
1. |
On
January 9, 2020, the Company entered into second amendment to the 2019 and 2018 Loan Agreements with one of the lenders whereby it
was determined to extend the Amended Maturity Date of applicable Note until March 31, 2020 and the Company shall not be deemed to
have been in default due to it not having repaid the Loan Principal and Interest by the original maturity date unless the Company
does not obtain additional bridge financing in an amount no less than the aforesaid Additional Bridge on or before January 31, 2019
(the “Second Amended Maturity Date”). The amended term were as follows: (i) the conversion feature of the applicable
Note and accrued Interest prior to the Amended Maturity Date was waived by the lender (ii) the Principal Amount shall be amended
by increasing from $101 to $127 and (iii) the Company issued the lender 1,000,000 stock warrants to purchase the same number of ordinary
shares, at an exercise price equal to $0.10 per stock warrant at any time commencing the issuance date and up to five years thereafter
(the “Fourth Warrant”). |
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
D. |
Amendments
to 2019 and 2018 Loan Agreements: |
|
2. |
On
February 20, 2020, the Company entered into Convertible Note Extension Agreements (the “Amendments”) with certain institutional
investors who participated in the Company’s 2019 and 2018 Loan Agreements, under which it was agreed to extend the maturity
of those notes to August 14, 2020 (the “Amended Maturity Date”). The institutional investors shall not be entitled to
convert the Loan Principal plus Interest prior to the Amended Maturity Date, unless such conversion is either (i) at the Fixed Conversion
Price as defined in the Amendments or (ii) upon an event of default in which case the Maturity Date shall be accelerated and the
Note shall be convertible at the Alternate Conversion Price as defined in the Amendments. |
In
addition to the warrants issued to the institutional investors pursuant to the original terms of the 2019 and 2018 Loan Agreement, the
Company (i) issued to the institutional investors a third Warrant (the “Third Warrant”) providing the institutional investors
with a right to purchase 20,792,380 Third Warrant Shares, at an exercise price equal to $0.10 per Third Warrant Share and (ii) paid cash
payment of $35. The Investor may exercise the Third Warrant after the issue date and up to 5 years thereafter.
Moreover,
the Company has entered into lock-up agreements with the institutional investors that preclude them from selling common shares in the
market until August 20, 2020.
|
3. |
On
September 1, 2020, the Company entered into Amendment No. 2 to the 2019 and 2018 Loan Agreements (the “Amendment”) with
certain lenders whereby it was determined to (i) reextend the Original Maturity Date of applicable Note until October 15, 2020 (the
“Second Amended Maturity Date”) and (ii) the Note shall accrue interest at the rate of 15% per annum, accruing on the
outstanding Loan Principal from and after the Original Maturity Date, through and including the date the Note is paid in full. All
accrued interest shall be due on the Second Amended Maturity Date. Upon occurrence and continuation of an Event of Default, the interest
rate on the Note shall be at the rate of 20% per annum. |
In
exchange for the aforesaid amendments the Company shall (i) pay upfront fee to each of the lenders in an amount equal to 5% of the principal
balance of the Note held by such lender (ii) issue shares of its common stock to each lender with a market value equal to 5% of the principal
balance of the Note held by such lender, based on the closing price of the share of the Company’s common stock reported on a public
exchange as of the date of the Amendment (iii) the exercise price of each of the First Warrant, Second Warrant and Third Warrant (together
referring as “Warrant”) shall be amended to be the lesser of (a) the share price of the share of the Company’s common
stock reported on a public exchange as of the Second Amended Maturity Date or (b) the exercise price as set forth in the applicable Warrant
and (iv) reimburse the lenders for reasonable fees and expenses incurred by them in execution of the Amendment.
The
Company shall pay a default fee for each of the applicable lender in an amount equal to 5% of the principal balance of the Note held
by such lender if the Company fails to pay the outstanding Loan Principal and Interest on the Second Amended Maturity Date.
During
the year ended December 31, 2020, the Company issued 309,427 ordinary shares representing 5% of the principal balance of the Note and
paid the required upfront fee in cash an amount of $19 representing 5% of the principal balance of the Note.
During
the year ended December 31, 2020, the management has determined by using the assistance of third-party appraiser that the fair value
of the modified loans amounted to $697 plus the cash payment amounted to $54 plus the fair value of the Third Warrant and shares amounted
to $416 are considered as substantially different from the fair value of the convertible bridge loans amounted to $4,918 prior to the
exchange date. Consequently, the original convertible bridge loans were derecognized, the new loans were initially recorded at fair value
as current financial liability and the Third Warrant and shares were initially recorded at fair value as an increase of additional paid-in
capital. The Company recorded an extinguishment amount of $3,751 as part of “Finance Expenses” line in operations in the
accompanying consolidated statement of operations for the year ended December 31, 2020.
As
of December 31, 2021, the above loans were converted or repaid. The Company recorded $619 income as part of “Finance Expenses”
line in operations in the accompanying consolidated statement of operations for the year ended December
31, 2021.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
E. |
During
the three months period ended March 31, 2020, the Company entered into certain Convertible Bridge Loan Agreements (the “March
2020 Loan Agreements”), under which the Company obtained an aggregate net cash amount of $697 (which representing 70% of the
gross Principal Amount of the loans) (the “Net Principal Amount”) from several private lenders (the “Lenders”). |
The
Loan Amount has been originally issued with 30% discount of aggregated amount of $299, bear interest at a flat rate of 10% (the “Interest”).
However, upon occurrence of any uncured Event of Default as defined in March 2020 Loan Agreements, and in the event that Lenders at their
sole discretion elect to allow the Company to continue with repayment of the Loan Amount and Interest after an Event of Default, the
Interest rate on the unpaid Loan Amount will be changed to 18% or the highest interest rate currently allowable under Nevada law for
loans of this amount (the “Default Interest Rate”). The Loan Amount has maturity date of 6-months period after receipt of
the Loans funds (the “Maturity Date”) but the Company may repay the Loan Amount prior to the Maturity Date with 20% penalty.
From the initial recognition and until the Maturity Date, the loans were presented as current liability.
As
part of the transaction, the Company also issued 31,236,042 warrants to purchase of the same number of ordinary shares at an exercise
price of $0.10 per share. The warrants shall be cashless exercisable with full rachet anti-dilution for a period of 5-years from the
issuance date (the “Warrants”).
At
the earlier of the effective date of Registration Statement as defined in March 2020 Loan Agreements or 6-months period after the Effective
Date provided that the Net Principal Amount and Interest were not repaid in cash by the Company, the Lenders at their sole option, may
convert the outstanding Loan Amount, or any portion of the Loan Amount, and any accrued interest, in whole or in part, into shares of
the common stock of the Company (the “Common Stock”). Any amount so converted will be converted into common stock of the
Company at a price equal to the lower of (i) the closing market price on the date of closing and (ii) 50% of the lowest trading price
on the primary trading market on which the Company’s Common Stock is quoted for the last 10 trading days immediately prior to but
not including the Conversion Date (“Conversion Price”). Following the Maturity Date, the convertible loans are reclassified
to non-current liability.
Upon
the occurrence of any uncured Event of Default, the Holder at any time, at its sole discretion, may elect to immediately (without prior
notice) convert the outstanding Loan Amount, or any portion of the Loan Amount, and any accrued Interest, in whole or in part, into shares
of the Common Stock, according to the terms of March 2020 Loan Agreements.
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $236 and $461, respectively. The amount allocated to the warrants
was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock
upon exercise for a fixed exercise price), net of any related issuance costs.
Furthermore,
in subsequent periods, the Note instrument is accounted for using the effective interest method over the term of the loan, until its
stated maturity. Due to the Company discrete decision not to repay the loan for cash), the loan became subject to the provisions
of ASC 480, “Distinguishing Liabilities and Equity” as it became an obligation that will be settled by issuance of
a variable number of shares (stock settle obligation) and as such is measured at fair value through profit or loss. Consequently, the
Company recorded expenses amounted to $1,985
and $756
related to remeasurement of the Note and the
discount amortization of the Note as part of the “finance expenses” line in operations in the accompanying consolidated statement
of operations for the year ended December 31, 2020. During the year ended December 31, 2021 the Company recorded expenses amounted
to $81
as part of the “finance expenses” line in operations in the accompanying consolidated statement of operations.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
F. |
Amendments
to March 2020 Loan Agreements: |
|
1. |
During
the three months period ended June 30 2020, the Company entered into amendment to March 2020 Loan Agreements with one of the lenders
whereby it was determined to extend the original Maturity Date of applicable Note by another 90-days from the original Maturity Date
(the “Amended Maturity Date”) in exchange for (i) waiver of the conversion feature of the applicable Note and accrued
Interest prior to the Amended Maturity Date and (ii) issuance of 720,000 shares of restricted common stock. |
|
|
|
|
2. |
During
the three months period ended June 30 2020, the Company entered into amendment to March 2020 Loan Agreements with the other lenders
whereby it was determined to extend the maturity date of applicable Notes by another 90-days from the original Maturity Date (the
“Amended Maturity Date”). The amended term were as follows: (i) the conversion feature of the applicable Principal Amount
and accrued Interest prior to the Amended Maturity Date was waived by the lenders, but the lenders shall be entitled to conversion
only until a reverse split in the Company’s shares, and thereafter will be redeemed at the Nasdaq listing or at the Amended
Maturity Date, whichever is first. If a Nasdaq listing occurs prior to the Amended Maturity Date, the Company will redeem the outstanding
note. If a Nasdaq listing does not happen by the Amended Maturity Date, the lender will be entitled to convert or request redemption
at its option; (ii) the Company will pay in cash to lenders 10% of the outstanding balance of the note within 25 days from the amendment
date and 10% of the outstanding balance in equity in consideration for the extension of the loan and (iii) the Third Warrants will
be cashless exercised upon the Company listing its ordinary shares on the Nasdaq. |
Due
to elimination of a substantive conversion option, it was determined that the amended terms are substantially different than the original
terms and accordingly the modification was accounted for as an extinguishment of the modified loans. Consequently, the original convertible
bridge loans were derecognized, the new loans were initially recorded at fair value as current financial liability and the Third Warrant
was initially recorded at fair value as an increase of additional paid-in capital. The Company recorded an extinguishment amount of $97
as part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations for the year ended
December 31, 2020.
G. |
On
April 24, 2020, the Company entered into a Securities Purchase Agreement for issuance of Convertible Redeemable Note (“Note”),
under which the Company received net cash of $200 (which representing 20% of the gross Principal Amount of the note) from several
private lenders (the “Lenders”). |
The
Note was issued with 20% original issue discount totaling $50, bears interest at a flat rate of 8% (which shall be increased to a rate
of 12% upon the occurrence of an Event of Default (as defined in the Note)) and has a maturity date of April 24, 2021 unless extended
at the option of Lenders for an additional term of 180 days (the “Maturity Date”). The Company shall have the right to prepay
all or any part of the principal under the Note without penalty upon not less than 10 days prior written notice to Lenders.
The
Lenders are entitled, at its option, at any time, to convert all or any amount of the principal face amount of the Note and the accumulated
Interest then outstanding into the Company’s ordinary shares at a price equal to $0.08 (the “Optional Conversion Price”).
In the event the Company completes an uplisting to Nasdaq (the “Mandatory Conversion Event”), the conversion price shall
equal to the lower of (i) 80% of the common share price as determined in the Mandatory Conversion Event; and (ii) the Optional Conversion
Price.
The
Lenders are also entitled to an amount of 1,250,000 warrants to purchase the same number of ordinary shares for a period of five years
at an exercise price equal to $0.10 subject to certain adjustments (the “Warrant”).
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $135 and $65, respectively. The amount allocated to the warrants
was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock
upon exercise for a fixed exercise price), net of any related issuance costs. Furthermore, it was determined that the embedded conversion
feature is required to be bifurcated from the host loan instrument. The embedded conversion feature was recognized in total amount of
$127 upon initial recognition and in subsequent periods as derivative liability at fair value through profit and loss and the remaining
amount of $8 was allocated to the host loan instrument, less any related issuance costs. In subsequent periods, the host loan instrument
is accounted for using the effective interest method over the term of the loan, until its stated maturity.
The
balance of the loan as of December 31, 2021 and 2020 amounted to $162 and $89, respectively.
The Company recorded (income) expenses amounted to ($60)
and $81
related to remeasurement of the embedded conversion
feature and the discount amortization of the host loan instrument as part of the “finance expenses” line in operations in
the accompanying consolidated statement of operations for the year ended December 31, 2020. During the year ended December 31, 2021 the
Company recorded expenses amounted to $(66)
and $71
related to remeasurement of the embedded conversion
feature and the discount amortization of the host loan instrument as part of the “finance expenses” line in operations in
the accompanying consolidated statement of operations
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
H. |
On
June 12, 2020 (the “Issuance Date”), the Company entered into a Securities Purchase Agreement for issuance of Convertible
Redeemable Note (“Note”), under which the Company received net cash of $50 (which representing 84% of the gross Principal
Amount of the note) from a private lender (the “Lender”). |
The
Note was issued with 20% original issue discount totaling $12.5, bears interest at a flat rate of 2% and has a maturity date of June
12, 2021 (the “Maturity Date”) on which all principal and interest is due and payable in one payment. During the first 40
days after the Issuance Date, the Company has the right to redeem the Note at a price equal to 125% of the Note’s face amount.
The
Lender is entitled, at its option, at any time, to convert all or any amount of the principal face amount of the Note and the accumulated
Interest then outstanding into the Company’s ordinary shares at a price equal to 80% of the lower of (i) the lowest closing bid
price on the trading day prior to the Issuance Date or (ii) the lowest trading price of the ordinary shares as reported by the trading
market on which the Company’s shares are traded, for the 20 prior trading days including the day upon which a conversion notice
is received (the “Conversion Price”).
The
Lenders are also entitled to an amount of 500,000 warrants to purchase the same number of ordinary shares for a period of five years
at an exercise price equal to $0.10 subject to certain adjustments (the “Warrant”).
Upon
the occurrence of an Event of Default (as defined in the Note), the Note shall accrue interest at the lower of (i) 24% per annum or (ii)
the highest rate of interest permitted by law. In addition, the Company may be subject to the daily penalty pending of default scenario
as described in the Note.
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $61 and $10, respectively. The amount allocated to the warrants
was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock
upon exercise for a fixed exercise price), net of any related issuance costs.
Furthermore,
it was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument. The embedded conversion
feature was recognized in total amount of $60 upon initial recognition and in subsequent periods as derivative liability at fair value
through profit and loss. The excess of the fair value of identified instruments over net proceeds amounted to $21 was recorded as part
of the “finance expenses” line in operations in the accompanying consolidated statement of operations for the year ended
December 31, 2020. In subsequent periods, the host loan instrument is accounted for using the effective interest method over the term
of the loan, until its stated maturity.
The balance of the loan
as of December 31, 2021 and 2020 amounted to $0 and $10, respectively. The
Company recorded expenses amounted to $10
and $9
related to remeasurement of the embedded conversion
feature and the discount amortization of the host loan instrument as part of the “finance expenses” line in operations in
the accompanying consolidated statement of operations for the year ended December 31, 2020.
During
the year ended December 31, 2021 the Company recorded expenses amounted to $(37)
and $3
related to remeasurement of the embedded conversion
feature and the discount amortization of the host loan instrument as part of the “finance expenses” line in operations in
the accompanying consolidated statement of operations
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
I. |
On
June 15, 2020 (the “Issuance Date”), the Company entered into a Securities Purchase Agreement for issuance of Convertible
Redeemable Note (“Note”), under which the Company received net cash of $315 (which representing 84% of the gross Principal
Amount of the note) from a private lender (the “Lender”). |
The
Note was issued with 16% original issue discount totaling $60, bears interest at a flat rate of 2% and has a maturity date of June 15,
2021 (the “Maturity Date”) on which all principal and interest is due and payable in one payment. During the first 40 days
after the Issuance Date, the Company has the right to redeem the Note at a price equal to 125% of the Note’s face amount.
The
Lender is entitled, at its option, at any time, to convert all or any amount of the principal face amount of the Note and the accumulated
Interest then outstanding into the Company’s ordinary shares at a price equal to 80% of the lower of (i) the lowest closing bid
price on the trading day prior to the Issuance Date or (ii) the lowest trading price of the ordinary shares as reported by the trading
market on which the Company’s shares are traded, for the 20 prior trading days including the day upon which a conversion notice
is received (the “Conversion Price”).
Upon
occurrence of Sale Event (as defined in the Note), upon the Lender request, the Company shall redeem the Note in cash in an amount equal
to 150% of the principal amount, plus accrued but unpaid interest through the redemption date, or at the Lender election, such Lender
may convert the unpaid principal amount of the Note and interest into ordinary shares of the Company at the Conversion Price immediately
prior to such Sale Event. At the closing date and December 31, 2020, the management considered Sale Event as remotely.
Upon
the occurrence of an Event of Default (as defined in the Note), the Note shall accrue interest at the lower of (i) 24% per annum or (ii)
the highest rate of interest permitted by law. In addition, the Company may be subject to the daily penalty pending of default scenario
as described in the Note.
It
was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument. Upon initial recognition,
the management by assistance of third-party appraiser recognized an embedded conversion feature in total amount of $374 and in subsequent
periods as derivative liability at fair value through profit and loss. In subsequent periods, the host loan instrument is accounted for
using the effective interest method over the term of the loan, until its stated maturity. The excess of the fair value of identified
instruments over net proceeds amounted to $60 was recorded as part of the “finance expenses” line in operations in the accompanying
consolidated statement of operations for the year ended December 31, 2020.
The
balance of the loan as of December 31, 2020 amounted to $24. During 2021 the loan was fully converted into 23,803,446 share of common
stock of the Company. The Company recorded expenses
amounted to $173
and $23
related to remeasurement of the embedded conversion
feature and the discount amortization of the host loan instrument as part of the “finance expenses” line in operations in
the accompanying consolidated statement of operations for the year ended December 31, 2020.
During
the year ended December 31, 2021 the Company recorded expenses amounted to $68
and $659
related to remeasurement of the embedded conversion
feature and the discount amortization of the host loan instrument as part of the “finance expenses” line in operations in
the accompanying consolidated statement of operations.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
J. |
In
June and July 2020, the Company entered into a Securities Purchase Agreement for issuance of Convertible Redeemable Note (“Note”),
under which the Company received net cash of $300 (which representing 75% of the gross Principal Amount of the note) from two private
lenders (the “Lenders”). |
The
Note was issued with 25% original issue discount totaling $100, bears interest at a flat rate of 2% and has a maturity date of December
22, 2020 (the “Maturity Date”) on which all principal and interest is due and payable in one payment. During the first 40
days after the Issuance Date, the Company has the right to redeem the Note at a price equal to 125% of the Note’s face amount.
The
Lenders are entitled, at its option, at any time, to convert all or any amount of the principal face amount of the Note and the accumulated
Interest then outstanding into the Company’s ordinary shares at a price equal to 150% of the closing price on the closing date
and will be effective for 40 trading days from the closing date. After the initial 40 trading days, the conversion price shall equal
to the lower of (i) 60% of the lowest volume weighted average price trading price for the common stock as reported at the market reporting
trade prices for the common stock during the 10 trading days immediately prior to conversion, and including, the date of the conversion
notice; and (ii) 150% of the closing price on the closing date and the closing price on the effectiveness date of the registration statement,
including the day upon which a conversion notice is received by the Company (the “Conversion Price”).
Upon
the occurrence of an Event of Default (as defined in the Note), the Note shall accrue interest at the lower of (i) 24% per annum or (ii)
the highest rate of interest permitted by law. In addition, the Company may be subject to the daily penalty pending of default scenario
as described in the Note.
The
Note is entitled to a disbursement of shares of 2,000,000 Ordinary Shares of the Company in consideration for issuing the notes (the
“Commitment Shares”). On January 18, 2021, the Commitment Shares have been issued to the Lenders.
The
Lenders are also entitled to an amount of 3,000,000 warrants to purchase the same number of ordinary shares for a period of five years
at an exercise price equal to $0.10 subject to certain adjustments (the “Warrant”).
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note, the shares and the detachable warrants in total amount of $360, $42 and $51, respectively. The amount allocated
to the warrants was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares
of common stock upon exercise for a fixed exercise price), net of any related issuance costs.
Furthermore,
it was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument. The embedded conversion
feature was recognized in total amount of $359 upon initial recognition and in subsequent periods as derivative liability at fair value
through profit and loss. The excess of the fair value of identified instruments over net proceeds amounted to $153 was recorded as part
of the “finance expenses” line in operations in the accompanying consolidated statement of operations for the year ended
December 31, 2020. In subsequent periods, the host loan instrument is accounted for using the effective interest method over the term
of the loan, until its stated maturity.
As
of December 31, 2020, upon the occurrence of an Event of Default in which the Note was not repaid before or at the Maturity Date (due
to the Company discrete decision not to repay the loan for cash), the loan become subject to the provisions of ASC 480, “Distinguishing
Liabilities and Equity” as it become an obligation that will be settled by issuance of a variable number of shares (stock settle
obligation) and as such is measured at fair value through profit or loss. Consequently, the Company recorded expenses amounted to $723
and ($359) related to remeasurement of the Note and its embedded conversion feature as part of the “finance expenses” line
in operations in the accompanying consolidated statement of operations for the year ended December 31, 2020.
The
balance of the loan as of December 31, 2021 and 2020 amounted to $539 and $724, respectively
During the year ended December 31, 2021 the Company recorded income amounted to $(74)
related to discount amortization of the host loan instrument as part of the “finance expenses” line in operations in the
accompanying consolidated statement of operations.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
K. |
In
July 2020, the Company entered into a Securities Purchase Agreement with institutional and high net worth investors (the “July
2020 Loan Agreements” and “Lenders”, respectively), under which the Company agreed to issue to the Lenders secured
promissory convertible notes in an aggregate principal amount of $1,881 (the “Convertible Note”). The Company received
net cash of $1,350 (which representing 71.8% of the gross Principal Amount of the note) from the Lenders. The Convertible Note bears
interest at a flat rate of 2% (the “Interest”) and have a maturity date of 6-months period after receipt of the Loans
funds (the “Maturity Date”). At Maturity Date the Company may pay the lender the loan principal and accrued interest
in cash or at the option of the lender in shares of the Company. |
The
Convertible Note may be redeemed at any time at an amount equal to 125% of the outstanding loan principal and unpaid interest. The Lenders
may convert the loan principal and accrued interest by 150% of the closing bid price and will be effective for 40 days following the
closing date. After the initial 40 days, the conversion price shall equal the lower of (i) 60% of the lowest VMAP trading price for the
common stock as reported on the market reporting trade prices for the common stock during 11 trading days immediately prior to the conversion
date (including conversion date) or (ii) 150% of the closing bid price on the closing date and (iii) 150% of the closing bid price on
the effectiveness date of the Company’s registration statements registering the conversion shares.
Upon
event of default as defined in the Securities Purchase Agreement, the Lenders may require the Company to redeem all or any portion of
the note at the greater of default interest rate of 18% or the maximum rate permitted under applicable law (the “Event of Default
Price”) together with liquidated damages of $250 plus an amount in cash equal to 1% of the Event of Default Price for each 30 day
period during which redemptions fail to be made. In addition, the Lenders may convert the loan principal and accrued interest by 150%
of the closing bid price and will be effective for 40 days following the closing date. After the initial 40 days, the conversion price
shall equal the lower of (i) 35% of the lowest VMAP trading price for the common stock as reported on the market reporting trade prices
for the common stock during 11 trading days immediately prior to the conversion date (including the conversion date), (ii) 150% of the
closing bid price on the closing date and (iii) 150% of the closing bid price on the effectiveness date of the Company’s registration
statements registering the conversion shares.
The
Lenders are also entitled to an amount of 10,513,513 warrants to purchase the same number of ordinary shares for a period of five years
at an exercise price equal to $0.10 subject to certain adjustments (the “Warrant”). If at the time of exercise hereof there
is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant
Shares to the Lenders, then the Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise”.
In addition, the Lenders are entitled to an option to require the Company to purchase the Warrant for cash in an amount equal to their
Black-Scholes Option Pricing Model value (the Black-Scholes Model), in the event that certain fundamental transactions (which some of
them are not considered solely within the control of the Company) as defined in the warrant agreement, occur.
The
Company also entered into a Security Agreement with one of the lenders under which the Company granted a security interest to the
lender in all equipment now existing or hereafter arising or acquired (see also Note 10K). The Company also issued the
Lenders an amount of 7,333,333 shares
as a commitment fee (the “Commitment Shares”) and an additional 2,000,000 shares
as a diligence fee (the “Diligence Shares”) to one of the Lenders.
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note, the shares and the detachable warrants in total amount of $1,710, $230 and $237, respectively. The amount allocated
to the warrants was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares
of common stock upon exercise for a fixed exercise price), net of any related issuance costs.
Furthermore,
it was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument. The embedded conversion
feature was recognized in total amount of $1,708 upon initial recognition and in subsequent periods as derivative liability at fair value
through profit and loss. The excess of the fair value of identified instruments over net proceeds amounted to $826 was recorded as part
of the “finance expenses” line in operations in the accompanying consolidated statement of operations for the year ended
December 31, 2020. In subsequent periods, the host loan instrument is accounted for using the effective interest method over the term
of the loan, until its stated maturity.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
Amendments
to July 2020 Loan Agreement:
On
November 4, 2020 (the “Effective Date”), the Company entered into amendment to July 2020 Loan Agreement with the one of its
lenders, under which it was determined to as follows: (i) the lender consented the Company entering into the Secured Convertible Equipment
Loan Agreements (see also Note 8A above); (ii) the lender subordinated its security interest in the four Liquid Handler Machines to the
security interest that will be granted by the Company to the lender parties under the Secured Convertible Equipment Loan Agreements (see
also Note 8H above); (iii) the lender waived the Registration Statement Events of Default (with respect to the Registration Statement
Event of Default, the Company shall be granted an extension of 60 days from the Effective Date to cause the Registration Statement registering
for resale the ordinary shares of the Company held by lender to be declared effective); (iv) the lender waived its rights under the most
favored nation clause only with respect to the Secured Convertible Equipment Loan Agreements and only under the condition that other
creditors of the Company also waive their rights under any most favored nation clauses they may be otherwise entitle to with respect
to the Secured Convertible Equipment Loan Agreements and (v) the Note shall be amended as follows: (i) the Conversion Price shall in
no event be greater than $0.05; (ii) an amount equal to 25% of the total outstanding amount due under the Note shall be added to the
Principal amount and (iii) an additional 2.5 million warrants shall be issued in the same form as those issued pursuant to the Purchase
Agreement.
The
management has determined by using the assistance of third-party appraiser that the fair value of the modified loans amounted to $1,434
plus the fair value of the Third Warrant amounted to $115 are considered as substantially different from the fair value of the convertible
bridge loans amounted to $1,100 prior to the exchange date. Consequently, the original convertible bridge loans were derecognized, the
new loans were initially recorded at fair value as current financial liability and the Third Warrant was initially recorded at fair value
as an increase of additional paid-in capital. The Company recorded an extinguishment amount of $449 as part of “Finance Expenses”
line in operations in the accompanying consolidated statement of operations for the year ended December 31, 2020.
The
balance of the loans as of December 31, 2021 and 2020 amounted to $899 and $1,664, respectively. The Company recorded expenses amounted
to $(66) and $1,991 related to remeasurement of the embedded conversion feature and the discount amortization of the host loan instrument
as part of the “finance expenses” line in operations in the accompanying consolidated statement of operations for the year
ended December 31, 2020. During the year ended December 31, 2021 the Company recorded expenses amounted to $0 and $4,030 related to remeasurement
of the embedded conversion feature and the discount amortization of the host loan instrument as part of the “finance expenses”
line in operations in the accompanying consolidated statement of operations.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
L. |
On
August 21, 2020, the Company entered into a Securities Purchase Agreement for issuance of Convertible Promissory Note (“Note”),
under which the Company received net cash of $175 (which representing 30% of the gross Principal Amount of the note) from private
lender (the “Lender”). |
The
Note was issued with 25% original issue discount totaling $75, bears interest at a flat rate of 10% and has a maturity date of November
21, 2020 (the “Maturity Date”) on which all principal and interest is due and payable in one payment. The Company may, at
its option, at any time and from time to time, prepay all or any part of the principal balance of this Note before the Maturity Date,
with a penalty or premium equal to 20% of the sum of any outstanding Principal and any interest accrued as of the prepayment date.
The
Lender at its sole option, may convert the outstanding Principal Amount of the Note, or any portion of the Principal Amount hereof, and
any accrued interest, in whole or in part, into shares of the common stock of the Company. Any amount so converted will be converted
into common stock of the Company at a price equal to the lower of (1) the closing market price on the date of closing and (2) 60% of
the lowest daily volume weighted average price (“VWAP”) of the Common Stock as reported on the market during the 11 trading
days immediately prior to but not including the date of conversion (“Conversion Price”). In addition, the Lender must convert
any outstanding balances due under the Note within 15 days if, (a) the Company successfully uplists its common stock to trade on the
Nasdaq stock exchange, and (2) there is an effective registration statement on file with the Securities and Exchange Commission that
includes a registration of the common stock underlying the Note.
The
Company agrees to reimburse the Lender’s certificate processing cost by adding $1.5 to the Principal for each note conversion effected
by Lender.
Upon
the occurrence of an Event of Default (as defined in the Note), there shall be a default charge equal to 30% of the sum of any unpaid
principal plus any interest accrued as of the default date. In the event that Lender at its sole discretion elects to allow the Company
to continue with repayment of the principal and interest on the Note after an Event of Default, the interest rate on the unpaid principal
of the Note will be change to 18% or the highest interest rate currently allowable under Nevada law for loans of the above amount (the
“Default Interest Rate”).
The
Lender is also entitled to an amount of 8,000,000 warrants to purchase the same number of ordinary shares for a period of five years
at an exercise price equal to $0.10 subject to certain adjustments (the “Warrant”).
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $267 and $123, respectively. The amount allocated to the warrants
was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock
upon exercise for a fixed exercise price), net of any related issuance costs.
Furthermore,
it was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument. The embedded conversion
feature was recognized in total amount of $266 upon initial recognition and in subsequent periods as derivative liability at fair value
through profit and loss. The excess of the fair value of identified instruments over net proceeds amounted to $215 was recorded as part
of the “finance expenses” line in operations in the accompanying consolidated statement of operations for the year ended
December 31, 2020. In subsequent periods, the host loan instrument is accounted for using the effective interest method over the term
of the loan, until its stated maturity.
As
of December 31, 2020, upon the occurrence of an Event of Default in which the Note was not repaid before or at the Maturity Date (due
to the Company discrete decision not to repay the loan for cash), the loan become subject to the provisions of ASC 480, “Distinguishing
Liabilities and Equity” as it become an obligation that will be settled by issuance of a variable number of shares (stock settle
obligation) and as such is measured at fair value through profit or loss (see also Note 2W). Consequently, the Company recorded expenses
amounted to $463 and ($266) related to remeasurement of the Note and its embedded conversion feature as part of the “finance expenses”
line in operations in the accompanying consolidated statement of operations for the year ended December 31, 2020.
The
balance of the loan as of December 31, 2020 amounted to $464 . In March 2021 the loan was converted into 6,337,180 shares of common stock
of the Company. During the year ended December 31,
2021 the Company recorded expenses amounted to $(188) as part of the “finance expenses” line in operations in the
accompanying consolidated statement of operations.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
M. |
Secured
Convertible Equipment Loan Agreement |
On
December 31, 2020 (the “Effective Date”), the Company entered into Secured Convertible Equipment Loan Agreement with a private
lender (the “Lender”), under which at the Effective Date and for the purpose for purchasing two Liquid Handler Machines (the
“Collateral”) to be placed in the laboratory of a Company’s client, the Company will receive from the Lender a net
cash amount of $450 which is including an original issue discount at the rate of 40% valued at $300, representing a face value of $750
for the loan (the “Aggregate Loan Principal Amount”). In addition, the Company incurred incremental and direct costs of $54.
In
addition, under the terms of the Secured Convertible Equipment Loan Agreement, the Lender will be entitled to receive a royalty at a
rate of 12.5% of all amounts resulting from any diagnostic tests performed by the two liquid handler machines. During the initial payback
period and up until the earlier of either (a) April 30, 2021, or (b) the aggregate loan amount is paid in full, all royalty payments
made to Lender will be counted towards their loan balance. Thereafter, the royalties continue so long as the machines are in use.
The
Aggregate Loan Principal Amount was received in January 2021.
The
Company has determined that its obligation for future royalties under the Secured Convertible Equipment Loan Agreement represent contingent
interest feature. However, it was determined that such feature is not required to be bifurcated and accounted for as derivatives, as
they are eligible for the scope exception prescribed under ASC Topic 815-10-15-59 (d) with respect to certain contracts that are not
traded on an exchange, as the underlying is an entity specific performance measure. Accordingly, the obligation for future royalties
was accounted for in accordance with the provisions of ASC Topic 450, Contingencies.
As
the secured loan upon its original term does not include conversion feature (such feature will only become applicable as a penalty, upon
the Company’s failure to repay the Aggregate Loan Principal Amount by the Maturity Date), the liability was accounted for using
the effective interest method over the term of the loans until their stated Maturity Date.
Total
discount amortization expenses of $2,414,
were recorded as part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations for
the year ended December 31, 2021. During the year ended December 31, 2021 the lender exercise the entire loan amount into 81,736,111
ordinary shares of the Company with aggregated
value of $2,810.
N. |
Securities
Purchase Agreement |
On
January 22, 2021, the Company entered into a Securities Purchase Agreement with Yozma Global Genomic Fund 1 (“Yozma”) pursuant
to which Yozma purchased from Todos a convertible note in the original principal amount of up to $4,857. The original principal amount
has been originally issued with 30% discount of aggregated amount of $1,457, bearing per annum interest at a flat rate of 4% (the “Interest”)
until it becomes due and payable, whether upon the maturity date, which is January 22, 2022, acceleration, conversion, redemption or
otherwise (in each case in accordance with the terms hereof) (the “Maturity Date”). In addition, the outstanding principal
amount to be converted, redeemed or otherwise with respect to which this determination is being made and the accrued and unpaid Interest
with respect to such outstanding principal amount shall be converted into shares of the Company at conversion price of $0.07161 (the
“Conversion Price”). Subsequent to the effective date of the registration statement registering for resale the Conversions
Shares and the Warrant Shares pursuant to the Purchase Agreement, if the closing sale price of the Common Stock averages less than the
then Conversion Price over a period of 10 consecutive trading days, the Conversion Price shall reset to such average price. If the 10-day
volume weighted average price of the Common Stock continues to be less than the Conversion Price, then the Conversion Price should reset
to such 10-day average price with a maximum of a 20% discount from the initial Conversion Price.
At
the Company’s option and upon 30 days’ notice to Yozma, 33% of the outstanding Principal and accrued and unpaid Interest
of the Note (the “Repayment Amount”) may be redeemed at any time at an amount equal to 115% of the Repayment Amount. The
foregoing notwithstanding, Yozma may convert any or all of the Note into shares of Common Stock at any time. Through September 30, 2021,
the Company has not redeemed any of the outstanding principal amount and accrued interest, and Yozma has not converted any portion of
the Note into shares.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
At
any time after Yozma becoming aware of an Event of Default as defined in the Securities Purchase Agreement, Yozma may require the Company
to redeem (an “Event of Default Redemption”) all or any portion of the Note in cash by wire transfer of immediately available
funds at a price equal to principal amount plus interest calculated from the Event of Default at the greater of the default interest
at a rate of 18% per annum or the maximum rate permitted under applicable law (the “Event of Default Redemption Price”) together
with liquidated damages of $250 plus an amount in cash equal to 1% of the Event of Default Redemption Price for each 30 day period during
which redemptions fail to be made. No event of default has occurred through September 30, 2021.
In
addition, the Company granted Yozma a warrant to purchase up to 16,956,929 ordinary shares for a period of 5 years with a fixed exercise
price equal to $0.107415, subject to certain adjustments (the “Warrant”). If at the time of exercise hereof there is no effective
registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to Yozma,
then the Warrant may also be exercised, in whole or in part, at such time by means of a net shares settlement. Moreover, Yozma is entitled
to an option to require the Company to purchase the Warrant for cash in an amount equal to their Black-Scholes Option Pricing Model value
(the Black-Scholes Model), upon occurrence of fundamental transactions, as defined in the warrant agreement, occur.
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $423 and $861, respectively. The amount allocated to the warrants
was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock
upon exercise for a fixed exercise price), net of any related issuance costs and as upon fundamental transaction the warrants holder
shall be entitled to receive from the Company the same type of form of consideration such as holders of common stock.
Furthermore,
it was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument. The embedded conversion
feature was recognized in total amount of $2,116 upon initial recognition and in subsequent periods as derivative liability at fair value
through profit and loss. The remaining amounted to $423 was allocated to the host loan instrument, which in subsequent periods is
accounted for using the effective interest method over the term of the loan, until its stated maturity.
The
Company recorded an income of $1,552 and expense of $3,939 related to remeasurement of the embedded conversion feature of convertible
bridge loan and the discount amortization of the host loan instrument, respectively, as part of the “Finance Expenses” line
in operations in the accompanying consolidated statement of operations for the year ended December 31, 2021.
In
addition, on October 7, 2020, the Company entered into consulting agreement with Aslano Private Limited (“Aslano”) whereby
Aslano will render non-exclusive advice and service to the Company concerning equity and/or debt financing with certain Potential Buyer
or Investor or Financing Party as defined in the consulting agreement in exchange for success fee equal to 8% of the gross amount paid
by the Potential Buyer or Investor or Financing Party. In consideration for Aslano’s non-exclusive services with respect to the
aforesaid Securities Purchase Agreement, during the year ended December 31, 2021, the Company incurred incremental and direct finder
fee cost of $272 which was allocated to the identified components (i.e. convertible bridge loans, bifurcated embedded conversion feature
and detachable Warrant) consistent with the allocation of the proceeds issuance expenses. Consequently, an amount of $34, $169 and $69
out of which was recorded as additional discount of the convertible bridge loans, immediate charge to finance expenses and as deduction
of additional paid-in capital, respectively, at the outset of the transaction.
On
March 3, 2021, the Company and one of its lenders entered into a Closing Agreement (the “Closing Agreement”), under which
the lender exercised its right to invest an additional $884
into the Company in the form of July 2020 Convertible
Notes (the “Tranche 2 Securities”). The original principal amount has been issued with 30% discount of aggregated amount
of $379 bearing per annum interest at a flat rate of 2% (the “Interest”). In addition, the Company covenanted and agreed
to file a registration agreement with respect to the Tranche 2 Securities on or before the earlier to occur of (i) the date that the
Company files a registration statement with respect to any other securities of the Company or (ii) April 1, 2021 (such date, the “Tranche
2 Filing Date”) and cause a registration statement to be declared effective under the Securities Act with respect to the Tranche
2 Securities on or before May 1, 2021. The
Company acknowledges that failure to timely comply with the foregoing obligations will subject the Company to substantial liability under
the Registration Agreement, including without limitation liquidated damages in the amount of $250, along with an amount of cash accruing
each month equal to the value of 1% of the value of the Tranche 2 Securities.
In
addition, the Company granted the lender warrants to purchase up to 5,513,513 ordinary shares and issued 6,000,000 shares.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
Upon
initial recognition, it was determined that the embedded conversion feature is required to be bifurcated from the host loan instrument.
The management by assistance of third-party appraiser measured the embedded conversion feature in total amount of $1,127
upon initial recognition and in subsequent periods
as derivative liability at fair value through profit and loss. The excess of the fair value of identified instruments over net proceeds
upon initial recognition amounted to $243
was recorded as part of the “Finance Expenses”
line in operations in the accompanying consolidated statement of operations. In subsequent periods, the host loan instrument is accounted
for using the effective interest method over the term of the loan, until its stated maturity.
The
Company recorded additional interest expenses amounting to $2,776
related to valuation of the loan to fair value
upon default event and income of $34
related to remeasurement of the embedded conversion
feature, which were recorded as part of the “Finance Expenses” line in operations in the accompanying consolidated statement
of operations for the year ended December 31, 2021.
P. |
Securities
Purchase Agreements |
|
1. |
On
April 9, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with a Family Office Investor (the
“Family Office”) to which the Company has agreed to issue a promissory convertible note (the “Note”) to the
Family Office in the principal amount of $4,286 for proceeds of $3,000 (the “Transaction”). The closing occurred on April
12, 2021. The Note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The Note
is convertible into shares of Common Stock (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion
Price). In addition, the Family Office received a warrant (the “Warrant”) to purchase up to 16,000,000 shares of Common
Stock (the “Warrant Shares”) of the Company with an exercise price equal to $0.107415 per share. The Warrant is exercisable
for a 5-year period from the issuance date. Upon a listing of the Company’s common shares onto a national exchange, the Note
will exchange into a class of Series A Preferred Shares in order to help improve the Company’s shareholder equity to meet the
Nasdaq CM Initial Listing Standards. |
The
Family Office shall have the option, exercisable at the Family Office’s sole discretion, on the date that is ninety (90) days following
the date of effectiveness of a registration statement filed by the Company, to purchase a Second Note and the Second Warrant, for a principal
amount of $4,286 for a consideration of $3,000 and a Warrant to purchase up to 16,000,000 shares of Common Stock, with an exercise price
equal to $0.107415 per share.
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $1 and $508, respectively. The amount allocated to the warrants
was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock
upon exercise for a fixed exercise price), net of any related issuance costs and as upon fundamental transaction the warrants holder
shall be entitled to receive from the Company the same type of form of consideration such as holders of common stock.
Furthermore,
it was determined that the Convertible note is hybrid instrument embodies both an embedded derivative and a host contract and that the
embedded conversion feature is required to be bifurcated from the host loan instrument using the with-and-without method. The embedded
derivative was measured first at fair value, and the residual amount was allocated to the host contract. The embedded conversion feature
was recognized in total amount of $3,007 upon initial recognition and in subsequent periods as derivative liability at fair value through
profit and loss. The host loan instrument is accounted for, in subsequent periods, using the effective interest method over the term
of the loan, until its stated maturity.
The excess of the fair
value of identified instruments over net proceeds upon initial recognition amounted to $516 was recorded as part of the “Finance
Expenses” line in operations in the accompanying consolidated statement of operations.The
Company recorded an income of $1,565
and expenses of $466
related to remeasurement of the embedded conversion
feature of convertible bridge loan and the discount amortization of the host loan instrument, respectively, as part of the “Finance
Expenses” line in operations in the accompanying consolidated statement of operations for the year ended December 31, 2021.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
|
2. |
Further
to the Securities Purchase Agreement described in Note 10Q above, on April 27, 2021, the Company entered into an additional
Securities Purchase Agreement (the “SPA”) with Yozma to which the Company has agreed to issue a promissory convertible
note (the “Note”) to Yozma in the principal amount of $4,714
for proceeds of $3,300
(the “Transaction”). The closing
occurred on April 27, 2021. The Note has a maturity date of one year from the date of issuance and pays interest at a rate of 4%
per annum. The Note is convertible into shares of Common Stock (the “Conversion Shares”) at a conversion price of $0.0599
(the “Conversion Price). In addition,
Yozma received a warrant (the “Warrant”) to purchase up to 16,458,196
shares of Common Stock (the “Warrant
Shares”) of the Company with an exercise price equal to $0.107415
per share. The Warrant is exercisable for
a 5-year
period from the issuance date. Upon a listing of the Company’s common shares onto a national exchange, the Note will exchange
into a class of Series A Preferred Shares in order to help improve the Company’s shareholder equity to meet the Nasdaq CM Initial
Listing Standards. |
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $378 and $2,922, respectively. The amount allocated to the warrants
was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of shares of common stock
upon exercise for a fixed exercise price), net of any related issuance costs and as upon fundamental transaction the warrants holder
shall be entitled to receive from the Company the same type of form of consideration such as holders of common stock.
The
Company recorded expenses in the amount of $1,779, related to remeasurement of the host loan instrument as part of the “Finance
Expenses” line in operations in the accompanying consolidated statement of operations for the for the year ended December 31, 2021.
The
Company has agreed to file a registration statement on Form S-1 with the Securities and Exchange Commission registering for resale the
Conversion Shares and the Warrant Shares (the “Registration Statement) under the above two transactions. Subsequent to the effective
date of such registration statement, if the closing sale price of the Common Stock averages less than the then Conversion Price over
a period of 10 consecutive trading days, the Conversion Price shall reset to such average price. If the 10-days volume weighted average
price of the Common Stock continues to be less than the Conversion Price then the Conversion Price should reset to such 10-day average
price with a maximum of a 20% discount from the initial Conversion Price.
On
May 13, 2021, the Company filed a registration statement on Form S-1 with respect to up to 240,591,462 ordinary shares to be issued pursuant
to Securities Purchase Agreement with Family Office and Yozma (first and second Tranches). As the Company complied with the registration
statement filing requirements, as of December 31, 2021, no accrual has been recorded for liquidated damages since the amount to be paid
was not probable and reasonably estimate under ASC 450 “Contingencies”.
|
3. |
On
July 7, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with an institutional investor (the
“Purchaser”) pursuant to which the Company has agreed to issue a promissory convertible note (the “Note”)
to the Purchaser in the principal amount of $1,536 for proceeds of $1,075 (the “Transaction”). The closing occurred on
July 7, 2021 (the “Closing Date”). The Note has a maturity date of one year from the date of issuance and pays interest
at a rate of 4% per annum. The Note is convertible into shares of Common Stock (the “Conversion Shares”) at a conversion
price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase
up to 3,440,000 shares of Common Stock (the “Warrant Shares”) of the Company with an exercise price equal to $0.107415
per share. The Warrant is exercisable for 5 years from the date of issuance. From the Closing Date until 180 days thereafter, the
Company shall be restricted from issuing or entering into any agreement to issue any shares of Common Stock, except under certain
circumstances. This provision shall no longer be in effect if the closing sale price of the Common Stock exceeds $0.10. The Company
intends to use the net proceeds for general corporate purposes. |
The
Company has agreed to file a registration statement with the Securities and Exchange Commission registering for resale of the Conversion
Shares and the Warrant Shares (the “Registration Statement). Subsequent to the effective date of such registration statement, if
the closing sale price of the Common Stock averages less than the then Conversion Price over a period of ten (10) consecutive trading
days, the Conversion Price shall reset to such average price. If the 10-day volume weighted average price of the Common Stock continues
to be less than the Conversion Price then the Conversion Price should reset to such 10-day average price with a maximum of a 20% discount
from the initial Conversion Price.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $954
and $121,
respectively. The amount allocated to the warrants was classified as a component of permanent equity (as their terms permit the holders
to receive a fixed number of shares of common stock upon exercise for a fixed exercise price), net of any related issuance costs and
as upon fundamental transaction the warrants holder shall be entitled to receive from the Company the same type of form of consideration
such as holders of common stock.
Furthermore,
it was determined that the Convertible note is hybrid instrument embodies both an embedded derivative and a host contract and that the
embedded conversion feature is required to be bifurcated from the host loan instrument using the with-and-without method. The embedded
derivative was measured first at fair value, and the residual amount was allocated to the host contract. The embedded conversion feature
was recognized in total amount of $257 upon initial recognition and in subsequent periods as derivative liability at fair value through
profit and loss. The host loan instrument is accounted for, in subsequent periods, using the effective interest method over the term
of the loan, until its stated maturity.
The
Company recorded expenses of $459 and $345 related to remeasurement of the embedded conversion feature of convertible bridge
loan and the discount amortization of the host loan instrument, respectively, as part of the “Finance Expenses” line in operations
in the accompanying consolidated statement of operations for the year ended December 31, 2021.
|
4. |
On
September 23, 2021, the Company completed the conditions precedent required to enter into a Securities Purchase Agreement (the “SPA”)
with an institutional investor (the “Purchaser”) pursuant to which the Company issued a promissory convertible note (the
“Note”) to the Purchaser in the principal amount of $2,857 for proceeds of $2,000 (the “Transaction”). The
Note has a maturity date of one year from the date of issuance and pays interest at a rate of 4% per annum. The Note is convertible
into shares of Common Stock (the “Conversion Shares”) at a conversion price of $0.0599 (the “Conversion Price).
In addition, the Purchaser received a warrant (the “Warrant”) to purchase up to 11,924,636 shares of Common Stock (the
“Warrant Shares”) of the Company with an exercise price equal to $0.107415 per share. The Warrant is exercisable for
5 years from the date of issuance. The Company intends to use the net proceeds from this Note to initiate Phase 2/3 trials for Tollovir™
COVID-19 patients, initiate digital marketing for its dietary supplement Tollovid®, increase sales & marketing for Provista
Diagnostics, and for general corporate purposes. |
The
Company has agreed to file a registration statement with the Securities and Exchange Commission registering for resale the Conversion
Shares and the Warrant Shares (the “Registration Statement). Subsequent to the effective date of the Registration Statement, if
the closing sale price of the Common Stock averages less than the then Conversion Price over a period of ten (10) consecutive trading
days, the Conversion Price shall reset to such average price. If the 10 day volume weighted average price of the Common Stock continues
to be less than the Conversion Price then the Conversion Price should reset to such 10-day average price with a maximum of a 20% discount
from the initial Conversion Price.
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $1,442
and $558,
respectively. The amount allocated to the warrants was classified as a component of permanent equity (as their terms permit the holders
to receive a fixed number of shares of common stock upon exercise for a fixed exercise price), net of any related issuance costs and
as upon fundamental transaction the warrants holder shall be entitled to receive from the Company the same type of form of consideration
such as holders of common stock.
Furthermore,
it was determined that the Convertible note is hybrid instrument embodies both an embedded derivative and a host contract and that the
embedded conversion feature is required to be bifurcated from the host loan instrument using the with-and-without method. The embedded
derivative was measured first at fair value, and the residual amount was allocated to the host contract. The embedded conversion feature
was recognized in total amount of $152 upon initial recognition and in subsequent periods as derivative liability at fair value through
profit and loss. The host loan instrument is accounted for, in subsequent periods, using the effective interest method over the term
of the loan, until its stated maturity.
The
Company recorded expenses of $41
and $357
related to remeasurement of the embedded conversion
feature of convertible bridge loan and the discount amortization of the host loan instrument, respectively, as part of the “Finance
Expenses” line in operations in the accompanying consolidated statement of operations for the year ended December 31, 2021.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
10 - CONVERTIBLE BRIDGE LOANS, NET (Cont.)
|
5. |
On
October 21, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with an institutional investor
(the “Purchaser”) pursuant to which the Company has agreed to issue a promissory convertible note (the “Note”)
to the Purchaser in the principal amount of $1,428 for proceeds of $1,000 (the “Transaction”). The closing occurred on
October 22, 2021 (the “Closing Date”). The Note has a maturity date of one year from the date of issuance and pays interest
at a rate of 4% per annum. The Note is convertible into shares of Common Stock (the “Conversion Shares”) at a conversion
price of $0.0599 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”) to purchase
up to 3,440,000 shares of Common Stock (the “Warrant Shares”) of the Company with an exercise price equal to $0.107415
per share. The Warrant is exercisable for 5 years from the date of issuance. The Company intends to use the net proceeds from this
Note to continue funding the ongoing Phase 2 clinical trial of Tollovir® in hospitalized COVID-19 patients, beginning the initial
marketing campaign for the cPass neutralizing antibody test launch at Provista Diagnostics and general corporate purposes. |
The
Company has agreed to file a registration statement with the Securities and Exchange Commission registering for resale the Conversion
Shares and the Warrant Shares (the “Registration Statement). Subsequent to the effective date of the Registration Statement, if
the closing sale price of the Common Stock averages less than the then Conversion Price over a period of ten (10) consecutive trading
days, the Conversion Price shall reset to such average price. If the 10 day volume weighted average price of the Common Stock continues
to be less than the Conversion Price then the Conversion Price should reset to such 10-day average price with a maximum of a 20% discount
from the initial Conversion Price.
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the relative
fair value of the Note and the detachable warrants in total amount of $877
and $123,
respectively. The amount allocated to the warrants was classified as a component of permanent equity (as their terms permit the holders
to receive a fixed number of shares of common stock upon exercise for a fixed exercise price), net of any related issuance costs and
as upon fundamental transaction the warrants holder shall be entitled to receive from the Company the same type of form of consideration
such as holders of common stock.
Furthermore,
it was determined that the Convertible note is hybrid instrument embodies both an embedded derivative and a host contract and that the
embedded conversion feature is required to be bifurcated from the host loan instrument using the with-and-without method. The embedded
derivative was measured first at fair value, and the residual amount was allocated to the host contract. The embedded conversion feature
was recognized in total amount of $356 upon initial recognition and in subsequent periods as derivative liability at fair value through
profit and loss. The host loan instrument is accounted for, in subsequent periods, using the effective interest method over the term
of the loan, until its stated maturity.
The
Company recorded expenses of $360
and $123
related to remeasurement of the embedded conversion
feature of convertible bridge loan and the discount amortization of the host loan instrument, respectively, as part of the “Finance
Expenses” line in operations in the accompanying consolidated statement of operations for the year ended December 31, 2021.
|
6. |
On
November 2, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with an institutional investor
(the “Purchaser”) which was amended on November 24, 2021, pursuant to which the Company has agreed to issue a promissory
convertible note (the “Note”) to the Purchaser in the principal amount of $1,432 for proceeds of $1,000 (the “Transaction”).
The closing occurred on November 2, 2021 (the “Closing Date”). The Note has a maturity date of one year from the date
of issuance and pays interest at a rate of 4% per annum. The Note is convertible into shares of Common Stock (the “Conversion
Shares”) at a conversion price of $0.06 (the “Conversion Price). In addition, the Purchaser received a warrant (the “Warrant”)
to purchase up to 3,733,333 shares of Common Stock (the “Warrant Shares”) of the Company with an exercise price equal
to $0.107 per share. The Warrant is exercisable for 5 years from the date of issuance. |
|
|
|
|
|
Upon
initial recognition, the management by assistance of third-party appraiser allocated the net cash proceeds received based on the
relative fair value of the Note and the detachable warrants in total amount of $727 and $208, respectively. The amount allocated
to the warrants was classified as a component of permanent equity (as their terms permit the holders to receive a fixed number of
shares of common stock upon exercise for a fixed exercise price), net of any related issuance costs and as upon fundamental transaction
the warrants holder shall be entitled to receive from the Company the same type of form of consideration such as holders of common
stock. |
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE 10 - CONVERTIBLE
BRIDGE LOANS, NET (Cont.)
|
|
Furthermore,
it was determined that the Convertible note is hybrid instrument embodies both an embedded
derivative and a host contract and that the embedded conversion feature is required to be
bifurcated from the host loan instrument using the with-and-without method. The embedded
derivative was measured first at fair value, and the residual amount was allocated to the
host contract. The embedded conversion feature was recognized in total amount of $68 upon
initial recognition and in subsequent periods as derivative liability at fair value through
profit and loss. The host loan instrument is accounted for, in subsequent periods, using
the effective interest method over the term of the loan, until its stated maturity.
|
|
|
|
|
|
The
Company recorded expenses of $39 and $89 related to remeasurement of the embedded conversion
feature of convertible bridge loan and the discount amortization of the host loan instrument,
respectively, as part of the “Finance Expenses” line in operations in the accompanying
consolidated statement of operations for the year ended December 31, 2021.
|
|
|
|
|
7. |
During
2021, the Company entered into additional Securities Purchase Agreements in total amount of $1,171
with several lenders. |
NOTE
11 – LEASES
A. The components of operating lease cost for the year ended December 31, 2021 and 2020 were as follows:
SCHEDULE
OF OPERATING LEASE COSTS
| |
2021 | | |
2020 | |
| |
December 31, | |
| |
2021 | | |
2020 | |
| |
| | |
| |
Operating lease costs | |
| 20 | | |
| - | |
Short-term lease cost | |
| 86 | | |
| - | |
Total operating lease cost | |
| 106 | | |
| - | |
B. Supplemental cash flow information related to operating leases was as follows:
SCHEDULE
OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO OPERATING LEASES
| |
2021 | | |
2020 | |
| |
December 31, | |
| |
2021 | | |
2020 | |
| |
| | |
| |
Cash paid for amounts included in the measurement of lease liabilities: | |
| | | |
| | |
Operating cash flows from operating leases | |
| 10 | | |
| - | |
Right-of-use assets obtained in exchange for lease obligations (non-cash): | |
| | | |
| | |
Operating leases | |
| 164 | | |
| - | |
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
11 – LEASES (continue)
C. Supplemental balance sheet information related to operating leases was as follows:
SCHEDULE
OF SUPPLEMENTAL BALANCE SHEET INFORMATION
| |
2021 | | |
2020 | |
| |
December 31, | |
| |
2021 | | |
2020 | |
| |
| | |
| |
Operating leases: | |
| | | |
| | |
Operating leases right-of-use asset | |
| 143 | | |
| - | |
| |
| | | |
| | |
Current operating lease liabilities | |
| 102 | | |
| - | |
Non-current operating lease liabilities | |
| 39 | | |
| - | |
Total operating lease liabilities | |
| 141 | | |
| - | |
| |
| | | |
| | |
Weighted average remaining lease term (years) | |
| 1.25 | | |
| - | |
| |
| | | |
| | |
Weighted average discount rate | |
| 21 | % | |
| - | |
D. Future minimum lease payments under non-cancellable leases as of December 31, 2021 were as follows:
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS
| |
2021 | |
| |
| |
2022 | |
| 122 | |
2023 | |
| 41 | |
Total operating lease payments | |
| 163 | |
Less: imputed interest | |
| 22 | |
Present value of lease liabilities | |
| 141 | |
The
Company signed a month-to-month lease agreement in Tel Aviv, Israel. Additionally, the Company lease office space in New York, which
is subject to an annual lease that is currently due to expire at the end of March 2022 and which is shared with two of our United States
subsidiaries, Todos Medical USA and Corona Diagnostics LLC.
Provista
Diagnostics signed a lease agreement for office space in Georgia, US trough June 30, 2023 with monthly payments of $10. A lease liability
in the amount of $164 and right-of-use asset in the amount of $$164 have been recognized in the balance sheet as at September 30, 2021
in respect of the lease.
TODOS
MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
12 - DERIVATIVE WARRANTS LIABILITY
A. |
Warrants
granted to investors through private placement transactions |
The
Company issued under Private Placement transactions 600,000,
4,518,406
and 3,106,000
warrants during the years ended December
31, 2018, 2016 and 2015, respectively. These warrants were classified as financial liability because of provisions in such warrants that
allow for the net cash settlement of such warrants in the event of certain fundamental transactions, as defined in the warrant agreement
(some of which are not considered solely within the control of the Company). The estimated fair value of this derivative liability for
such warrants as of December 31, 2021 and 2020, was $0
and $54
, respectively.
B. |
Warrants
granted to lenders and placement agent through Convertible Bridge Loans transactions |
The
Company issued under convertible bridge loans transactions certain warrants during the year ended December 31, 2019 (the First Warrant
as described in Note 10B). In addition, the Company has an obligation to issue warrants in total amount of $79
to the placement agent in connection with the
convertible bridge loans transactions (see also Note 10B). These warrants were classified as financial liability because of provisions
in such warrants that permit the holders to receive a variable number of shares of common stock upon exercise (see also Note 2Y).
The estimated fair value of derivative liability for such warrants as of December 31, 2021 and 2020, was $0
and $247
, respectively.
C. The remaining outstanding warrants and terms as of December 31, 2021 and 2020 is as follows:
SCHEDULE OF OUTSTANDING WARRANTS AND TERMS
Issuance date | |
Outstanding as of
December 31,
2021 | | |
Outstanding as of
December 31,
2020 | | |
Exercise Price | | |
Exercisable as of December 31, 2021 | | |
Exercisable
Through |
| |
| | |
| | |
| | |
| | |
|
Series (2015) | |
| - | | |
| 1,502,500 | | |
$ | 0.5 | | |
| - | | |
April 2021 |
Series (2016) | |
| 375,000 | | |
| 375,000 | | |
$ | 0.5 | | |
| 375,000 | | |
March 2022 |
Series (2018) | |
| - | | |
| 600,000 | | |
$ | 0.5 | | |
| - | | |
November 2021 |
2019 warrants | |
| -(*) | | |
| -(*) | | |
| -(*) | | |
| - | | |
-(**) |
| |
| 375,000 | | |
| 2,477,500 | | |
| | | |
| 375,000 | | |
|
|
(*)
|
The
number of shares to be issued upon the exercise of derivative liabilities related to warrants instruments has not been determined
as such warrants provide the Lenders with 25%
warrant coverage, with the warrant exercise price to be equal to the offering price in the Company’s proposed public offering,
or, in the event the Loan Amount are converted into ordinary shares, the warrant exercise price will be equal to the applicable closing
bid price of the Company’s shares at the time of the conversion of the Loan Amount. However, based on the share price of the
Company as of December 31, 2021 and 2020, the number of the warrants would have been 78,707,922
and 3,351,586
shares, respectively. |
|
|
|
|
(**) |
The
exercise period is three years from the date of the determination of the exercise price. |
The
Company uses the Black-Scholes valuation model to estimate fair value of these warrants. In using this model, the Company makes certain
assumptions about risk-free interest rates, dividend yields, expected stock price volatility, expected term of the warrants and other
assumptions. Expected volatility was calculated based upon historical volatility of peer companies in the same industry on weekly basis
since the marketability of the Company is considered low. Risk-free interest rates are derived from the yield on U.S. Treasury debt securities.
Dividend yields are based on historical dividend payments, which have been zero to date. The expected term of the warrants is based on
the time to expiration of the warrants from the measurement date.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
12 - DERIVATIVE WARRANTS LIABILITY (CONT.)
D. The following table summarizes the observable inputs used in the valuation of the derivative warrant liabilities as of December 31, 2020:
SCHEDULE OF VALUATION OF THE DERIVATIVE WARRANT LIABILITIES
| |
Series
(2015) | | |
Series
(2016) | | |
Series
(2018) | |
| |
As of December 31, 2020 | |
| |
Series
(2015) | | |
Series
(2016) | | |
Series
(2018) | |
Share price (U.S. dollars) | |
$ | 0.075 | | |
$ | 0.075 | | |
$ | 0.075 | |
Exercise price (U.S. dollars) | |
$ | 0.50 | | |
$ | 0.50 | | |
$ | 0.50 | |
Expected volatility | |
| 144.63 | % | |
| 209.19 | % | |
| 238.82 | % |
Risk-free interest rate | |
| 0.09 | % | |
| 0.09 | % | |
| 0.09 | % |
Dividend yield | |
| - | | |
| - | | |
| - | |
Expected term (years) | |
| 0.35 | | |
| 1.21 | | |
| 0.88 | |
| |
First Warrant | |
| |
Closing Date | | |
As of December 31,
2020 | |
Share price (U.S. dollars) | |
$ | 0.12-$0.26 | | |
$ | 0.075 | |
Exercise price (U.S. dollars) | |
$ | 0.12-$0.26 | | |
$ | 0.04 | |
Expected volatility | |
| 125.31%-129.94 | % | |
| 105.77%-113.53 | % |
Risk-free interest rate | |
| 1.74%-2.56 | % | |
| 0.11%-0.13 | % |
Dividend yield | |
| - | | |
| - | |
Expected term (years) | |
| 2.38 | | |
| 1.50-1.91 | |
Probability for uplisting | |
| 75 | % | |
| 75 | % |
SCHEDULE OF WARRANT ACTIVITIES
| |
Series
(2015) | | |
Series
(2016) | | |
Series
(2018) | | |
2019
Warrant | | |
Placement
Agent
Warrant | | |
Total | |
Balances at December 31, 2019 | |
$ | 2 | | |
$ | 3 | | |
$ | 6 | | |
$ | 662 | | |
$ | 79 | | |
$ | 752 | |
Amount classified to equity upon determination of the exercise price (*) | |
| - | | |
| - | | |
| - | | |
| (651 | ) | |
| - | | |
| (651 | ) |
Amount classified to equity upon determination of the exercise price | |
| - | | |
| - | | |
| - | | |
| (651 | ) | |
| - | | |
| (651 | ) |
Modification of convertible bridge loans transactions | |
| - | | |
| - | | |
| - | | |
| (727 | ) | |
| - | | |
| (727 | ) |
Changes in fair value | |
| 9 | | |
| 10 | | |
| 24 | | |
| 884 | | |
| - | | |
| 927 | |
Balances at December 31, 2020 | |
$ | 11 | | |
$ | 13 | | |
$ | 30 | | |
$ | 168 | | |
$ | 79 | | |
$ | 301 | |
Beginning balance | |
$ | 11 | | |
$ | 13 | | |
$ | 30 | | |
$ | 168 | | |
$ | 79 | | |
$ | 301 | |
Changes in fair value | |
| (11 | ) | |
| (13 | ) | |
| (30 | ) | |
| (168 | ) | |
| (79 | ) | |
| (301 | ) |
Balances
at December 31, 2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Ending balance | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
(*)
|
Following
the partial conversion of certain convertible bridge loans into ordinary shares (see also Note 10), the right that was granted
to the lenders to receive a variable number of shares of common stock upon exercise of certain warrants has been lapsed and accordingly
the applicable amount was reclassified from non-current financial liability into additional paid-in capital. |
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
13 - FAIR VALUE OF BIFRUCATED CONVERTIBLE FEATURE OF CONVERTIBLE BRIDGE LOANS
A. |
During
the years ended December 31, 2021 and 2020, the Company allocated approximately $7,420
and $2,893,
respectively, of proceeds from its units that were issued under convertible bridge loans transactions to the fair value of the convertible
feature embedded in such convertible bridge loans (see also Note 10E - Note 101M). The Company has determined that
such feature requires bifurcation, as the conversion represent an obligation to issue a variable number of shares and as such the
embedded conversion feature cannot be considered as indexed to the Company’s own stock. The estimated fair value of derivative
liability for such convertible components as of December 31, 2021 and 2020 was $4,182
and $2,500,
respectively. |
|
|
B. |
The
Company uses the Monte-Carlo Simulation Model to estimate fair value of this convertible component liability. In using this model,
the Company makes certain assumptions about risk-free interest rates, expected stock price volatility and other assumptions. Expected
volatility was calculated based on the Company’s stock performance. Risk-free interest rates are derived from the yield
on U.S. Treasury debt securities. |
|
|
C. |
The
following table summarizes the observable inputs used in the valuation of the convertible component liability as of the closing date
and December 31, 2021 and 2020: |
SUMMARY OF OBSERVABLE INPUTS USED IN THE VALUATION OF THE CONVERTIBLE COMPONENT LIABILITY
| |
|
Closing Date | |
|
As of December 31, 2021 | |
Share price (U.S. dollars) | |
$ |
0.058 | |
|
$ | 0.058 | |
Expected volatility | |
|
142.2%-169.8 | % |
|
| 142.2%-169.8 | % |
Risk-free interest rate | |
|
0.19%-0.38 | % |
|
| 0.19%-0.38 | % |
| |
|
Closing Date | |
|
As of December 31, 2020 | |
Share price (U.S. dollars) | |
$ |
0.051-$0.125 | |
|
$ | 0.075 | |
Expected volatility | |
|
95.92%-127.53 | % |
|
| 128.3%-131.5 | % |
Risk-free interest rate | |
|
0.10%-0.18 | % |
|
| 0.08%-0.14 | % |
SUMMARY OF FAIR VALUE OF CONVERTIBLE COMPONENT LIABILITY
| |
Fair value of
bifurcated
conversion
feature liability | |
Balances as of December 31, 2019 | |
$ | - | |
Plus: Recognition at the initial date | |
| 2,893 | |
Less: Partial conversion of convertible bridge loans into equity | |
| (38 | ) |
Plus: Modification of convertible bridge loans transactions | |
| 213 | |
Less: Changes in fair value | |
| (568 | ) |
Balances as of December 31, 2020 | |
$ | 2,500 | |
Plus: Recognition at the initial date | |
| 7,420 | |
Less: Partial conversion of convertible bridge loans into equity | |
| (174 | ) |
Plus: Modification of convertible bridge loans transactions | |
| (3,384 | ) |
Less: Changes in fair value | |
| (2,180 | ) |
Balances as of December 31, 2021 | |
$ | 4,182 | |
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES
|
1. |
Financial
Buzz Media Networks LLC |
|
A. |
On
June 8, 2020, the Company entered into new PR and Media Service Provider Agreement with Financial Buzz, whereby Financial Buzz would
provide the Company with media and PR marketing services will be extended over a period of 6 months commenced on June 8, 2020. In
consideration for the Media Services, the Company shall issue a total of 5,000,000 fully vested Ordinary Shares of NIS 0.01 par value
to Financial Buzz upon execution of the PR and Media Service Provider Agreement. The fair value of these shares amounted to $450,
representing a price per share of $0.09 at the commitment date. |
|
|
|
|
B. |
On
December 14, 2021, the Company entered into new PR and Media Service Provider Agreement with Financial Buzz, whereby Financial Buzz
would provide the Company with media and PR marketing services over a period of 6 months commenced on December 14, 2021. In consideration
for the Media Services, the Company shall issue a total of 15,000,000 fully vested Ordinary Shares of NIS 0.01 par value to Financial
Buzz upon execution of the PR and Media Service Provider Agreement. The fair value of these shares amounted to $1,170, representing
a price per share of $0.078 at the commitment date. |
On
May 27, 2020, the Company issued 2,500,000
ordinary shares to Financial Buzz.
As of December 31, 2021, the Company has an obligation to issue the aforesaid 17,500,000
shares under both agreements. During the year
ended December 31, 2021 and 2020, the Company recorded stock-based compensation expenses in total amount of $117
and $450, respectively, as part of “Sales
and Marketing Expenses” line in operations in the accompanying consolidated statement of operations.
|
2. |
3D
Biomedicine Science and Technology Co. Limited |
On
March 16, 2020 (the “Effective Date”), Todos Medical USA entered into Distribution Agreement with 3D Biomedicine Science
and Technology Co. Limited (“3DMed”), whereby at the Effective Date 3DMed appointed Todos Medical USA as its non-exclusive
agent for importing, marketing and distributing of the 3DMed’s products which include physician kits, lab kits and any other kits
that may be used in the process of analyzing and diagnostic swab samples (the “Products”) in specific countries (the “Territories”).
The Distribution Agreement shall be in effect for a period of one year from the Effective Date (the “Term”) and will be extending
automatically for an additional period of three years unless terminated by either party at the end of the Term by giving the other party
termination notice in writing at least 90 days prior to the Term end.
At
the initial of the Distribution Agreement, the Company will validate the performance of the Products provided by 3DMed (the “Validation
Stage”). If the Validation Stage result will be accepted by the Company, both parties will have further commercial cooperation
according to the terms of the Distribution Agreement, under which the Company will be committed to minimum purchase quantities of the
Products according to the supply price as defined in the Distribution Agreement.
In
consideration for the reduced supply price that the Company will be entitled to under the Distribution Agreement, the Company will
issue to 3DMed restricted ordinary shares at the end of the Validation Stage upon successful completion of the Validation based on value
of $250 according to the share price as of March 13, 2020. As of December 31, 2020, and as of the signing date of these consolidated
financial statements, the Validation Stage is still in progress and the Company has its own discretion to stop the commercial cooperation
with 3DMed.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
On
May 23, 2020, the Company entered into Consulting Agreement with Andrew Blumenthal (“Andrew”) whereby Andrew will provide
service to the Company in connection with entering into contracts with third parties for sales and or sub distribution agreements whereby
Company will provide testing and treatment products related to COVID-19 (the “Service”). For fulfillment of Andrew’s
duties under the Consulting Agreement, Andrew will receive compensation as follows:
|
A. |
Monthly
retainer of $15 beginning upon execution of Consulting Agreement (the “Monthly Retainer”). |
|
|
|
|
B. |
Issuance
of 2,500,000 ordinary shares of the Company par value NIS 0.01 per share which will be vested over a period of nine months as follows: |
|
1. |
900,000 vested in 100,000 monthly increments over nine months commencing with the execution of the Consulting Agreement. |
|
|
|
|
2. |
400,000
for each contract that delivers over $1,000 in gross profits, up to 4 contracts. |
|
C. |
25%
of net revenues (gross sales price less the acquisitions cost excluding financing and operational expenses) from any product sale
in which Andrew is the introducing representative (the “Commission Fee”). The Company’s Commission Fee shall be
remained as long as the Company sell product to a representative sourced by Andrew, regardless of whether the Consulting Agreement
has been terminated. |
|
|
|
|
D. |
For
every month that Andrew is engaged with the Company, up to maximum of 6-months period, Andrew shall be granted one month of severance
consulting fee posts termination equal to Monthly Retainer. |
The
Consulting Agreement term commenced on May 6, 2020 and will continue until the earlier to occur of: (i) March 25, 2021, or (ii) termination
as described in the Consulting Agreement. Commencing August 2021, Andrew is compensated as an employee of the Company and the Company
and Andrew terminated the Consulting Agreement
During
the years ended December 31, 2021 and 2020, the Company recorded expenses in total amount of $46
($13
out of which related to stock-based compensation
expenses which represented a price per share of $0.067
at the commitment date) and $159
($47
out of which related to stock-based compensation
expenses which represented a price per share of $0.067
at the commitment date), respectively, as part
of “Sales and Marketing Expenses” line in operations in the accompanying consolidated statement of operations. During the
years ended December 31, 2021 and 2020, the Company has not recorded expenses with respect to the aforesaid Commission Fee.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
A. |
Consulting
Agreements (Cont.) |
On
May 23, 2020, the Company entered into Consulting Agreement with Singh Global LLC (“Singh”) whereby Singh will provide service
to the Company in connection with entering into contracts with third parties for sales and or sub distribution agreements whereby the
Company will provide Testing and Treatment products related to COVID-19 (the “Service”). For fulfillment of its duties under
the Consulting Agreement, Singh will receive compensation as follows:
|
A. |
Monthly
retainer of $15 beginning upon execution of Consulting Agreement (the “Monthly Retainer”). |
|
|
|
|
B. |
Issuance
of 2,500,000 ordinary shares of the Company par value NIS 0.01 per share which will be vested over a period of nine months as follows:
|
|
1. |
900,000 vested in 100,000 monthly increments over nine months commencing with the execution of the Consulting Agreement. |
|
|
|
|
2. |
400,000
for each contract that delivers over $1,000 in gross profits, up to 4 contracts. |
|
C. |
25%
of net revenues (gross sales price less the acquisitions cost excluding financing and operational expenses) from any product sale
in which Singh is the introducing representative (the “Commission Fee”). The Company’s Commission Fee shall be
remained as long as the Company sell product to a representative sourced by Singh, regardless of whether the Consulting Agreement
has been terminated. |
The
Consulting Agreement term commenced on May 6, 2020 and will continue until the earlier to occur of: (i) March 25, 2021, or (ii) termination
as described in the Consulting Agreement.
During
the years ended December 31, 2021 and 2020, the Company recorded expenses in total amount of $59 ($14 out of which related to stock-based
compensation expenses which representing a price per share of $0.067 at the commitment date) and $139 ($49 out of which related to stock-based
compensation expenses which representing a price per share of $0.07 at the commitment date), respectively, as part of “Sales and
Marketing Expenses” line in operations in the accompanying consolidated statement of operations. During the year ended December
31, 2021 and 2020, the Company has not recorded expenses with respect to the aforesaid Commission Fee.
On
June 22, 2020, the Company entered into Consulting Agreement with Priyanka Misra (“Priyanka”) whereby Priyanka will provide
service to the Company which include inter alia (i) implementing salesforce and sale surveillance strategies; (ii) develop and implement
a methodology to track sales and strategic relationship opportunities; (iii) investor relations (the “Service”). For fulfillment
of its duties under the Consulting Agreement, Priyanka will receive compensation as follows:
|
A. |
Monthly
draw of $15 beginning upon execution of Consulting Agreement (the “Monthly Draw”). |
|
|
|
|
B. |
25%
of monthly operating profits generated by all sales representatives working under Priyanka, to be calculated as the value of gross
sales received minus cost of goods sold (including shipping, accounting and bookkeeping expenses and sales commission paid to Expansion’s
sales force, less the Monthly Draw (the “Commission Fee”). |
|
|
|
|
C. |
Issuance
of 1,250,000 ordinary shares of the Company par value NIS 0.01 per share which will be vested over a period of six months as follows:
|
|
1. |
250,000
vested upon completion of salesforce implementation or equipment CRM. |
|
|
|
|
2. |
250,000
for each contract that delivers over $1,000 in gross profits, up to 4 contracts. |
(together
referring herein as “Performance Condition”).
The
Consulting Agreement term commenced on June 22, 2020 and will continue until the earlier to occur of: (i) June 23, 2021, or (ii) termination
as described in the Consulting Agreement. Commencing March 2021, Priyanka is compensated as an employee of the Company and the Company
and the Company and Priyanka terminated the Consulting Agreement
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
A. |
Consulting
Agreements (Cont.) |
During
the years ended December 31, 2021 and 2020, the Company recorded expenses in total amount of $107 ($85 out of which related to stock-based
compensation expenses in connection with the Performance Condition related to completion of salesforce implementation or equipment CRM,
which representing a price per share of $0.057 at the commitment date, of which $71 are related to the aforesaid Commission Fee and the
Performance Condition in connection with deliver contracts) and $104 ($14 out of which related to stock-based compensation expenses,
which representing a price per share of $0.057 at the commitment date), respectively, as part of “Sales and Marketing Expenses”
line in operations in the accompanying consolidated statement of operations.
On
January 22 the Company issued Priyanka 1,500 ordinary shares in exchange for the above commitment.
Commencing
March 2021, Priyanka is compensated as an employee of the Company.
On
July 23, 2020, the Company entered into Consulting Agreement with Leomics Associates (“Leomics”) whereby Leomics will provide
worldwide service to the Company which include inter alia (i) identify and introduce to the Company potential US customers for its CLIA
lab services in Atlanta; (ii) working as development business agent targeting the US and global market to bring clients for Covid related
products; (iii) provide guidance and assistance with the clinical validation, reimbursement, and market penetration of the Company’s
current pipeline of products in Breast Cancer and Alzheimer’s contribute to development and optimization of all marketing materials;
(iv) provide the Company with a strategic development plan focused in corporate growth; (v) assistance in raising funds (the “Service”).
For fulfillment of its duties under the Consulting Agreement, Leomics will receive compensation as follows:
|
A. |
Annual
fee amount of $250 which will be payable in 12 equals installments. |
|
|
|
|
B. |
Additional
expenses of $25 which is due at signing of the Consulting Agreement. |
|
|
|
|
C. |
Issuance
of 1,000,000 fully vested ordinary shares of the Company par value NIS 0.01 per share within 5 days of the execution of the Consulting
Agreement. |
|
|
|
|
D. |
Travel
related expenses, when applicable. |
The
Consulting Agreement term commenced on June 22, 2020 and will continue until the earlier to occur of: (i) July 23, 2021, or (ii) termination
as described in the Consulting Agreement.
During
the year ended December 31, 2021 and 2020, the Company recorded expenses in total amount of $85 ($44 out of which related to stock-based
compensation expenses which representing a price per share of $0.095 at the commitment date) and $173 ($44 out of which related to stock-based
compensation expenses which representing a price per share of $0.095 at the commitment date), respectively, as part of “General
and Administrative Expenses” line in operations in the accompanying consolidated statement of operations.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
|
1. |
B.G.
Negev Technologies and Applications Ltd. and Mor Research Applications Ltd. |
At
inception date, the Company entered into a License Agreement (“Agreement”) with B.G. Negev Technologies and Applications
Ltd (a wholly owned subsidiary of Ben Gurion University - Israel) and Mor Research Applications Ltd. (a wholly owned subsidiary of Clalit
Medical Services - Israel) (“Licensors”) in which the Company obtained an exclusive world-wide license to develop, research,
commercialize, produce, market and sub-license, products based on the Licensors’ technology. The Company’s technology is
built on this license which is therefore material to the Company. According to the Agreement, future royalties would be paid to the licensors
based on the following royalty rates:
SCHEDULE OF ROYALTY RATES
On net sales of: | |
% | |
● leukemia related products | |
| 3.0 | |
● other products | |
| 2.5 | |
● in certain limited circumstances, rates may be reduced to | |
| 2.0 | |
On fixed sublicense income (with no sublicense income on sales by sub licensee): | |
% | |
● leukemia related products | |
| 20.0 | |
● other
products | |
| 15.0 | |
On fixed sublicense income (with sublicense income on sales by sub licensee): | |
% | |
● leukemia related products | |
| 10.0 | |
●other products | |
| 7.5 | |
Without
any connection to the Company’s sales, the Company is required to pay minimum royalties to the Licensors according to the following
schedule (subject to the termination clause described below):
|
A. |
Year
2015 - $10 |
|
|
|
|
B. |
Year
2016 - $25 |
|
|
|
|
C. |
Year
2017 and thereafter - $50 per year. |
|
|
|
|
In
any specific year, the total royalties payable to the Licensors shall be the higher of: |
|
|
|
|
A. |
the
regular royalties based on the royalty rates as described above and |
|
|
|
|
B. |
the
minimum royalties. |
The
minimum royalties will be paid to the Licensors regardless of whether the Company succeeds in generating revenues from sales of the products
arising from the usage of the Licensors’ technology.
The
Agreement term is unlimited, but each party is entitled to terminate the Agreement as a result of material breach or failure to comply
with material term by the other party, as a result of liquidation or insolvency of the other party (“Termination for Cause”).
In addition, the Company was entitled to terminate the Agreement if during a period of 7-years following the transaction effective date,
the Company, at its sole discretion, determined that commercialization of the leukemia licensed products is not commercially viable.
After such period, the Company is not entitled to terminate the Agreement other than in accordance with the Termination for Cause provisions.
As of December 31, 2021, the Company did not reach a determination regarding viability of commercialization of the leukemia licensed
products. However, since the 7-year period ended, the Company may not terminate the agreement other than Termination for Cause.
On
May 20, 2020, the Company entered into Amendment No. 3 to the Agreement pursuant to the Company paid the Licensors an amount of $250
which representing an aggregate annual minimum royalty in respect of the years 2015 through 2020. All other Agreement terms regarding
the annual minimum royalties were remained unchanged. Consequently, as of December 31, 2021 and 2020, the Company has accrued an amount
of the non-cancellable minimum royalties and the future liability with respect to commitment to pay minimum royalties to the Licensors
for any future periods in a total amount of $524 and $476, respectively, of which $341 and $291, respectively, was considered as current
liability and $183 and $185, respectively, was considered as non-current liability.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
B. |
Other
Commitments (Cont.) |
|
2. |
University
of Leipzig License Agreement |
On
November 7, 2018, Amarantus entered into an amended license agreement with the University of Leipzig (the “Leipzig License Agreement”)
whereby the University of Leipzig granted Amarantus an exclusive license to the University of Leipzig’s patent that underlies the
Lympro Test. As part of the Amarantus transaction (see also Note 5A), Amarantus assigned the Leipzig License Agreement to our subsidiary,
Breakthrough.
Under
the Leipzig License Agreement, the licensee is required to pay the University of Leipzig the following fees and royalties:
|
A. |
A
license issuance fee of $80 as partial reimbursement of patent expenses related to the patent rights; |
|
|
|
|
B. |
An
annual royalty of $35 on the first and second anniversary of the effective date of the Leipzig License Agreement, and an annual royalty
of $15 on each subsequent anniversary of the effective date; |
|
C. |
The
following milestone payments: |
|
1. |
$75
on first commercial sale of a licensed product; |
|
|
|
|
2. |
$150
on obtaining first FDA approval for a licensed product; and |
|
|
|
|
3. |
$150
upon reaching $5,000 in cumulative net sales; |
|
D. |
The
annual royalty and milestone payments will be treated as an advance on royalty payments due from sales, and after the royalties from
sales equal the aggregate annual royalty and the milestone payments made, a royalty of 3% of net sales, provided that with regard
to each country in which a licensed product is sold, after seven years, the royalty will be reduced to 2% of net sales; and |
|
|
|
|
E. |
10%
of non-royalty sub-licensing income. |
During
the year ended December 31, 2020, the Company recorded expenses amounted to $170 as part of “Research and Development
Expenses” line in operations in the accompanying consolidated statement of operations.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
B. |
Other
Commitments (Cont.) |
|
4. |
Strategic
Partnerships |
The
Company has entered into the following agreements in order to form strategic partnerships with Integrated Health LLC (“Integrated”)
a Louisiana-based medical diagnostics and services provider and MOTOPARA Foundation Inc. (“MOTOPARA”) a non-profit private
operating foundation based in Florida, to deploy mobile COVID-19 testing in the United States:
|
A. |
Charitable
Pledge Agreement |
On
September 25, 2020 (“Effective Date”) the Company entered into Charitable Pledge Agreement (“Charitable Contribution
Agreement”) with MOTOPARA, under which the Company obligate to irrevocable pledge to MOTOPARA for the use and benefit gift amounted
to $1,500 according to the funding schedule as determined in the Charitable Contribution Agreement (the “Charitable Contribution”).
The
Charitable Contribution shall be used to (i) support MOTOPARA and its Biological Protective Services and Response Division for the continued
support of development and implementation of COVID-19 testing, MOTOPARA’s disaster relief and veteran employment-focused mission
(MOTOPARA Mission) and MOTOPARA’s mobile high-complexity laboratories (MHCL) and mobile moderately complex laboratories (MMCL)
with authorized use of Integrated Health LLC’s US CLIA, training, validation and chain of custody licensed and certified authorization
domestically and internationally and (ii) establish a protocol and to distribute the Company’s COVID tests to be used on equipment
supplied by the Company for testing by MOTOPARA.
In
consideration for the Charitable Contribution, MOTOPARA will acknowledge the Charitable Contribution by including, displaying where appropriate
the phrase, “Supported by Todos Medical” and or “Supported by Todos Medical Logo”, in promotional, marking and
proposal documents, website sections related to MOTOPARA’s Biological Protective Services and Response division, MHCLs, MMCLs’
cases, trade shows and exhibits related to MOTOPARA’s Biological Protective Services and Response Division.
MOTOPARA
may terminate the Charitable Contribution Agreement and all rights and benefits of the Company hereunder:
|
1. |
In
the event of any default in payment of the Charitable Contribution as provided in the Charitable Contribution Agreement, or |
|
|
|
|
2. |
In
the event MOTOPARA determines in its reasonable and good faith opinion that circumstances have changed such that the support chosen
by the Company would adversely impact the reputation, image, mission or integrity of MOTOPARA, in the event of a continued association
with the Company and the continuation of the support provided for herein. |
Upon
any such termination of the Charitable Contribution Agreement and/or the support hereunder, MOTOPARA shall have no further obligation
or liability to the Company and shall not be required to return any portion of the Charitable Contribution already paid. However, MOTOPARA
may in its sole and absolute discretion determine an alternative recognition for the portion of the Charitable Contribution already received.
Through
December 31, 2020, an amount of $425 was utilized by MOTOPARA out of the Charitable Contribution amount. Consequently, during the year
ended December 31, 2020, the Company recorded such amount as expenses as part of “Sales and Marketing Expenses” line in operations
in the accompanying consolidated statement of operations.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
B. |
Other
Commitment (Cont.) |
|
6. |
Strategic Partnerships (Cont.) |
|
B. |
Collaboration
Agreement |
In
October 2020, the Company entered into Collaboration Agreement with Integrated who has entered into a partnership with MOTOPARA where
Integrated powers MOTOPARA manufactured mobile Biosafety Level 3 laboratories with its mobile Clinical Laboratory Improvement Amendments
(CLIA) license and operations to allow for COVID-19 testing to occur at scale nationally across the United States (Mobile Lab). The Company,
MOTOPARA and Integrated are referred to as a “Collaborator” and collectively as the “Collaborators”. The terms
of the Collaboration Agreement are as follows:
The
purpose of the Collaboration is for Integrated to distribute the Company COVID tests to be used on equipment supplied by the Company
for COVID-19 testing through Integrated’s licensed, and compliant mobile high complexity CLIA laboratories in conjunction with
MOTOPARA. The Collaborators shall each have the power to engage in the foregoing business, as well as to engage in activities that are
related or incidental to any of these purposes. Integrated agrees that Todos will be the exclusive supplier of any and all test kits
or equipment of which the Company is a distributor or manufacturer Todos agrees to support and perform to ensure compliance with Integrated’s
Mobile laboratory CLIA license. The Company and Integrated agree to work closely to support MOTOPARA’s design and implementation
necessary to implement the mobile laboratory infrastructure to support Integrated’s operations and to support MOTOPARA in obtaining
cash-pay contracts (not reimbursed by insurance) for COVID-19 testing.
|
2. |
Exclusive
Supply Rights |
The
Company shall have an exclusive right to supply Integrated with COVID-19 related equipment, reagents and testing supplies under all agreements
and requests for proposals (RFPs) it signs with domestic and international counterparties for use in Integrated’s CLIA Mobile Lab.
The
Company shall provide to Integrated 1-year loan for up to $1,500 (the “Loan”), according to funding schedule as determined
in the Collaboration Agreement. Integrated has the option to accept or not accept any funding schedule for the Loan. Each Loan tranche
shall bear interest at a rate of 2% and repayment shall commence only upon full Loan funding, or in the event Integrated refuses a Loan
tranche. The Loan will be payable in monthly installment payments over 5-years period and will commence only upon the Collaborators receipt
of the first contract to provide testing services, expected to be with the State of Louisiana. Through December 31, 2020, the Company
funded an amount of $250 out of the Loan which was recorded as prepaid expenses as the monthly Loan repayments will be deducted from
the gross amount of payments received from contracts executed for the testing services and shall be considered part of the out-of-pocket
expenses of such contract.
|
4. |
Integrated
Contribution |
Integrated
shall contribute access to its CLIA license to the Collaboration.
|
5. |
Compensation
Structure of the Collaboration |
Collaborators
agree to full transparency with out-of-pocket expenses as it relates to the initiation of each contract within the Collaboration, and
such costs shall be reimbursed (or advanced as the case may be) to each Collaborator as soon as contracts with Collaboration customers
are funded by the customers, or their funding source. After deducting all out-of-pocket expenses and loan reimbursement to the Company
as it relates to the establishment and ongoing funding of the Collaboration, each Collaborator agrees to divide any potential profit
33.33% to the Company, 33.33% to MOTOPARA and 33.33% to Integrated.
The
Collaboration Agreement shall be effective in October 2020 and continue until the earlier of (i) 5 years or (ii) execution of unanimous
mutual termination agreement (the “Termination Date”).
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
| B. | Other
Commitments (Cont.) |
Settlement
Agreements
On
February 11, 2021, the Company and Todos Medical USA, Inc. (herein referring as “Todos”) entered into Mutual Release and
Settlement Agreement (“Settlement Agreement”) with MOTOPARA Foundation, Inc. (“MOTOPARA”) pursuant to which in
consideration of the Settlement Agreement execution and the releases and promises made in the Settlement Agreement by the parties, the
parties agree as follows
| A. | Todos
shall pay to MOTOPARA an amount of $27 per month for the period of January 11, 2021 through
January 11, 2022. The monthly payment is representative of MOTOPARA’s rent and utilities
increase incurred from signing the original agreement with Todos and signing a lease on an
expansive building to facilitate the originally executed agreement between Todos and MOTOPARA. |
| | |
| B. | Todos
will cease to promote any affiliation with MOTOPARA in any capacity. |
| | |
| C. | MOTOPARA
agrees that upon receipt of the total $351, MOTOPARA will indemnify and defend Todos against
any liens for services provided to MOTOPARA. |
|
5. |
Distribution
agreements |
Commencing
2020, the Company has entered into several distribution agreements with companies to distribute certain novel coronavirus (COVID-19)
test kits. The distribution agreements cover multiple international suppliers of PCR testing kits and related materials and supplies,
as well as antibody testing kits from multiple manufacturers after completing validation of said testing kits and supplies in certified
laboratory in the United States.
During
the year ended December 31, 2021 and 2020, the Company has no obligation under its distribution agreements.
On
July 28, 2020, the Company entered into Royalty Agreement with Toledo under which it was agreed inter alia that (i) the Applicable Rate
for each draw requested on or after the date herein shall accrue on the unpaid aggregate principal balance of each draw at an interest
rate per annum equal to the greater of (a) 12% per annum, or (b) 20% of the anticipated margin for the applicable receivable financed
as presented to the Lender in connection with each draw; (ii) to issue 3,500,000 ordinary shares to Toledo and pay to Toledo a royalty
of 10% of the Gross Margins (as defined in the Royalty Agreement) of the SARS CoV-2 Testing Business (the “Royalty”) in exchange
for Toledo agreeing to amend the terms of the Receivables Financing Agreement with the Company, including, inter alia, a loss of exclusivity
on with respect to purchase order financing.
The
term of the Royalty Agreement commenced on the Effective Date and shall continue in perpetuity. In the event that a court of competent
jurisdiction determines that the perpetual nature of the payment of the Royalty would void the Royalty Agreement, then the term shall
be modified to be a term of 25 years, with a right of Toledo to one automatic extension of another 25 years.
At
any time on or after July 2030, the Company shall have the right to make a pre-payment in the amount of the greater of (i) $5,000 and
(ii) 3 times the average annual Royalty payments due and owning hereunder for the preceding 3 years in order to buy-out and all existing
or remaining rights, claims and privileges of Toledo or its successors or assigns, under and in connection with this Royalty Agreement,
and upon such payment, this Royalty Agreement shall terminate. Such termination shall not relieve the Company of its obligations to satisfy
any obligations to pay Royalties accruing prior to such termination.
In
case that any payment due is not received by Toledo within 10 days, such amounts shall accrue interest at the rate of 12% per annum on
said payments accrued from the date such payment was due. In addition, in case that Royalty is not paid within 30 days of the due date,
the Company shall issue to Toledo a convertible promissory note (the “Note”) in the initial principal amount equal to the
amount then due, which Note shall be convertible into ordinary shares of the Company on the above terms.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
14 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
B. |
Other
Commitments (Cont.) |
As
of August 4, 2020, the Company issued 3,500,000 ordinary shares to Toledo valued at $315 which was recorded as prepaid expenses and will
be amortized over the Term at the Receivables Financing Facility. During the year ended December 31, 2020, the Company recorded amortization
expenses amounted to $34 as part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations.
The
Company has determined that its obligation for future royalties under the Royalty Agreement and also its obligation to pay Toledo an
interest that is partly based on the margin that will be produced by the Company from certain sales (an interest that is equal to the
greater of (i) 12% per annum, or (ii) 30% of anticipated margin applicable to certain receivables) represent contingent interest feature.
However,
it was determined that such features are not required to be bifurcated and accounted for as derivatives, as they are eligible for the
scope exception prescribed under ASC Topic 815-10-15-59 (d) with respect to certain contracts that are not traded on an exchange, as
the underlying is an entity specific performance measure (specified volumes of sales or service revenues of one of the parties to the
contract).
Accordingly,
interest expense related to such contingent features were recognized pursuant to ASC Topic 470-10, Debt - Overall. Thus, the liability
for the contingent payment features was based on the applicable interest rate at the balance sheet date (with no anticipation for any
future changes in the applicable interest rate).
In
addition, the obligation for future royalties was accounted for in accordance with the provisions of ASC Topic 450, Contingencies.
The
Company also has accounted for the Receivables Financing Agreement as a short-term secured loan since the ownership of the accounts receivables
remains with the Company and such receivables serves as a collateral for the amount that has been advanced to the Company according to
the Receivables Financing Agreement.
As
of December 31, 2021 and 2020, the Company has an obligation for Royalty payment of $360 and $139, respectively under the aforesaid Royalty
Agreement with Toledo.
|
1. |
Israeli
Innovation Authority |
Commencing
2012 through 2013, the Company received grants of $162 from the IIA (Israeli Innovation Authority) for its plans to develop a series
of patient-friendly blood tests that enable the early detection of a variety of cancers (the “Development Plan”). Such contingent
obligation has no expiration date. In 2016, the IIA approved further grants (under the same terms) up to maximum amount of approximately
$185, of which the Company received $110 in 2016. The receipt of such amounts is dependent on numerous conditions being met. Amounts
were not received in 2019 and 2018. The Company is required to pay royalties to IIA at a rate of 3% in the first 3-years period and 3.5%
commencing from the fourth year of the proceeds from the sale of the Company’s products arising from the Development Plan up to
an amount equal to $272, plus annual interest equal to 12-month LIBOR applicable to dollar deposit.
As
of December 31, 2021 the Company did not accrue for or pay any royalties to the IIA as no revenue has yet been generated.
On January 7, 2022,
Toledo filed a complaint against Corona, Todos Medical USA, and the Company (the “Todos Defendants”), seeking unspecified
damages for breach of the aforesaid agreements and claiming that at least $139 is due under the royalty agreement. The Todos Defendants
filed an answer and counterclaim on February 9, 2022, wherein various affirmative defenses were asserted, the allegations of the complaint
were denied, and the Company asserted counterclaims for breach of contract and other relief. This dispute is only in its initial legal
stages.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
15 - SHAREHOLDERS’ DEFICIT
The
Ordinary Shares confer upon the holders thereof all rights accruing to a shareholder of the Company, as provided in the company’s
Articles of Association, including, inter alia, the right to receive notices of, and to attend meetings of shareholders; for
each share held, the right to one vote at all meetings of shareholders; and to share equally, on a per share basis, in such dividend
and other distributions to shareholders of the Company as may be declared by the Board of Directors in accordance with these Articles
and the Companies Law, and upon liquidation or dissolution of the Company, in the distribution of assets of the Company legally available
for distribution to shareholders in accordance with the terms of applicable law and these Articles. All Ordinary Shares rank pari passu
in all respects with each other.
B. |
On
July 26, 2021 the Annual General Meeting of the Company approved: |
|
1. |
The
resolution to amend the Company’s Articles of Association: (a) to authorize the creation of 50,000
redeemable Preferred shares of the Company;
(b) to authorize the creation of five thousand redeemable Preferred B Shares of the Company; (c) to increase the Company’s
authorized share capital to permit the issuance of a total of up to 5,000,000,000
ordinary shares of the Company; and (d) to
allow the Company to fulfill relevant provisions of U.S. law in lieu of Israeli law requirements regarding External Directors, if
and to the extent allowed to do so under Israeli corporate law and regulation. |
|
|
|
|
2. |
The
nomination of additional two external directors to the board of directors of the Company for a period ending on July 26, 2024. |
|
|
|
|
3. |
The
extension for an additional year of the authority granted to the Company’s Board of Directors to effect a reverse split
of the Company’s ordinary shares (as per resolution of the Company’s Shareholders’ Meeting of May 11, 2020), such
that the authority so granted shall extend until July 26, 2022, and to expand such authority to include a
reverse split of the Company’s entire share capital share at a ratio within the range from 1-for-2 up to 1-for 500, provided
that the Company shall not effect reverse share splits that, in the aggregate, exceed 1-for-500. |
C. |
Issuance
of Ordinary Shares: |
|
1. |
In
March 2020, the Company entered into subscription agreements with several investors under which the Company raised gross funds in
total amount of $30 in exchange for the issuance of units consisting of 1,500,000 ordinary shares of the Company and 1,339,284 warrants
to purchase the same number of ordinary shares of the Company at an exercise price of $0.10. These warrants may be eligible for exercise
over a period of four years from the issuance date and are subject to standard anti-dilution provisions. In addition, the Company
may be subject to liquidated damages upon failure to timely deliver shares upon exercise of the warrants. An amount of 1,000,000
ordinary shares out of the above have been issued through December 31, 2020. |
|
|
|
|
2. |
On
April 13, 2020, the Company entered into exchange agreement under which the Company agreed to exchange partial amount of the outstanding
trade debt of $100 held by MDM Worldwide Solution, Inc. for issuance of 5,000,000 ordinary shares of the Company at an exchange price
of $0.02 per share. The fair value of the ordinary shares that have been issued on May 14, 2020 as settlement of financial liability
to MDM was $345, reflecting a price per share of $0.069 at the commitment date. The difference amount of $245 has been recorded as
part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations. |
|
|
|
|
3. |
On
May 10, 2020, the Company entered into Loan Conversion Agreement (the “Agreement”) with certain of its shareholders pursuant
to which the Company agreed to convert the outstanding loan amounting to $350 into 8,750,000 ordinary shares of the Company at a
conversion price of $0.04 per share. The fair value of the ordinary shares that have been issued on May 19, 2020 as settlement of
financial liability to shareholders was $604, reflecting a price per share of $0.069 at the commitment date. The difference amount
of $254 has been recorded as part of “Finance Expenses” line in operations in the accompanying consolidated statement
of operations. |
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
15 - SHAREHOLDERS’ DEFICIT (continue)
|
4. |
On
December 8, 2020, the Company entered into a settlement agreement with SRK Kronengold Law office (“SRK”) under which
the Company agreed to exchange partial amount of the outstanding trade debt of $80 held by SRK for issuance of 800,000 ordinary shares
of the Company at an exchange price of $0.09 per share. The fair value of the ordinary shares have been issued on October 26, 2020
as settlement of financial liability to SRK was $68, reflecting a price per share of $0.0851 at the commitment date. The difference
amount of $12 has been recorded as part of “Finance Expenses” line in operations in the accompanying consolidated statement
of operations. |
|
|
|
|
5. |
During
the year ended December 31, 2020, the Company entered into several service agreements with certain service providers, whereby the
Company issued 14,028,503 ordinary share of NIS 0.01 par value in exchange for services that have been rendered. Consequently, the
Company recorded related stock-based compensation expense of $60, $390 and $310 as part of “Research and Development Expenses”,
“Sales and Marketing Expenses” and “General and Administrative Expenses” lines in operations in the accompanying
consolidated statement of operations, respectively, based on the fair value of the issued shares at each applicable commitment date,
which representing an average price per share of $0.54. See also Note 14. |
|
|
|
|
6. |
On
August 4, 2020, the Company entered into a Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement
(the “Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which
Lincoln Park has agreed to purchase from the Company, from time to time, up to $10,275 of its ordinary shares, par value NIS 0.01
per share (the “Ordinary Shares”), subject to certain limitations set forth in the Purchase Agreement, during the term
of the Purchase Agreement (the “Equity Line”). |
The
Company does not have the right to commence any further sales to Lincoln Park under the Purchase Agreement until all of the conditions
thereto that are set forth in the Purchase Agreement, all of which are outside of Lincoln Park’s control, have been satisfied,
including, among other things, the Registration Statement being declared effective by the SEC (the date on which all such conditions
are satisfied, the “Commencement Date”). From and after the Commencement Date, under the Purchase Agreement, on any business
day selected by the Company on which the closing sale price of the Company’s Ordinary Shares exceeds $0.02, the Company may direct
Lincoln Park to purchase up to 500,000 Ordinary Shares on the applicable purchase date (a “Regular Purchase”), which maximum
number of shares may be increased to certain higher amounts up to a maximum of 1,000,000 Ordinary Shares, if the market price of our
Ordinary Shares at the time of the Regular Purchase equals or exceeds $0.13 (such share and dollar amounts subject to proportionate adjustments
for stock splits, recapitalizations and other similar transactions as set forth in the Purchase Agreement), provided that Lincoln Park’s
purchase obligation under any single Regular Purchase shall not exceed $500.
The
purchase price of Ordinary Shares the Company may elect to sell to Lincoln Park under the Purchase Agreement in a Regular Purchase, if
any, will be based on 95% of the lower of: (i) the lowest sale price on the purchase date for such Regular Purchase and (ii) the arithmetic
average of the three lowest closing sale prices for an Ordinary Share during the 15 consecutive business days ending on the business
day immediately preceding such purchase date for such Regular Purchase.
In
addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts of the Company’s Ordinary Shares
in “accelerated purchases” and in “additional accelerated purchases” under the terms set forth in the Purchase
Agreement.
In
connection with the Purchase Agreement, the Company issued 5,812,500 Ordinary shares to Lincoln Park as a commitment fee of $482 thousand
which is recorded as prepaid expenses which are amortized in accordance with the Equity Line utilization. As of December 31, 2020, the
balance of those prepaid expenses was $372 thousand. During the year ended December 31, 2020, the Company recorded amortization expenses
amounted to $110 as part of “Finance Expenses” line in operations in the accompanying consolidated statement of operations.
During
the year ended December 31, 2020, the Company sold 32,747,579 Ordinary Shares to Lincoln Park in an initial purchase out of the Investment
Amount under the Purchase Agreement for a total purchase price of $2,339 thousand.
During
the three months ended March 31, 2021, the Company sold additional 5,229,809 Ordinary Shares to Lincoln Park in an initial purchase out
of the Investment Amount under the Purchase Agreement for a total purchase price of $255 thousand.
As
of December 31, 2021, the Company decided not to utilize the Equity Line utilization and amortized the balance of the prepaid expenses.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
15 - SHAREHOLDERS’ DEFICIT (continue)
|
7. |
In
December 2020, one of the Company’s lenders has partially exercised its warrants into number of 475,411 ordinary shares on
the Company through cashless exercise basis. |
|
|
|
|
8. |
During
the year ended December 31, 2021, Principal Amount and unpaid Interest in total amount of $20,095 have been converted into 487,822,015
ordinary shares. In addition, the Company issued 2,500,000 ordinary shares of NIS 0.01 par value as fulfillment of commitment related
to loan received in 2020. |
|
|
|
|
9. |
During
the year ended December 31, 2021, one of the Company’s Secured Convertible Equipment Loan Agreement was entered into default
scenario as result of lapse of the original maturity date, as defined. Consequently, 20,000,000 ordinary shares of NIS 0.01 par value
of the Company were issued as collateral shares for purpose of repayment of the principal amount. The issued shares have been valued
at $870 and was deducted from the fair value of the principal amount. |
|
|
|
|
10. |
During
the year ended December 31, 2021, the Company entered into several service agreements with certain service providers, whereby the
Company issued 14,921,053 ordinary share of NIS 0.01 par value or the Company is committed to issue fixed number of ordinary shares
in exchange for services that have been rendered. Consequently, the Company recorded related stock-based compensation expense of
$151 as part of “Sales and Marketing Expenses” and “General and Administrative Expenses” lines in operations
in the accompanying consolidated statement of operations, respectively. |
|
|
|
|
11. |
On
October 4, 2021, and upon achieving market launch, the Company issued 39,473,684
shares of common stock to cover its Contingent
Consideration as detailed in Note 5B above. The value of the shares was calculated on the share price on the closing
date of the amendment at $1,500,
and a results recorded additional $450
as part of financing expenses in the accompanying
consolidated statement of operations for the year ended December 31, 2021. |
|
|
|
|
12. |
On
August 3, 2021 and August 9, 2021 the Company issued a total of 25,862,069
shares of common stock to cover its obligation
under its Provista SPA (see Note 3 above). The value of the shares was calculated on the share price on the closing date of
the amendment at $1,500. |
|
|
|
|
13. |
On
March 10, 2021, the Company issued 2,000,000 shares of common stock as part of an amendment to Secured Convertible Equipment Loan
Agreement (see Note 8B). The value of the shares was calculated on the share price on the closing date of the amendment at $83. |
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
16 - STOCK OPTIONS
A. |
On
January 11, 2016, the Company’s Board of Directors approved and adopted the Todos Medical Ltd. 2015 Israeli Share Option Plan
(the “2015 Plan”), pursuant to which the Company’s Board of Directors may award stock options to purchase its ordinary
shares to designated participants. Subject to the terms and conditions of the 2015 Plan, the Company’s Board of Directors has
full authority in its discretion, from time to time and at any time, to determine (i) the designate participants; (ii) the terms
and provisions of the respective Option Agreements, including, but not limited to, the number of Options to be granted to each Optionee,
the number of Shares to be covered by each Option, provisions concerning the time and the extent to which the Options may be exercised
and the nature and duration of restrictions as to the transferability or restrictions constituting substantial risk of forfeiture
and to cancel or suspend awards, as necessary; (iii) determine the Fair Market Value of the Shares covered by each Option; (iv) make
an election as to the type of Approved 102 Option under Israeli IRS law; (v) designate the type of Options; (vi) take any measures,
and to take actions, as deemed necessary or advisable for the administration and implementation of the 2015 Plan; (vii) interpret
the provisions of the 2015 Plan and to amend from time to time the terms of the 2015 Plan. |
The
2015 Plan permits grant of up to 6,000,000 options to purchase ordinary shares subject to adjustments set in the 2015 Plan. As of December
31, 2021, there were no ordinary shares available for future issuance under the 2015 Plan.
B. |
On
July 29, 2020 (the “Commitment Date”), the Company held its Annual General Meeting of Shareholders, at which the shareholders
of the Company approved compensation packages for two officers that include inter alia the Company is obligated to grant of 2,545,083
stock options which are exercisable into the same number of shares of common stock at an exercise price of $0.095 per share and shall
become vested quarterly over a 5-year period from its grant date. At the Commitment Date, the Company by assistance of third-party
appraiser measured the fair value of the stock options in total amount of $206 by using Black-Scholes-Merton pricing model in which
the assumptions that have been used are as follows: expected dividend yield of 0%; risk-free interest rate of 0.25%; expected volatility
of 131.9%, and stock options exercise period based upon the stated terms. |
In
addition, as one-time bonus as compensation for uncompensated efforts to the Commitment Date, the Company is obligated to grant fully
vested shares equal to $275 based on the fair market value of the Company’s shares as of July 28, 2020. The Company recorded stock-based
compensation expense of this amount as part of “General and Administrative Expenses” line in operations in the accompanying
consolidated statement of operations during the year ended December 31, 2020.
Moreover,
upon consummation of the Company’s planned public offering, 30,000,000 restricted stock units’ bonuses will be granted to
the aforesaid officers. At the Commitment Date, December 31, 2021 and 2020, the likelihood that the Performance Milestone for consummation
of the Company’s planned public offering was not considered as probable. Thus, during the years ended December 31, 2021 and 2020,
stock-based compensation expense has not been recorded with respect to the Performance Milestone.
During
the period of nine months ended September 30, 2021, the Company recorded stock-based compensation expense amounting to $59, as part of
“General and Administrative Expenses” line in operations in the accompanying consolidated statement of operations.
C. |
On
July 29, 2020 (the “Commitment Date”), the Company held its Annual General Meeting of Shareholders, at which the shareholders
of the Company approved compensation packages for all its members of the Board of Directors that include inter alia grant of restricted
stock units equal to aggregate amount of $900 that shall become vested quarterly over a 3-year period from its grant date (except
the restricted stock of the board chairman who will be vested quarterly over a 1-year period). |
During
the year ended December 1, 2021, the Company recorded stock-based compensation expense amounting to $405, respectively, as part of “General
and Administrative Expenses” line in operations in the accompanying consolidated statement of operations.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
16 - STOCK OPTIONS (Cont.)
D. |
Compensation
packages for officers and members of the Board of Directors and its committees |
|
1. |
On
March 10, 2021, the Company’s Compensation Committee of the Board of Directors has approved compensation package for the Company’s
Chief Executive Officer that include inter alia (i) based annual salary of $400; (ii) an immediate granting of 50% of salary in restricted
shares for uncompensated efforts to date; (iii) up to 30% cash bonus based on predefined milestones or milestone bonuses in form
of Restricted Stock Units ranging of 250,000 up to 2,000,000 common shares, and cash bonus range of $250 up to $1,500 which are based
on cumulative volume of sales range from $25,000 up to $100,000 or milestone bonuses in form of Restricted Stock Units in value of
$10,000 up to $50,000 which are based on market cap range of $1,000,000 up to $2,000,000 (“Milestone Bonus Fees”); (iv)
1.5% of gross margin for the calendar year 2020 based on Board approval of the Company’s 2020 Financial Statements (“One-Time
Bonus”); (v) grant of 8,750,000 stock options to purchase the same number of shares, vesting quarterly over the course of five
years and (vi) 50% of base cash bonus and grant of 20,000,000 restricted shares upon consummation of the Company’s planned
public offering (“Uplist Fees”). |
|
|
|
|
2. |
On
March 10, 2021, the Company’s Compensation Committee of the Board of Directors has approved compensation package for the Company’s
Chief Financial Officer that include inter alia (i) based annual salary of $250; (ii) an immediate granting of 50% of salary in restricted
shares for uncompensated efforts to date; (iii) up to 30% cash bonus predefined milestones or milestone bonuses in form of Restricted
Stock Units range of 50,000 up to 200,000 and cash bonus range of $75 up to $300 which are based on cumulative volume of sales range
of $25,000 up to $100,000 (“Milestone Bonus Fees”); (iv) 0.5% of gross margin for the calendar year 2020 based on Board
approval of the Company’s 2020 Financial Statements (“One-Time Bonus”); (v) grant of 5,000,000 stock options to
purchase the same number of shares, vesting quarterly over the course of five years and (vi) 50% of base cash bonus and grant of
10,000,000 restricted shares upon consummation of the Company’s planned public offering (“Uplist Fees”). |
|
|
|
|
3. |
On
March 10, 2021, the Company’s Compensation Committee of the Board of Directors has approved compensation package for the Company’s
members of the Board of Directors and its committees that include inter alia (i) each board member will receive $65 annual salary
(to be paid quarterly after financing) and $150 in RSU vesting quarterly over three years; (ii) the Chairman of the board will receive
$65 annual salary (to be paid quarterly after consummation of the Company’s planned public offering) and $150 in RSU annually;
(iii) Lead Independent Director is entitled to receive additional 100% of annual board cash compensation and RSU; (iv) a grant of
RSU of the Company upon consummation of the Company’s planned public offering in an amount equal to annual compensation of
each director (“Uplist Fee”) and (iv) cash bonus of $71 to be paid for services of all board committees (“Bonus
Fee”). |
On
July 26, 2021 the Annual General Meeting of the Company approved the Compensation packages for officers and members of the Board of Directors
and its committees as detailed above.
The
following table presents the Company’s stock option activity for employees and directors of the Company for the years ended December
31, 2020 and 2019:
SCHEDULE OF STOCK OPTION ACTIVITY
| |
Number of
Options | | |
Weighted
Average
Exercise Price | |
Exercisable as of December 31, 2020 | |
| 3,682,818 | | |
| 0.663 | |
Granted (A) | |
| 13,750,000 | | |
| 0.030 | |
Forfeited or expired | |
| (1,137,735 | ) | |
| 0.003 | |
Outstanding as of December 31, 2021 | |
| 16,295,083 | | |
| 0.040 | |
Exercisable as of December 31, 2021 | |
| 1,323,771 | | |
| 0.061 | |
| |
Number of
Options | | |
Weighted
Average
Exercise Price | |
Outstanding as of December 31, 2019 | |
| 2,267,571 | | |
| 0.061 | |
Granted (B) | |
| 2,545,083 | | |
| 0.095 | |
Forfeited or expired | |
| (1,129,836 | ) | |
| 0.120 | |
Outstanding as of December 31, 2020 | |
| 3,682,818 | | |
| 0.663 | |
Exercisable as of December 31, 2020 | |
| 877,122 | | |
| 0.160 | |
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
16 - STOCK OPTIONS (Cont.)
As
of December 31, 2021, the aggregate intrinsic value for the stock options outstanding and exercisable according to $0.058 price per share
is $19, with a weighted average remaining contractual life of 4.5 years.
Stock-based
compensation expenses incurred for employees (and directors) and non-employees for the year ended December 31, 2021, amounted to $645.
As
of December 31, 2021, the aggregate accrual for officers and members of the board and its committees in connection with salary and other
benefits, amounted to $1,752 and is included in Other Current liabilities in the balance sheet.
NOTE
17 - COST OF REVENUES
SCHEDULE OF COST OF REVENUES
| |
2021 | | |
2020 | |
| |
| |
| |
2021 | | |
2020 | |
| |
| | |
| |
Materials and other costs | |
$ | 6,504 | | |
$ | 3,418 | |
Freights and customs | |
| 609 | | |
| 332 | |
Depreciation | |
| 734 | | |
| 68 | |
Cost of revenues | |
$ | 7,847 | | |
$ | 3,818 | |
NOTE
18 - RESEARCH AND DEVELOPMENT EXPENSES
SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSES
| |
| |
| |
2021 | | |
2020 | |
| |
| | |
| |
Salaries and related expenses | |
$ | - | | |
$ | 27 | |
Stock-based compensation | |
| - | | |
| 60 | |
Professional fees | |
| 203 | | |
| 47 | |
Impairment of intangible IPR&D (Note 5A3) | |
| 450 | | |
| 8,157 | |
Laboratory and materials | |
| 127 | | |
| 1,535 | |
Rent and maintenance | |
| 15 | | |
| 6 | |
Depreciation | |
| 29 | | |
| 28 | |
Insurance and others | |
| - | | |
| 3 | |
| |
$ | 824 | | |
$ | 9,863 | |
NOTE
19 - MARKETING EXPENSES
SCHEDULE
OF SALES AND MARKETING EXPENSES
| |
Year ended December 31 | |
| |
2021 | | |
2020 | |
| |
| | |
| |
Stock-based compensation | |
$ | 266 | | |
$ | 1,517 | |
Professional fees | |
| 3,215 | | |
| 1,541 | |
| |
$ | 3,481 | | |
$ | 3,058 | |
NOTE
20 - GENERAL AND ADMINISTRATIVE EXPENSES
SCHEDULE
OF GENERAL AND ADMINISTRATIVE EXPENSES
| |
| |
| |
2021 | | |
2020 | |
| |
| | |
| |
Salaries and related expenses | |
$ | 522 | | |
$ | 167 | |
Stock-based compensation | |
| 893 | | |
| 1,034 | |
Rent and maintenance | |
| 330 | | |
| - | |
Communication and investor relations | |
| 109 | | |
| 44 | |
Bad debts | |
| 2,534 | | |
| - | |
Professional fees | |
| 4,810 | | |
| 1,412 | |
Insurance and other expenses | |
| 166 | | |
| 72 | |
| |
$ | 9,364 | | |
$ | 2,729 | |
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
21 - FINANCING (INCOME) EXPENSES, NET
SCHEDULE OF FINANCING EXPENSES
| |
2021 | | |
2020 | |
| |
| |
| |
2021 | | |
2020 | |
| |
| | |
| |
Change in fair value of warrants liability and warrants expired | |
$ | (301 | ) | |
$ | 201 | |
Change in fair value of liability related to conversion feature of convertible bridge loans | |
| (2,180 | ) | |
| (355 | ) |
Amortization of discounts and accrued interest on straight loans | |
| 2,657 | | |
| 1,170 | |
Amortization of discounts and accrued interest on convertible bridge loans | |
| 25,575 | | |
| 11,196 | |
Change in terms relating to convertible bridge loans transactions | |
| - | | |
| (3,375 | ) |
Issuance of ordinary shares and stock warrants upon modification of terms relating to convertible bridge loans transactions | |
| - | | |
| 170 | |
Issuance of shares as call options to acquire potential acquiree | |
| - | | |
| 3,000 | |
Settlement in cash of prepayment obligation related to convertible bridge loan | |
| 182 | | |
| | |
Issuance of shares as a settlement in excess of the carrying amount of financial liabilities | |
| 870 | | |
| 487 | |
Interest and related royalty of receivables financing facility | |
| 375 | | |
| 1,006 | |
Amortization of prepaid expenses related to commitment shares in connection with receivables financing facility and equity line | |
| 591 | | |
| 144 | |
Exchange rate differences and other finance expenses | |
| 2,571 | | |
| 668 | |
Financing (income) expenses,
net | |
$ | 30,340 | | |
$ | 14,312 | |
NOTE 22 - SHARE IN LOSSES
OF AFFILIATED COMPANIES
SCHEDULE
OF SHARE IN LOSSES OF AFFILIATED COMPANIES
| |
2021 | | |
2020 | |
| |
| |
| |
2021 | | |
2020 | |
| |
| | |
| |
Impairment of investment in Antigen COVID Test Killer see note 5.b. | |
$ | 1,040 | | |
$ | 1,200 | |
Impairment of investment in Bio Imagery Ltd. see note 5.c. | |
| 618 | | |
| - | |
Share in losses of affiliated companies | |
$ | 1,658 | | |
$ | 1,200 | |
NOTE
23 - TAXES ON INCOME
Taxable
income of the Company is subject to the Israeli corporate tax at the rate of 23%.
As
of December 31, 2021, the Company has carried forward losses for Israeli income tax purposes of approximately $12.8 million which can
be offset against future taxable income for an indefinite period of time.
The
Company has final (considered final) tax assessments through the 2015 tax year.
The
U.S. subsidiaries are taxed under United States federal and state tax rules. Income tax is calculated based on a U.S. federal tax rate
of 21%.
The
U.S. subsidiaries estimated federal tax loss carryforward amounted to $13,744 as of December 31, 2021. Such losses are available to offset
any future U.S. taxable income of the U.S. subsidiaries and will expire in the years 2021-2027 for federal tax purposes.
The
U.S. subsidiaries have not received final tax assessments since incorporation.
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
23 - TAXES ON INCOME (Cont.)
C. |
Deferred
income taxes reflect the net tax effects of net operating loss and temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s
deferred tax assets are as follows: |
SCHEDULE OF DEFERRED TAX ASSETS
| |
2021 | | |
2020 | |
| |
As of December 31 | |
Composition of deferred tax assets: | |
2021 | | |
2020 | |
Net operating loss carry-forward | |
$ | 6,141 | | |
$ | 2,568 | |
Research and development credits | |
| 1,879 | | |
| 99 | |
Deferred revenues | |
| - | | |
| 177 | |
Allowance for Bad Debt | |
| 583 | | |
| - | |
Others | |
| 439 | | |
| 75 | |
Net deferred tax asset before deferred tax liabilities and valuation allowance | |
| 9,042 | | |
| 2,919 | |
| |
| | | |
| | |
Composition of deferred tax liabilities: | |
| | | |
| | |
Intangible assets upon acquisition of subsidiary | |
| 315 | | |
| - | |
Prepaids | |
| - | | |
| 88 | |
Depreciation costs | |
| 477 | | |
| 407 | |
Net deferred tax asset before valuation allowance | |
| 8,250 | | |
| 2,424 | |
| |
| | | |
| | |
Valuation allowance | |
| (8,565 | ) | |
| (2,424 | ) |
Net deferred tax assets | |
$ | (315 | ) | |
$ | - | |
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of
the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of
future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on
consideration of these factors, the Company recorded a full valuation allowance as of December 31, 2021 and 2020.
D. |
For
the years ended December 31, 2021 and 2020, the following table reconciles the statutory income tax rate to the effective
income tax rate: |
SCHEDULE OF RECONCILE THE STATUTORY INCOME TAX RATE TO EFFECTIVE INCOME TAX RATE
| |
2021 | | |
2020 | |
| |
Year Ended December 31, | |
| |
2021 | | |
2020 | |
| |
| | |
| |
Tax rate | |
| 23 | % | |
| 23 | % |
| |
| | | |
| | |
Tax expense (benefit) at statutory rate | |
$ | (9,962 | ) | |
$ | (7,071 | ) |
Tax rate differential | |
| 81 | | |
| 45 | |
Permanent differences with respect to stock-based compensation | |
| 273 | | |
| 595 | |
Permanent differences with respect to derivative warrants liabilities, bifurcated conversion feature and convertible loans | |
| 6,851 | | |
| 2,813 | |
Permanent differences with respect to call option to acquire potential acquiree | |
| - | | |
| 732 | |
Change in temporary differences | |
| 941 | | |
| 1,999 | |
Others | |
| - | | |
| - | |
Recognition of deferred tax liability related to acquired asset (IPR&D) | |
| - | | |
| (2,168 | ) |
Loss carryforwards and others | |
| 1,816 | | |
| 887 | |
Income tax expense (benefit) | |
| - | | |
| - | |
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
24 - SEGMENT REPORTING
Commencing
2020, the operations of the Company are conducted through three different core activities: Breast Cancer Test (TM-B1, TM-B2), Alzheimer
and COVID-19 testing and related products (commencing the fourth quarter of 2020), each of which are operating segments. These activities
also represent the reportable segments of the Group.
The
reportable segments are viewed and evaluated separately by Company management, since the marketing strategies, processes and expected
long term financial performances of the segments are different.
B. |
Information
about reported segment profit or loss and assets |
SCHEDULE
OF INFORMATION ABOUT REPORTED SEGMENT PROFIT OR LOSS AND ASSETS
| |
| | |
| | |
COVID-19 | | |
|
|
| |
| |
Breast
Cancer Test | | |
| | |
Testing and
related
products | | |
Un-
allocated
|
|
Total | |
| |
Unaudited | |
Year ended December 31, 2021 | |
| | |
| | |
| | |
|
|
|
| |
Revenues | |
| | | |
| - | | |
| 12,230 | | |
|
- |
|
|
| 12,230 | |
Operating loss | |
| (528 | ) | |
| - | | |
| (3,442 | ) | |
|
(5,316 |
) |
|
| (9,286 | ) |
Unallocated amounts: | |
| | | |
| | | |
| | | |
|
|
|
|
| | |
Financing expenses, net | |
| | | |
| | | |
| | | |
|
(30,340 |
) |
|
| (30,340 | ) |
Other losses | |
| | | |
| | | |
| | | |
|
(2,030 |
) |
|
| (2,030 | ) |
Share in losses of affiliated companies accounted for under equity method, net | |
| | | |
| | | |
| | | |
|
(1,658 |
) |
|
| (1,658 | ) |
Net loss | |
| | | |
| | | |
| | | |
|
(43,314 |
) |
|
| (43,314 | ) |
The
evaluation of performance is based on the operating income of each of the three reportable segments.
Accounting
policies of the segments are the same as those described in the accounting policies applied in the consolidated financial statements.
Due
to the reportable segments’ nature, there have been no inter-segment sales or transfers during the reported periods.
Financing
expenses, net and the share of the Company in losses of affiliated companies were not allocated to the reportable segments, since these
items are carried and evaluated on the enterprise level.
Management
has determined that none of the equity method investees is eligible to be considered as reportable segment as they do not meet the criteria
in ASC Topic 280-10-50 (or they did not commence their operations).
C. |
Revenues
by geographic region are as follows: |
SUMMARY OF REVENUES BY GEOGRAPHIC REGION
| |
2021 | | |
2021 | |
| |
Year ended December 31, | |
| |
2021 | | |
2021 | |
| |
| | |
| |
Israel | |
$ | - | | |
$ | - | |
United States | |
| 12,230 | | |
| 5,207 | |
Revenues | |
| 12,230 | | |
| 5,207 | |
D. |
Property
and equipment, net, by geographic areas: |
SUMMARY OF PROPERTY AND EQUIPMENT, NET, BY GEOGRAPHIC AREA
| |
2021 | | |
2020 | |
| |
As of December 31, | |
| |
2021 | | |
2020 | |
Israel | |
$ | 34 | | |
$ | 61 | |
United States | |
| 2,011 | | |
| 1,938 | |
Property and equipment, net | |
$ | 2,045 | | |
$ | 1,999 | |
SCHEDULE
OF MAJOR CUSTOMER
| |
2021 | | |
2020 | |
| |
As
of December 31, | |
| |
2021 | | |
2020 | |
Client A | |
| 47.2 | % | |
| 56.6 | % |
Client B | |
| 12.0 | % | |
| 0.8 | % |
Client C | |
| 11.9 | % | |
| 2.7 | % |
Major customer | |
| 71.1 | % | |
| 60.1 | % |
TODOS MEDICAL LTD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S.
dollars in thousands)
NOTE
25 - SUBSEQUENT EVENTS
On
March 11, 2022, the Company entered into a Share Purchase Agreement with 3CL Sciences Ltd. (“3CL”) and NLC
Pharma Ltd. (“NLC”), pursuant to which the Company will acquire 52%
of the issued and outstanding shares of 3CL and
NLC will acquire 48%
of the issued and outstanding shares of 3CL (the
“Share Purchase Agreement”). Immediately prior to entering into the Share Purchase Agreement, NLC conveyed to 3CL all of
the therapeutic, diagnostic, dietary supplement and pharmaceutical assets from NLC that relate to 3CL protease biology (which is used
in the development, manufacture, sale and distribution of Tollovid™ and Tollovir™).
In
consideration of the 3CL shares being issued to us, the Company undertook to raise $10,000 for 3CL and committed to issue to NLC $3,800 worth of our ordinary shares, based upon the
closing price for our ordinary shares the day before the closing of the Share Purchase Agreement. The Company and NLC agreed to identify
a seasoned biopharmaceutical CEO to run 3CL going forward. The board of directors of 3CL Sciences will be made up of five (5) individuals:
three (3) appointed by the Company and two (2) appointed by NLC. The Company anticipate that the Share Purchase Agreement will
close during the second quarter of 2022.