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10-K: TODOS MEDICAL LTD.

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(EDGAR Online via COMTEX) -- ITEM 7. 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, which have been publicly filed with the Securities Exchange Commission and are included with this annual report on Form 10-K. This discussion and other parts of this annual report on Form 10-K contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under "Risk Factors" and elsewhere in this annual report on Form 10-K. We report financial information under US GAAP and our financial statements were prepared in accordance with generally accepted accounting principles in the United States.

Overview

Todos Medical is an in-vitro-diagnostic ("IVD") firm engaging in the development and commercialization of a series of patient-friendly blood tests that enable screening of a variety of cancers. Detecting cancer at an early stage may lead to more effective treatment and possible better survival rate. Our goal is to establish our name in the cancer detection industry worldwide. Our cancer tests are still in the development phase, have not yet been approved by the FDA and are not yet being marketed.

Screening tests for cancer, specifically breast, colon and lung cancers, have compliance shortcomings due to their scientific limitations, invasive procedures, and expensive nature of more accurate diagnostic methods. More importantly, many of the most effective diagnostic methods remain too expensive for adoption as screening tests for all those at risk are used too rarely and not quickly enough to allow for the most effective treatment. Blood based tests are the future of cancer screening.

Our Provista Diagnostics Laboratory serves as a hub for our diagnostic development programs, including our flagship Videssa blood test, as well as support for our automation solutions customers.

Diagnostic testing helps health care providers screen for or monitor specific diseases or conditions. It also helps assess patient health to make clinical decisions for patient care. Our Provista Diagnostics Laboratory is approved under the Clinical Laboratory Improvement Amendments (CLIA). The Clinical Laboratory Improvement Amendments (CLIA) regulate laboratory testing and require clinical laboratories to be certified by the Center for Medicare and Medicaid Services (CMS) before they can accept human samples for diagnostic testing. Laboratories can obtain multiple types of CLIA certificates, based on the kinds of diagnostic tests they conduct.

We have also focused our COVID-19 diagnostic testing efforts at Provista to prioritize delivering diagnostic services, including PCR and neutralizing antibody testing, becoming a direct provider to healthcare professionals.

This expansion into testing services allows us to diversify our business into higher margin revenue in the COVID-19 space, as well as help us to expand our business development opportunities with the labs we work with by providing reference lab testing services as we increase Provista's automated testing capabilities. The Company intends to build Provista into a highly automated lab capable of running multiple platforms in parallel in order to offer clients comprehensive testing solutions that meet their needs, especially in cancer, infectious disease, immune monitoring and Alzheimer's disease.

The Company is also a developer and distributor of immune support products and antivirals that target the inhibition of 3CL protease for the treatment of Covid-19. Todos has acquired exclusive rights to the dietary supplement Tollovid(TM) through its purchase of a controlling interest in 3CL Sciences Ltd., an Israeli corporation. Tollovid is a powerful proprietary blend of plant extracts that help support healthy immune function for today's challenges.

Todos is also developing a more concentrated version of Tollovid for COVID-19 infected patients, using a proprietary blend of botanical extracts with an active chemical ingredient that limits replication of coronaviruses. Todos is currently supporting randomized, placebo-controlled clinical trials managed by joint venture partner NLC Pharma in Israel. Tollovir is the result of over 15 years of development and an investment of over $18 million to date.

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Videssa Breast

Current methods of breast cancer detection have known limitations, particularly in women with abnormal or difficult-to-interpret imaging findings. While clinical examination and imaging technologies are critical elements for detecting breast cancer, the high rate of false positive and false negative results from these approaches can significantly impact patient care. In an effort to improve the accuracy of early breast cancer detection, complementary blood-based approaches are being developed to help address the current limitations of breast imaging. By utilizing new detection strategies, healthcare providers will be able to improve the accuracy of breast cancer detection and minimize the consequences of false positive and false negative results. To help address the diagnostic challenges in breast cancer, we developed Videssa Breast-the first blood test of its kind to detect the presence or absence of breast cancer in women with abnormal or difficult-to-interpret imaging findings. When combined with imaging, Videssa Breast improves diagnostic accuracy and provides greater confidence and clarity when clinical assessment is challenging.

Videssa Breast was developed to provide physicians with actionable information regarding breast cancer risk in women following an inconclusive mammogram result (BI-RADS III or IV), which primarily occurs in women with dense breasts. The data provided from the test, which has demonstrated specificity of ~99% in both women over and under 50 years of age, arms physicians with a powerful tool to help guide decisions of whether to continue to monitor a low-risk patient intermittently, or whether to advance an at-risk patient immediately into a more expensive and invasive diagnostic assessment that likely includes a breast biopsy. With Videssa as the proprietary centerpiece of our cancer diagnostic strategy, we will be looking to offer highly advanced, comprehensive cancer testing solutions to OB-GYNs, general practitioners and other stakeholders in the medical community who will ultimately be managing patients likely to be strong candidates for Videssa.

Videssa Breast combines multiple Serum Protein Biomarkers (SPBs) and Tumor-Associated Autoantibodies (TAAbs), along with patient clinical data, to generate a unique protein signature for breast cancer. As these protein biomarkers are released into the bloodstream, they act as biological cues for the presence of a malignancy, providing a snapshot of what's going on inside of a woman's body to complement the anatomical features visible on imaging. Unlike genetic testing which determines the future risk of developing breast cancer, Videssa Breast is designed to detect real-time disease status. By identifying early biochemical warning signals of breast cancer in the bloodstream, such as "protein biomarkers," Videssa Breast provides information not detectable through imaging technologies, allowing for a more comprehensive assessment.

LymPro Test(TM):

The Lymphocyte Proliferation (LymPro) Test(TM) measures markers of immune cells present in the blood as a surrogate for loss of nerve cell function and the toxic accumulation of beta-amyloid plaques in the brain, which is a hallmark of Alzheimer's disease. Based on differences observed in the response of cells from patients with Alzheimer's disease as compared with age-matched controls and patients with other dementias, it appears that the test has high potential as an adjunctive diagnostic for Alzheimer's disease. LymPro exploits the fact that abnormalities in replication (or the cell cycle) seem to extend to immune cells in the blood. The test specifically measures the alterations in cell cycle activity in blood lymphocytes (a type of immune cell) as a biomarker of neuronal damage, for the early identification and screening of Alzheimer's. Areas for deployment include initial Investigational Use Only ("IUO") testing followed by full diagnostic testing for patients with mild cognitive impairment ("MCI") and dementia for differential diagnosis. Todos owns the exclusive worldwide rights to this Alzheimer's blood test as a result of its acquisition of Breakthrough from Amarantus as follows. On February 27, 2019, we entered into a joint venture agreement with Amarantus, pursuant to which we issued Ordinary Share representing 19.99% of our then outstanding Ordinary Shares to Amarantus, in exchange for Amarantus transferring to us 19.99% of Breakthrough, then a wholly-owned subsidiary of Amarantus, and for Amarantus assigning the license for the LymPro test to Breakthrough. As part of the transaction, we agreed to provide working capital to Breakthrough to support Breakthrough's operations. As part of the Breakthrough joint venture, we were granted an exclusive option to acquire the remaining 80.01% of Breakthrough from Amarantus. At our 2019 annual meeting of shareholders, our shareholders approved a resolution authorizing us to exercise our option to acquire the remaining 80.01% of Breakthrough from Amarantus in exchange for an additional 30% of our then issued and outstanding Ordinary Shares. We closed the acquisition of Breakthrough in July 2020.

There are a few blood-based approaches to Alzheimer's, most of which focus on identifying canonical Alzheimer's markers - Amyloid or Tau. The rationale for these tests is that they serve as a proxy for brain concentration Amyloid and Tau-based imaging. Given the failure of these two mechanisms to demonstrate improvement across hundreds of clinical trials, we believe that looking upstream from Amyloid and Tau is where both true diagnostic and therapeutic avenues exist. LymPro captures both Amyloid and Tau-based information by proxy. Given the expectation that the Alzheimer's therapeutic market could reach $13.57 billion by 20272, we believe LymPro could also help drive mid-term value for Todos as progress is made. Taken together with our core patented Todos Biochemical Infrared Analyses ("TBIA"), which uses a platform based upon a highly sensitive mid infrared equipment called fourier transform infrared spectrometers ("FTIR"), we believe Todos is positioned to become a worldwide leader in the field of immune-based diagnostics.

2 https://www.medgadget.com/2021/01/alzheimers-therapeutics-market-to-reach-usd-13-57-billion-by-2027-size-share- industry-analysis-and-global-forecast-to-2027.html

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COVID-19 Proprietary Lab and Distribution Business:

We provide advanced technologies addressing bottlenecks, whether they be scientific, technical or logistical, to enable laboratories to rapidly expand testing capacity while reducing operational costs. To forward this business, we entered into distribution agreements with multiple companies (such as 3D Biomedicine Science and Technology Col. Ltd., Meridian Health Services Network, Inc., and PCL Inc.) to gain rights to rapid IgM/IgG COVID-19 antibody test kits, RNA extraction machines, RNA extraction reagents, qPCR reagents, digital PCR reagents and automated liquid handler machines, in order to offer a comprehensive suite of solutions to laboratories worldwide. In the second quarter of 2020, we began marketing a turnkey automation services solution to laboratories seeking to expand their COVID-19 testing capabilities and started generating revenue from the distribution of products to support laboratory COVID testing through the automated machinery we provided.

Our Provista Diagnostics Laboratory serves as a hub for our diagnostic development programs, including our flagship Videssa blood test, as well as support for our automation solutions customers. We have focused our COVID-19 diagnostic testing efforts at Provista to prioritize delivering diagnostic services, including PCR and neutralizing antibody testing, becoming a direct provider to healthcare professionals. We have partnered with Fosun Pharma to offer the first neutralizing antibody test, cPass(TM) SARS-CoV-2 Neutralizing Antibody Detection Kit, which has received Emergency Use Authorization ("EUA") from the US FDA for the detection of SARS-CoV-2 receptor binding domain ("RBD" or "neutralizing") antibodies. We believe this test can serve as a key marker for physicians, businesses and schools to access Covid-19 immunity risk among their populations. This expansion into testing services allows us to diversify our business into higher margin revenue in the COVID-19 space, as well as help us to expand our business development opportunities with the labs we work with by providing reference lab testing services as we increase Provista's automated testing capabilities. The Company intends to build Provista into a highly automated lab capable of running multiple platforms in parallel in order to offer clients comprehensive testing solutions that meet their needs, especially in cancer, infectious disease, immune monitoring and Alzheimer's disease.

With the Delta variant posing a significant risk for breakthrough infections, we see neutralizing antibody testing becoming critical for informed decision making to assess who may be best suited for booster shots, as well as at what point someone previously infected with COVID begins to show waning immunity and may decide to receive vaccination as a result. We see a large market opportunity developing for the cPass(TM) SARS-CoV-2 Neutralizing Antibody Detection Kit that we believe will begin to encroach on the COVID-19 PCR testing market. The cPass test will enable individuals to take charge of their health by making data-driven decisions to protect themselves beyond vaccination, such as masking or avoiding certain higher-risk activities when armed with this crucial information. A key differentiator for this novel cPass test is that it detects neutralizing antibodies in patient samples without the use of live virus and with very fast turnaround times, as compared to the conventional method of measuring neutralizing antibodies in patient samples, which requires the use of live cells. We believe immune monitoring will be the primary driver of COVID-19 testing growth going forward. As time advances, and more individuals are several months from their initial vaccine dose, it will become increasingly important for individuals and healthcare providers to assess and monitor neutralizing antibody levels in order to make data-driven decisions with respect to booster shots and behavioral changes. We are currently in the process of automating the cPass test at our laboratory, Provista Diagnostics, to add high-capacity neutralizing antibody testing to its test menu. Provista plans to offer cPass as a testing service to other CLIA labs on a reference basis, as well as directly to the public through healthcare professionals.

We intend to focus on ways of leveraging our existing testing business and our client base to deliver actionable high value testing that will improve outcomes while lowering cost of care. We believe that our establishment of a strong commercial infrastructure is the key to unlocking the value of our intellectual property portfolio for our Company and its shareholders.

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TBIA Platform

Todos Medical's TBIA platform represents a cost effective, scalable, and patient-friendly screening method for cancer screening. Todos has developed the "Total Biochemical Infrared Analysis" (TBIA) method, a proprietary method for screening of solid tumors using peripheral blood spectroscopy analysis. The process involves observing the immune system's response to tumor presence rather than looking for the tumor cells themselves or specific markers. TBIA analyzes the entire biochemical signatures spectrum (including proteins, lipids, nucleic acids and carbohydrates) of affected immune cells from peripheral blood, using infrared spectroscopy.

? Advances in mid infrared spectroscopy using fourier transform infrared spectrometers (FTIR) open new diagnostic frontiers

? Immune system changes detected in plasma and mononuclear cells via FTIR

? Immune response acts as body's sensor for cancer

? FTIR allows observation of distinct immune response to breast, colorectal, lung and other cancer types

The test offered under our TBIA method could help reduce false positives and improve detection rate by reporting to the physician the probability of the presence/absence of cancer prior to more expensive tests. A large, underserved population of unscreened and inadequately screened patients represents a significant opportunity for a patient friendly screening test. Furthermore, traditional tests are more likely to expose patients to radiation and other risks inherent in those tests, our products offer may become a viable solution for these patients, as it is a simple blood test.

Each of the existing screening diagnosis methods have at least one of the following significant drawbacks:

- Expensive

Many patients who need to be checked regularly for cancer, avoid undertaking periodic examinations due to one or more of the above disadvantages. The objective of our Company is to provide a more reliable alternative to the current methods of testing and to thereby overcome patients' fear of regular cancer checkups, leveraging our proprietary technology in TBIA.

Despite the various indications of the positive potential of our products, in order to establish our product in the market we still need to conduct larger and more focused blind trials and we need to invest in a large-scale validation blind trial on the same cancer to confirm these preliminary results.

Our test is for cancer screening and cannot be regarded as a final diagnosis. However, it only requires a simple blood test causing minor risk and pain (as below diagram demonstrates). Following the results of the test for positive or negative for specific cancer, the physician will refer the patient for additional screenings such as colonoscopy for further examination of cancer presence.

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Immune Support Products and 3CL Protease Inhibiting Antivirals

On March 11, 2022, the Company entered into a Share Purchase Agreement (the "SPA") with 3CL Sciences Ltd. ("3CL"), an Israeli corporation, and NLC Pharma Ltd. ("NLC"), an Israeli corporation, pursuant to which 3CL Sciences will purchase all therapeutic, diagnostic, dietary supplement and pharmaceutical assets from NLC that relate to 3CL protease biology from NLC. The Company owns a controlling interest in 3CL. 3CL is working to advance a theragnostic program targeting the 3CL protease, a key enzyme required for coronaviruses to replicate and infect other cells. We have funded the development of a novel enzymatic 3CL protease diagnostic test that determines whether a coronavirus is actively replicating vs. inactively being cleared from the body by the immune system, as well as 3CL protease inhibitors that aim to slow the replication of the virus in order to be able to further support the body's ability to be able to overcome a potential coronavirus exposure or infection.

Tollovir:

Furthermore, through 3CL, we are in the development phase of our own antiviral, Tollovir(TM), a potent 3CL protease inhibitor for the treatment of hospitalized COVID-19 patients, which is currently undergoing a Phase 2 clinical trial in Israel with plans to expand the clinical development program to India.

In light of the emerging delta variant circulating widely worldwide, there is now a clear need for novel COVID-19 anti-viral therapies to protect the unvaccinated and those for whom authorized vaccines do not confer immunity, which includes a large portion of the elderly and those taking immune suppressants, against COVID-19 infection. In the United States, the Biden administration recently underscored this need by pledging to invest $3.2 billion into research for COVID-19 anti-viral therapies, similar to the US Government's investments into COVID-19 vaccines in 2020 at the beginning of the pandemic. We believe this government recognition of the need for antivirals will provide a significant tailwind for the development of our Tollovir(TM) anti-viral that is currently undergoing a Phase 2 clinical trial in Israel with plans progressing rapidly to expand the clinical development program to India. As part of the ongoing scientific effort to further elucidate the mechanisms that have enabled Tollovir to achieve its very positive early clinical results, NLC Pharma identified an anti-inflammatory mechanism of action of Tollovir to complement its 3CL protease inhibiting mechanism. This dual mechanism of action helps explain the significant reduction in symptoms and the biomarker C Reactive Protein (CRP) that was documented in the earliest clinical COVID-19 data sets produced in Israel, which could not be explained by a reduction in viral load alone likely caused by Tollovir's 3CL protease inhibiting mechanism. As a result of these quite complementary 3CL protease inhibiting and anti-inflammatory mechanisms, given that we are in a race with Pfizer to get to market with the first 3CL protease inhibiting COVID-19 antiviral for which therapeutic claims could be made, we believe it is critical to rapidly expand our clinical development programs to gather additional data in multiple clinical settings to demonstrate Tollovir's ability to help patients suffering from COVID-19. As part of that effort, our Israel-based Principal Investigators have introduced us to physician clinical collaborators in India who work with a highly-respected local Clinical Research Organization (CRO) with extensive experience in running COVID-19 clinical trials. This CRO has near-immediate access to 6 clinical sites that have previously enrolled patients into clinical trials for hospitalized COVID-19 patients and 5 clinical sites that have previously enrolled patients into clinical trials for non-hospitalized COVID-19 patients. We believe this CRO relationship will allow for the rapid expansion of enrollment for Tollovir's clinical data acquisition, and allow us to quickly prepare for a Phase 3 international clinical development program to support regulatory approval under Emergency Use Authorization.

Tollovid:

The Company's 3CL protease inhibitor botanical product, Tollovid, is a dietary supplement that helps to support and maintain healthy immune function. This technology will potentially have a significant impact for the development of virus targeting therapeutic development strategies, as well as clearance for return to life activities post-infection.

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We are very pleased that the Company's dietary supplement Tollovid, which provides immune support as a protease inhibitor, received FDA authorization for a new 5-day dosing regimen in April 2021. We believe this authorization underscores the emerging need in the marketplace for immune support supplements supported by strong scientific and safety data, as well as provides international regulatory authorities with a high degree of comfort of Tollovid's safety profile. Going forward, the Company sees two critical areas of expansion in the advancement of Tollovid:

1) International distribution partnerships in jurisdictions where high value dietary supplements are distributed by reputable pharmacies and other high-end wellness stores that can engage with consumers directly on the value and underlying science of their products; and

2) US marketing campaign to dramatically expand awareness of Tollovid for consumers and distribution partners who are looking for products to further support immune function.

We believe that as we continue to grow our automation services business, we are creating a natural distribution base for the Videssa test, as well as for the eventual commercialization of our proprietary TBIA platform tests and diagnostics developed with NLC Pharma. We intend to seek out additional opportunities to leverage our expanding base of laboratory partners in the coming years.

Operating Results

Revenues

During the years ended December 31, 2021 and 2020 we have generated revenues of $12,229,280 and $5,207,142, respectively, 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:







                                      Year ended December 31
                                       2021            2020
        Materials and other costs   $ 7,112,578     $ 3,749,901
        Depreciation                    734,214          68,340
        Total                       $ 7,846,792     $ 3,818,241
        


Research and Development Expenses

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

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







                                                        Year ended December 31
                                                         2021            2020
        Salaries and related expenses                 $         -     $    27,270
        Stock-based compensation                                -          60,449
        Professional fees                                 202,728          47,000
        IPR&D acquired as part of asset acquisition       450,000       8,157,000
        Laboratory and materials                          127,041       1,535,073
        Patent expenses                                         -               -
        Rent and maintenance                               15,004           6,221
        Depreciation                                       29,061          28,121
        Insurance and other expenses                            -           2,569
        Total                                         $   823,834     $ 9,863,703
        


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

Marketing expenses

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

The following table discloses the breakdown of marketing expenses:







                                     Year ended December 31
                                      2021            2020
        Stock Based Compensation   $   265,687     $ 1,517,240
        Professional Fees            3,215,620       1,540,854
        Total                      $ 3,481,307     $ 3,058,094
        


General and administrative

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

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







                                                 Year ended December 31
                                                  2021            2020
        Salaries and related expenses          $   522,172     $   166,741
        Stock-based compensation                   893,124       1,113,488
        Rent and maintenance                       330,104               -
        . . .
        


Mar 31, 2022

COMTEX_405062285/2041/2022-03-31T18:19:00

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