TODOS MEDICAL LTD. - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the three months ended ‘June 30, 2022

For the transition period from to

Commission file number 000-56026

TODOS MEDICAL LTD.

(Exact name of registrant as specified in its charter)

121 Derech Menachem Begin, 30th Floor, Tel Aviv, 6701203 Israel

(Address of principal executive offices and Zip Code)

+972 (52) 642-0126

(Registrant’s telephone number, including area code)

(I.R.S. Employer Identification No.)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 16, 2022, the registrant had 1,193,175,121 ordinary shares outstanding.

TODOS MEDICAL LTD.

FORM 10-Q

FOR THE QUARTER ENDED ‘JUNE 30, 2022

TABLE OF CONTENTS

General and Where You Can Find Other Information

Unless otherwise indicated, all references to the “Company,” “we,” “our,” “Todos” and “Todos Medical” refer to Todos Medical Limited and its subsidiaries, Todos Medical USA, a Nevada corporation, Todos Medical Singapore Pte. Ltd., a Singaporean corporation, Corona Diagnostics, LLC, a Nevada limited liability company and a subsidiary of Todos Medical USA, Breakthrough Diagnostics Inc., a Nevada corporation, and 3CL Sciences Ltd., an Israeli corporation. References to “revenues” refer to net revenues. References to “U.S. dollars,” “dollars,” “U.S. $” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to new Israeli shekels. All references to “shares” in this quarterly report on Form 10-Q refer to the pre-reverse split ordinary shares of Todos Medical Ltd., par value NIS 0.01 per share. As is discussed elsewhere in this annual report on Form 10-Q, on July 26, 2021, Todos’ shareholders approved a reverse split of its shares based upon a ratio to be determined by Todos’ management, and at their next annual meeting, Todos’ shareholders will be asked to approve an extension of the deadline for the reverse split.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TODOS MEDICAL LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2022

TODOS MEDICAL LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2022

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TODOS MEDICAL LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands except share and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TODOS MEDICAL LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands except share and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TODOS MEDICAL LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT

(U.S. dollars in thousands except share and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TODOS MEDICAL LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT

(U.S. dollars in thousands except share and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TODOS MEDICAL LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TODOS MEDICAL LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)

(U.S. dollars in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TODOS MEDICAL LTD.

NOTES TO CONDENSED 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.

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, during 2021, upon completion of the Share Purchase Agreement for the purchase of Provista Diagnostics, Inc. (see below), the Company, through Provista Diagnostics, Inc. provide diagnostic testing laboratory services 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.

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 Todos 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 the closing of the Share Purchase Agreement, NLC will conveye 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 to be issued to the Company, Todos undertook to raise $8,000 for 3CL and committed to pay $2,000 to NLC and to issue to NLC $3,800 worth of the Company’s 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 half of 2022, subsequent to the date on which these unaudited condensed consolidated financial statements are issued.

Revenues of the six months ended June 30, 2022, resulted from sales of COVID-19 related products, testing kits and dietary supplement, Tollovid™ . Through June 30, 2022, the Company has not yet generated any revenue from its developed cancer-screening tests TMB-1 and TMB-2 or LymPro Test™.

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands, except shares amounts)

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 June 30, 2022, 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.

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.

On July 28, 2020, the Company completed the purchase of 100% of the issued and outstanding common stock of Breakthrough Diagnostics, Inc. (“Breakthrough”) for entering into the field of early detection of Alzheimer’s disease.

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”, it was also determined that the asset purchased had no alternative future use and therefore the entire purchase price allocated to the acquired IPR&D was charged to expense in the consolidated statement of operations.

On April 19, 2021, the Company entered into an Agreement to Purchase 100% of the issued and outstanding common stock of Provista Diagnostics, Inc. Provista is a molecular diagnostics company focused on developing and commercializing proprietary blood-based proteomic diagnostic, prognostic and monitoring tests in women’s cancer, Videssa®, such as breast and gynecologic cancers. Provista also operates a laboratory for purposes of test validation and commercialization activities related to the distribution and sampling of COVID-19 testing.

On March 14, 2022, the Company entered into a Revolving Line of Credit Agreement with Testing 123, LLC. Under the terms of the Revolving Line of Credit Agreement, the Company agreed to deliver to Testing 123, LLC, shares, equal to a 10% ownership stake in Provista. In the event that additional shares of Provista are issued, the Company committed to issue the Lender additional shares so that his 10% stake in Provista is maintained.

In August 2020, the Company entered into an 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”), developing 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. Under the agreement, the Company granted Bio Imagery an irrevocable, perpetual, exclusive 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.

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars in thousands except shares amounts)

On April 5, 2022 the Company entered into an Agreement Addendum according to which the Company issued 24,000,000 ordinary shares of the Company to Care GB Plus Ltd to increase its holding in Bio Imagery to 51%. The Company estimated the value of the shares issued based on the share price of the Company as of the agreement date at $396,000.

At the Agreement Addendum Closing Date, Bio Imagery 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”. The entire additional investment was charged to expenses at the acquisition date as “other expenses” in the profit and loss as Bio Imagery has not yet commenced its business operations.

In June 2020, the Company entered into agreement with NLC Pharma Ltd., under which Antigen COVID Test Killer (“CATK”) was formed for the purpose of development of diagnostic candidate Antigen Killer and product commercialize through the Company’s sales channels. As of June 30, 2022 the Company hold 15% of the outstanding equity of CATK. As of June 30, 2022, CATK has not commenced its business operations.

See also note 1 regarding the Share Purchase Agreement with 3CL Sciences Ltd. Signed on March 11, 2022.

The Company and its entities herein considered as the “Group”.

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

NOTE 1 - GENERAL

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 June 30, 2022, the Company has incurred accumulated losses of $104,966. As of June 30, 2022, the Company’s current liabilities exceed its current assets by $8,514, and there is a shareholders’ deficit of $30,402. The Company has generated negative operating cash flow for all periods. As of August 22, 2022 (date of approval of these financial statements), the total cash and cash equivalent balance is approximately $28. 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 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 $4,378 and $6,199 during the six months ended June 30, 2022 and 2021, respectively. 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.

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022 (the “2021 Form 10-K”). The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company’s financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature.

The results for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim period or for any future period.

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 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.

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 will be 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. The Company will start amortizing the intangible asset when the asset will be brought into actual use.

During the six and three months ended June 30, 2022 the Company recorded $0, of impairment losses .

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 period of six months ended June 30, 2022 and 2021 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 4,897,109,376 and 323,874,156, respectively.

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

The net loss and the weighted average number of shares used in computing basic and diluted net loss per share for the period of six and three months ended June 30, 2022 and 2021, is as follows:

SCHEDULE OF WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES 

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.

Other new pronouncements issued but not effective as of June 30, 2022 are not expected to have a material impact on the Company’s consolidated financial statements.

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

NOTE 3 - SIGNIFICANT TRANSACTIONS

On March 10, 2022 the Company and Leonite Capital LLC (the “Investor”) entered into an Agreement pursuant to which, the Company agreed to issue the Investor 16,000,000 ordinary shares of the Company as full conversion of all Investor’s outstanding warrants. On March 17, 2022, the Company issued 16,000,000 ordinary shares of the Company.

On March 14, 2022, the Company and Testing 123, LLC (the “Lender”) signed a Revolving Line of Credit Agreement, pursuant to which the Lender will provide the Company with a credit facility of up to $1,250 bearing a monthly interest of 5% calculated for a minimum period of 60 days. The Company may draw funds under the agreement from the date of the agreement and until March 14, 2023. The Maturity date of each draw will be the earlier of (i) 60 days from the date of the loan, (ii) the occurrence of an event of default as defined in the agreement and (iii) with respect to funds received by Borrower through collections on receivables included in a Receivables Pool, as defined in the agreement, 3 days after such funds have been received by the escrow account agent or the Company.

In additional to the above the Company agreed to issue the Lender shares, equal to a 10% ownership stake in Provista. In the event that additional shares of Provista are issued, the Company committed to issue the Lender additional shares such that his stake in Provista shall be maintained at 10%.

On April 7, 2022 the Company issued 1,500,000 ordinary shares (with fair value of $25) as additional interest.

As of June 30, 2022, the Company utilized the full credit facility.

The Company has estimated the fair value of the 10% portion of shares of Provista on March 14, 2022 at $710. The carrying value sold to non-controlling interests as of March 14, 2022 was $635, accordingly $75 was recognized in additional paid in capital. The fair value of the 10% ownership in Provista which is the cost associated with obtaining the revolving line of credit, was amortized to interest expenses as the entire credit facility was utilized.

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 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.

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 (the “Royalty Agreement”).

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 $139,000 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.

On April 7, 2022, the Company and Toledo signed a Settlement Agreement pursuant to which upon execution of the agreement the Company shall pay Toledo $130 and shall issue to Toledo $200 worth of ordinary shares. Upon delivery of the cash payment and shares the parties shall file and discontinue the compliant file by Toledo on January 7, 2022 and Toledo irrevocably and unconditionally, release and discharge the Company from the Receivables Financing Agreement and the Royalty Agreement. The company recorded an income of $153 in the second quarter of 2022, as a result of the cancelation of prior agreements.

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

NOTE 4 - OTHER CURRENT LIABILITIES

 SCHEDULE OF OTHER CURRENT LIABILITIES

NOTE 5 - STOCK BASED COMPENSATION

Stock-based compensation expenses incurred for employees (and directors) and non-employees for the period of six and three months ended June 30, 2022, amounted to $2,221 and $623, respectively.

A. STOCK OPTIONS

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 June 30, 2022, there were 2,338,838 ordinary shares available for future issuance under the 2015 Plan.

The following table presents the Company’s stock option activity for employees and directors of the Company during the periods of six months ended June 30, 2022 and 2021:

 SCHEDULE OF STOCK OPTION ACTIVITY

As of June 30, 2022, the aggregate intrinsic value for the stock options outstanding and exercisable according to $0.012 price per share is $0, with a weighted average remaining contractual life of 3.9 years.

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

B. RESTRICTED STOCK UNITS

The Company issues restricted stock units (“RSU”) under the 2015 Plan to employees and non-employees. The following table outlines the restricted stock awards activity for the Company’s during the periods of three months ended June 30, 2022 and 2021:

 SCHEDULE OF RESTRICTED STOCK UNITS

Weighted average grant date fair value of restricted stock awards granted during the six months period ended June 30, 2022 was $0.029.

NOTE 6 - FINANCING EXPENSES (INCOME), NET

 SCHEDULE OF FINANCING EXPENSES (INCOME) NET

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

NOTE 7 - TAXES ON INCOME

 SCHEDULE OF DEFERRED TAX ASSETS

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 June 30, 2022.

 SCHEDULE OF RECONCILE THE STATUTORY INCOME TAX RATE TO EFFECTIVE INCOME TAX RATE

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

NOTE 8 – 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, 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.

 SCHEDULE OF INFORMATION ABOUT REPORTED SEGMENT PROFIT OR LOSS AND ASSETS

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)..

 SUMMARY OF REVENUES BY GEOGRAPHIC REGION

TODOS MEDICAL LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

(U.S. dollars in thousands)

NOTE 8 – SEGMENT REPORTING (continue)

 SCHEDULE OF MAJOR CUSTOMER

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this quarterly report on Form 10-Q. This discussion and other parts of this quarterly report on Form 10-Q contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this quarterly report on Form 10-Q. We report financial information under US GAAP and our financial statements were prepared in accordance with generally accepted accounting principles in the United States.

Overview

Products

Operating Results

Revenues

During the six and three months ended June 30, 2022, we generated revenues of $4,378,135 and $2,178,769, respectively, compared to revenues of $6,763,219 and $1,732,122, respectively, in revenues during the six and three months ended June 30, 2021. Such revenues were generated by the Company and through our U.S. subsidiaries, Corona Diagnostics, LLC and Provista Diagnostics, Inc.

Operating Expenses

Our current operating expenses consist of four components - cost of revenues, research and development expenses, marketing expenses and general and administrative expenses.

Cost of revenues

Our cost of revenues consists primarily of materials, depreciation and other related cost of revenues expenses.

The following table discloses the breakdown of cost of revenues:

Research and Development Expenses

Our research and development expenses consist primarily of salaries and related personnel expenses, subcontracted work and consulting and other related research and development expenses.

The following table discloses the breakdown of research and development expenses:

We expect that our research and development expenses will materially increase as we plan to rapidly recruit more employees in order to accelerate our research and development efforts.

Sales and Marketing expenses

Sales and marketing expenses consist primarily of salaries and share-based compensation expense.

The following table discloses the breakdown of sales and marketing expenses:

General and administrative

General and administrative expenses consist primarily of salaries, share-based compensation expense, professional service fees (for accounting, legal, bookkeeping, intellectual property and facilities), directors fee and insurance and other general and administrative expenses.

The following table discloses the breakdown of general and administrative expenses:

Comparison of the six months ended June 30, 2022, to the six months ended June 30, 2021:

Results of Operations

Revenues. Our revenues for the six months ended June 30, 2022, were $4,378,135, compared to $6,763,219 revenues during the six months ended June 30, 2021, representing a net decrease of $2,385,084, or 35%. The decrease in our revenues is a result of the reduction in sales of our COVID-19 testing products through our U.S. subsidiary, Corona Diagnostics, LLC which was somewhat offset by sales of Tollovid™, which commenced in the fourth quarter of 2021.

Cost of revenues. Our cost of revenues for the six months ended June 30, 2022, were $2,340,866, compared to $4,148,000 during the six months ended June 30, 2021, representing a net decrease of $1,807,134, or 44%. The decrease in our cost of revenues is related to the decrease in sales of our COVID-19 testing products.

Research and Development Expenses. Our research and development expenses for the six months ended June 30, 2022, were $455,155 compared to $643,000 for the six months ended June 30, 2021, representing a net decrease of $187,845, or 29%. The decrease is primarily due to a decrease in professional fees and other research and development costs in connection with providing Covid testing services.

Sales and Marketing Expenses. Our sales and marketing expenses decreased from $1,828,296 in the six months ended June 30, 2022, to $1,958,000 in the six months ended June 30, 2021, a decrease of $129,704 or 7%.

General and Administrative Expenses. Our general and administrative expenses for the six months ended June 30, 2022, were $5,882,046, compared to $3,204,000 for the six months ended June 30, 2021, providing an increase of $2,678,046 or 84%. The increase is primarily due to an increase in stock-based compensation, salaries and related expenses, including for new employees, and doubtful debts partially offset by a decrease in professional services.

Finance (Income) Expenses, Net. Our net finance expenses for the six months ended June 30, 2022 was $7,876,359 compared to net finance expenses of $10,484,722 for the six months ended June 30, 2021, providing a decrease of $2,608,363 or 25%. The decrease is primarily due to changes in the fair value of warrants liability and amortization of discounts and accrued interest on convertible bridge loans.

Share in losses of affiliated company is accounted for under the equity method. Our share in losses of affiliated company accounted for under the equity method amounted to $492,018 in the six months ended June 30, 2021 ($0 in the six months ended June 30, 2022).

Other losses. Our other losses amounted to $396,000 in the six months ended June 30, 2022 ($0 in the six months ended June 30, 2021).

Net loss attributable to non-controlling interests. Our net loss attributable to non-controlling interests amounted to $29,173 in the six months ended June 30, 2022 ($0 in the six months ended June 30, 2021).

Net Loss attributable to the Company’s stockholders’ equity. Our net loss attributable to the Company’s stockholders’ equity for the six months ended June 30, 2022 was $14,371,842, compared to $14,167,830 for the six months ended June 30, 2021, providing an increase of $204,012 or 1%. The increase is primarily due to an increase in general and administrative expenses offset by a decrease in finance expenses, net as well as other changes as mentioned above.

Comparison of the three months ended ‘June 30, 2022, to the three months ended ‘June 30, 2021:

Results of Operations

Revenues. Our revenues for the three months ended June 30, 2022, were $2,178,769, compared to $1,732,122 revenues during the three months ended June 30, 2021, representing a net increase of $446,647, or 26%. The increase in our revenues is a result of the increase in sales of our sales of Tollovid™, which commenced in the fourth quarter of 2021 offset by decrease in sales of our COVID-19 testing products through our U.S. subsidiary, Corona Diagnostics, LLC.

Cost of revenues. Our cost of revenues for the three months ended June 30, 2022, were $1,023,751, compared to $913,000 during the three months ended June 30, 2021, representing a net increase of $110,751, or 12%. The increase in our cost of revenues is related to the increase in materials and other costs associated with our sales.

Research and Development Expenses. Our research and development expenses for the three months ended June 30, 2022, were $12,900 compared to $239,000 for the three months ended June 30, 2021, representing a net decrease of $226,100, or 95%. The decrease is primarily due to a decrease in research and development costs in connection with providing Covid testing services.

Sales and Marketing Expenses. Our sales and marketing expenses increased from $599,000 in the three months ended June 30, 2021, to $747,822 in the three months ended June 30, 2022, an increase of $148,822 or 25%. The increase in our sales and marketing expenses is related to an increase in professional fees.

General and Administrative Expenses. Our general and administrative expenses for the three months ended June 30, 2022, were $2,406,059, compared to $1,643,000 for the three months ended June 30, 2021, providing an increase of $763,059 or 46%. The increase is primarily due to an increase in stock-based compensation, salaries and related expenses, including for new employees, and doubtful debts partially offset by a decrease in professional services.

Finance (Income) Expenses, Net. Our net finance expenses for the three months ended June 30, 2022 was $4,404,359 compared to net finance expenses of $5,170,913 for the three months ended June 30, 2021, providing a decrease of $766,554 or 15%. The decrease is primarily due to changes in the fair value of warrants liability and amortization of discounts and accrued interest on convertible bridge loans.

Share in losses of affiliated company is accounted for under the equity method. Our share in losses of affiliated company accounted for under the equity method amounted to $0 in the three months ended June 30, 2022 ($118,698 in the three months ended June 30, 2021).

Other losses. Our other losses amounted to $396,000 in the three months ended June 30, 2022 ($0 in the three months ended June 30, 2021).

Net loss attributable to non-controlling interests. Our net loss attributable to non-controlling interests amounted to $29,173 in the three months ended June 30, 2022 ($0 in the three months ended June 30, 2021).

Net income (Loss) attributable to the Company’s stockholders’ equity. Our net loss attributable to the Company’s stockholders’ equity for the three months ended June 30, 2022 was $6,783,039, compared to net income of $3,390,654 for the three months ended June 30, 2021, providing an increase of $10,173,693. The increase is primarily due to an increase in general and administrative expenses and an increase in net finance expenses, as well as other changes as mentioned above.

We prepare our financial statements in accordance with US GAAP. At the time of the preparation of the financial statements, our management is required to use estimates, evaluations, and assumptions which affect the application of the accounting policy and the amounts reported for assets, obligations, revenues and expenses. Any estimates and assumptions are continually reviewed. The changes to the accounting estimates are credited during the period in which the change to the estimate is made.

Until December 31, 2021, we were an “emerging growth company” under the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we elected to rely on certain exemptions, including without limitation, (i) providing an auditor’s attestation report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). These exemptions applied until the last day of the 2021 fiscal year (the fifth anniversary of the end of the fiscal year in which the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act occurred).

Going Concern Uncertainty

Until 2020, we devoted substantially all of our efforts to research and development and raising capital. In 2020, we raised significant capital, but we also generated revenues for the first time as a result of our activities related to Covid-19. There is no certainty as to the continuance of our revenues related to Covid-19. The development and commercialization of our other products, which are necessary for our long term financial health, are expected to require substantial further expenditures. We remain dependent upon external sources for financing our operations. Since inception, we have incurred substantial accumulated losses, negative working capital, and negative operating cash flow, and have a significant shareholders’ deficit. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. We plan to finance our operations through the sale of equity and, to the extent available, short term and long-term loans. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations.

Liquidity and Capital Resources

Overview

To date, we have funded our operations primarily with convertible bridge loans, grants from the IIA, and issuing Ordinary Shares and stock warrants (including warrants’ exercise).

The table below presents our cash flows: