As filed with the United States Securities and Exchange Commission on February 26, 2016.

 

Registration No. 333-

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM F-1

 

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

TODOS MEDICAL LIMITED

(Exact name of Registrant as specified in its charter)

 

Israel

(State or other jurisdiction of

incorporation or organization)

 

2835

(Primary Standard Industrial

Classification Code Number)

 

Not Applicable

(I.R.S. Employer

Identification Number)

 

1 Hamada Street

Rehovot, Israel

+972-8-633-3964

 

(Address, including zip code, and telephone number,

including area code, of Registrant’s principal executive offices)

 

Todos Medical Limited

1 Hamada Street

Rehovot, Israel

+972-8-633-3964

 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

Gregg E. Jaclin, Esq.

Szaferman, Lakind, Blumstein & Blader, PC

101 Grovers Mill Road, Suite 200

Lawrenceville, NJ 08648

Phone: 609-275-0400

Fax: 609-275-4511

 

Dana Livneh-Zemer, Law Office

34 Dvora Hanevia Street

Tel Aviv 69350

Israel

Phone: +972-54-439-3490

Fax: +972-3-644-1808

 

 

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, (the “Securities Act”), check the following box.   þ

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

 

 

Calculation of Registration Fee

 

CALCULATION OF REGISTRATION FEE

  

Title of Each 
Class Of 
Securities to 
be Registered
  Amount to 
be 
Registered
    Proposed 
Maximum 
Aggregate 
Offering 
Price per 
Share (1)
    Proposed 
Maximum 
Aggregate 
Offering 
Price (1)
    Amount of 
Registration 
Fee (1)
 
Ordinary shares, par value NIS 0.01     46,288,050 (2)   $ 0.20     $ 9,257,610      $ 932.24   
Employee option shares, par value NIS 0.01     2,172,034 (2)   $ 0.20     $ 434,406.80      $ 43.75    
Ordinary shares underlying warrants, par value NIS 0.01     4,889,406 (2)   $ 0.20     $ 977,881.20      $ 98.47   
TOTAL     53,349,490      $ 0.20     $  10,669,898     $

1,074.46 

 

 

  (1)

The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o). Our ordinary shares are not traded on any national exchange and in accordance with Rule 457 the offering price was determined by the price of the shares that were sold to some of our shareholders in a private placement memorandum. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority, which regulates the OTCQB marketplace of OTC Link, nor can there be any assurance that such an application for quotation will be approved.

  (2) This Registration Statement covers the resale by our selling security holders of up to 46,288,050 ordinary shares previously issued to such selling security holders (including, in the case of one selling security holder, ordinary shares that will be automatically converted from previously issued preferred shares upon our ordinary shares being approved to be quoted on the OTCQB marketplace of OTC Link) up to 2,172,034 employee option shares that have not yet been exercised of which 2.1% are vested as of February 26, 2016, and up to 4,889,406 ordinary shares underlying warrants previously issued to such selling security holders that have not yet been exercised.

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall hereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the U.S. Securities and Exchange Commission acting pursuant to said section 8(a), may determine .

  

 

 

 

The information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the U.S. Securities and Exchange Commission. These securities may not be sold until the registration statement becomes effective. This prospectus is not an offer to sell and is not a solicitation of an offer to buy in any jurisdiction in which an offer, solicitation, or sale is not permitted.

 

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION, DATED FEBRUARY 26, 2016

 

Todos Medical Limited

 

53,349,490 Ordinary Shares

 

The selling security holders named in this prospectus are offering all of the ordinary shares offered through this prospectus. The ordinary shares to be sold by the selling security holders as provided in the “Principal and Selling Shareholders” section are 46,288,050 ordinary shares, par value NIS 0.01 per share, that have already been issued and are currently outstanding (including, in the case of one selling security holder, ordinary shares that will be automatically converted from previously issued preferred shares upon our ordinary shares being approved to be quoted on the OTCQB marketplace of OTC Link), up to 2,172,034 employee option shares that have not yet been exercised, of which 2.1% are vested as of February 26, 2016, and up to 4,889,406 ordinary shares underlying warrants previously issued to such selling security holders that have not yet been exercised. We will not receive any proceeds from the sale of the ordinary shares covered by this prospectus.

 

Our ordinary shares are presently not traded on any market or securities exchange. The selling security holders have not engaged any underwriter in connection with the sale of their shares of ordinary shares. Ordinary shares being registered in this Registration Statement will be sold by selling security holders at $0.20 per share until our ordinary shares are quoted on the OTCQB marketplace of OTC Link and thereafter at prevailing market prices or in transactions that are not in the public market at privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority (“FINRA”), which regulates the OTCQB marketplace of OTC Link, nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares of the selling security holders.

 

We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and are subject to reduced public company reporting requirements.

 

Purchasing our ordinary shares involves a high degree of risk. See “Risk Factors” beginning on page 13 to read about factors you should consider before buying our ordinary shares.

 

NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The Date of This Prospectus is: [  ] [  ], 2016

 

3  

 

 

TABLE OF CONTENTS

 

  Page
   
PROSPECTUS SUMMARY 6
   
RISK FACTORS 13
   
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS 32
   
USE OF PROCEEDS 33
   
DIVIDEND POLICY 33
   
CAPITALIZATION 34
   
DILUTION 35
   
ENFORCEABILITY OF CIVIL LIABILITIES 36
   
SELECTED FINANCIAL DATA 37
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 40
   
BUSINESS 46
   
MANAGEMENT 54
   
RELATED PARTY TRANSACTIONS 69
   
PRINCIPAL AND SELLING SHAREHOLDERS 70
   
DESCRIPTION OF SHARE CAPITAL 72
   
SHARES ELIGIBLE FOR FUTURE SALE 80
   
TAXATION 80
   
LEGAL MATTERS 88
   
EXPERTS 89
   
WHERE YOU CAN FIND ADDITIONAL INFORMATION 89
   
EXPENSES RELATING TO THIS OFFERING 89
   
INDEX TO FINANCIAL STATEMENTS 90

 

  4  
 

 

You should rely only on the information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer of these securities, or soliciting any offers to buy these securities, in any jurisdiction where the offer or solicitation is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our ordinary shares.

 

We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required other than the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our ordinary shares set forth in, and the possession and distribution of, this prospectus outside of the United States.

 

  5  
 

 

PROSPECTUS SUMMARY

 

The following summary does not contain all of the information you should consider before purchasing our ordinary shares. You should read the following summary together with the entire prospectus carefully, including the “Risk Factors” section beginning on page 13 and the financial statements and the accompanying notes to those financial statements beginning on page F-1 before making an investment decision. Unless otherwise indicated, all information in this prospectus assumes exercise of all of the warrants as well as the automatic conversion of all previously issued preferred shares into ordinary shares upon our ordinary shares being approved to be quoted on the OTCQB marketplace of OTC Link. Unless the context otherwise requires, references to “we,” “our,” “us,” “our company,” and “Todos” refer to Todos Medical Limited, an Israeli company. The terms “dollar,” “US$” or “$” refer to U.S. dollars, the lawful currency of the United States, and the term “NIS” refers to New Israeli Shekels, the lawful currency of the State of Israel. Unless otherwise indicated, U.S. dollar translation of NIS amounts presented in this prospectus are translated using the rate of $1.00 = NIS 3.889, the exchange rate published by the Bank of Israel on December 31, 2014.

 

Our Company

 

We are a cancer in-vitro-diagnostic (“IVD”) firm engaging in the development of a series of patient-friendly blood tests for the screening of a variety of cancers. Detecting cancer at an early stage generally means more effective treatment which translates into better survival chances. Our goal is to bring a low cost screening tool that will be accessible to the mass population and thus increase cancer detection rates and save lives with lower costs to the payer.

 

We developed and have applied for a patent of our Todos Biochemical Infrared Analysis method (“TBIA”), a proprietary method for screening of solid tumors using peripheral blood analysis. The method incorporates biochemistry, physics and signal processing. The TBIA screening method is based on the cancer’s influence on the immune system which triggers biochemical changes in peripheral blood mononuclear cells (“PBMC”) and plasma.

 

Compared to traditional screening methods, we believe the TBIA method has many advantages – it is minimally invasive, highly sensitive, low cost, and user friendly. We believe our products will be able to be used by underserved populations in the developed and developing worlds who are unscreened or inadequately screened patients for various cancers.

 

Our products that are currently under development consist of kits for blood test screening of breast cancer and colorectal cancer. The company has already received CE approval for its breast cancer and colorectal cancer screening tests. Our receipt of CE approval allows us to legally commercialize our products in Europe and some other parts of the world with relatively small efforts. However, without demonstrable scientific data from clinical trials by region, medical professionals within these regions might not recommend or endorse our products. As the U.S. does not recognize CE certification, the company cannot currently commercialize its products in the United States. In order for the company to commercialize its products in the U.S., the company must receive approval from the U.S. Food and Drug Administration (the “FDA”).

 

In order to commercialize our cancer screening tests in countries that accept CE certification, we need to conduct two series of clinical trials. The first clinical trial is to train our proprietary technology so that it is compatible with the population of a country. This requires a trial of approximately 200 patients. If the training trials are successful, the second stage of clinical trials will be validating that the tests are able to detect breast cancer and colorectal cancer with the target sensitivity and specificity. This also requires trials of approximately 200 patients. Each one of the trials stages (training and validation) requires a local institutional review board (“IRB”), also known as an independent ethics committee, ethical review board, or research ethics board approval.

 

We have received IRB approval for our training clinical trials in Israel and are currently in the middle of the training stage for breast cancer test in Israel. It is our expectation to conclude this phase of clinical trials within the next six to twelve months. Once completed, we hope the results will lead to IRB approval to move onto the validation clinical trials. It is our hope to complete the entire process within the next 12 – 24 months. It is our expectation that once we have successfully completed our clinical trials in Israel, we will be able to begin commercializing our products there.

 

Additionally, we are working to set up clinical trials in East Asia. It is hoped that we can gain approvals and begin commercialization of our products within the next 18 - 36 months.

 

In parallel with these efforts, we are in the initial stages of moving forward with the FDA to ultimately gain their approval for operations in the United States. Currently, we are preparing the protocols to begin a “small pilot” clinical trial and are awaiting feedback. It is expected the small pilot trial will consist of approximately 200 patients. Assuming the small pilot trial shows favorable results, we will then begin discussions with the FDA to get their recommendations on the trial size and protocols for a larger clinical trial necessary to gain approval. We expect gaining FDA approval will take 2 - 4 years and expense of somewhere in the vicinity of $5 million dollars. As we do not have this amount of money, the company would need to raise the funds to gain FDA approval. If we cannot raise the funds we will not be able proceed with the FDA. We still might have the option of commercialization in the US with a laboratory certified under the Clinical Laboratory Improvement Amendments (“CLIA”) providing the service. Not being able to obtain FDA approval would significantly harm our viability as a company.

 

If we are unable to raise $5 million but are still able to raise at least $2 million, we anticipate our operations will consist of conducting clinical trials in Israel and India to gain the scientific validation to promote the sale of our products in those countries as well as moving forward with a “small pilot” clinical trial with the FDA. The small pilot clinical trial will allow the company to take the initial steps for FDA feedback while avoiding the time and expense for complete FDA approval. If we are unable to raise $2 million, we will focus our current funds on solely completing clinical trials in Israel and India and reaching commercialization of our products in those countries as well as exploring the option of commercialization in the US using a CLIA pathway. By utilizing CLIA, the company would be allowed to sell its products in the US but it would require that the company be limited to using one qualified centralized lab to provide the service.

 

There is no guarantee that our tests will be proven successful. If we are not successful in clinical trials we will not be able to substantiate our business.

 

Concurrently with the above, we plan to develop new products in the coming three years that will detect other cancers. We hope to complete successful clinical trials and receive FDA approval within approximately two to four years. There is no assurance, however, that we will meet this timing schedule and that all of our efforts will be successful. 

  6  
 

 

Products – Cancer Screening Kits

 

Our product is for preliminary cancer screening and cannot be regarded as a final diagnosis. Our product consists of a simple blood test that causes what we believe to be minor risk and pain to the patient (as demonstrated by the diagram below) that is analyzed by our proprietary technology to detect the presence of various cancers. Our test analysis results are provided to the healthcare provider who may decide to refer the patient for additional screenings such as colonoscopy for further determination of cancer presence.

 

 

Our Challenges

 

Because we are still in the clinical trials stage, we are subject to certain challenges, including, among others, that:

 

· our technology has been tested on a limited basis and therefore we cannot assure the product’s clinical value;

 

· although we have obtained CE mark approval for our tests in the European Union we still need to obtain the requisite regulatory approvals in the United States and other markets where we plan to focus our commercialization efforts;

 

  7  
 

 

· as of February 26, 2015, our cash holdings were $398,216. As our burn rate is approximately $50,000 per month, we need to raise an amount of capital sufficient to continue the development of our technology, obtain the requisite regulatory approvals, and commercialize our current and future products; and

 

· we need to obtain reimbursement coverage from third-party payors for procedures using our tests.

 

Our ability to operate our business and achieve our goals and strategies is subject to numerous risks as described more fully in “Risk Factors.”

 

Corporate Information

 

We were incorporated as a limited liability private company under the laws of the State of Israel on April 22, 2010. Our principal executive offices are located at 1 Hamada Street, Rehovot, Israel. Our telephone number is +972-8-633-3964. Our website address is www.todosmedical.com . Information contained on, or accessible through, our website does not constitute part of this prospectus and is not incorporated by reference herein.

 

Implications of Being an Emerging Growth Company

 

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of certain exemptions from specified disclosure and other requirements that are otherwise generally applicable to publicly reporting companies. These exemptions include:

 

· being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

 

· not being required to comply with the auditor attestation requirements for the assessment of our internal control over financial reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002;

 

· not being required to comply with any requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and our financial statements;

 

· reduced disclosure obligations regarding executive compensation; and

 

· not being required to hold a nonbinding advisory vote on executive compensation or seek shareholder approval of any golden parachute payments not previously approved.

 

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to take advantage of this extended transition period.

 

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which our total annual gross revenues exceed $1.0 billion; (ii) the last day of the fiscal year in which the fifth anniversary of the date of the first sale of ordinary shares under the registration statement of which this prospectus forms a part occurs; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). When we are no longer deemed to be an emerging growth company, we will not be entitled to rely on the exemptions provided in the JOBS Act discussed above. We may choose to take advantage of some, but not all, of the exemptions available to emerging growth companies. We have taken advantage of some of the reduced reporting exemptions in this prospectus. Accordingly, the information contained herein and in future filings with the U.S. Securities and Exchange Commission (the “SEC”) may be different from the information provided by other publicly reporting companies in similar filings.

 

  8  
 

 

Implications of Being a Foreign Private Issuer

 

We are also considered a “foreign private issuer.” In our capacity as a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our ordinary shares. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.

 

The Offering

 

Issuer   Todos Medical Limited
     
Ordinary shares offered by the selling shareholders   53,349,490 ordinary shares
     
Ordinary shares outstanding immediately prior to the offering   68,818,564 ordinary shares (This amount includes: the ordinary shares issuable upon the exercise of the currently outstanding warrants, all of which are currently exercisable; and the ordinary shares that will be automatically converted from previously issued preferred shares upon our ordinary shares being approved to be quoted on the OTCQB marketplace of OTC Link. This amount does not include the employee option shares.)
     
Ordinary shares to be outstanding immediately after the offering   68,818,564   ordinary shares.
     
Use of Proceeds   We are not selling any ordinary shares covered by this prospectus. As such, we will not receive any of the offering proceeds from the registration of the ordinary shares covered by this prospectus.
     
Dividend Policy   We do not anticipate declaring or paying any cash dividends on our ordinary shares following this offering.
     
Transfer Agent and the Registrar   VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598, phone number: 212-828-8436, and fax number: 646-536-3179.
     
Risk Factors   Purchasing our ordinary shares involves a high degree of risk. See “Risk Factors” beginning on page 13 of this prospectus. See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to purchase our ordinary shares.

  

  9  
 

 

Summary Financial Data

 

The following tables set forth our summary financial data. You should read the following summary financial data in conjunction with, and it is qualified in its entirety by reference to, our historical financial information and other information provided in this prospectus, including “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus.

 

The summary statements of comprehensive loss data for the six months ended June 30, 2014 and 2015, and the statements of financial position data as of June 30, 2015 are derived from our unaudited financial statements appearing elsewhere in this prospectus. The summary statements of comprehensive loss data for the years ended December 31, 2013 and 2014, and the statements of financial position data as of December 31, 2014 are derived from our audited financial statements appearing elsewhere in this prospectus. The historical results set forth below are not necessarily indicative of the results to be expected in future periods. Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles.

 

Statements of Comprehensive Loss Data

 

    US dollars  
    For the 6 months ended June 30,  
    2015     2014  
Research and development expenses, net     206,247       178,086  
General and administrative expenses     330,291       17,013  
Operating loss     536,538       195,099  
Financing expenses, net     12,303       8,445  
Comprehensive loss for the period     548,841       203,544  

 

    US dollars  
    For the Year ended December 31,  
    2014     2013     2012  
                   
Research and development expenses, net     336,474       305,021       222,438  
General and administrative expenses     64,372       34,512       22,056  
                         
Operating loss     400,846       339,533       244,494  
                         
Financing (income) expenses, net     (78,779 )     42,285       11,626  
                         
Comprehensive loss for the year     322,067       381,818       256,120  

 

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Statements of Financial Position Data

 

    US dollars  
    June 30,     December 31,  
    2015     2014  
    (Unaudited)        
ASSETS                
Current Assets                
Cash and cash equivalents     343,552       60,600  
Other current assets     20,634       64,391  
Total current assets     364,186       124,991  
Property and Equipment, Net     113,734       3,695  
Total assets     477,920       128,686  
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
Current Liabilities                
Accounts payable     17,639       15,378  
Liability for Minimum Royalties – current maturity     22,500       -  
Other current liabilities     61,141       84,365  
Total current liabilities     101,280       99,743  
Long-Term Liabilities                
Long-Term Loans from shareholders     636,269       616,636  
Liability for Minimum Royalties     12,500       -  
Total long-term liabilities     648,769       616,636  
Total liabilities     750,049       716,379  
Shareholders' Deficit                
Preferred Shares of NIS 0.01 par value:                
10,000,000 shares authorized and 3,000,000 issued at June 30, 2015 and December 31, 2014     8,562       8,562  
Ordinary Shares of NIS 0.01 par value:                
990,000,000 shares authorized at June 30, 2015 and December 31, 2014; and 53,446,233 issued shares at June 30, 2015 and 33,352,200 at December 31, 2014.     140,668       89,492  
Additional paid in capital     1,215,920       345,335  
Receipts on account of ordinary shares     -       57,356  
Accumulated Deficit     (1,637,279 )     (1,088,438 )
Total shareholders' deficit     (272,129 )     (587,693 )
Total liabilities and shareholders’ deficit     477,920       128,686  

 

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    US dollars  
    December 31,  
    2014     2013  
ASSETS                
                 
Current Assets                
Cash and cash equivalents     60,600       18,541  
Other current assets     64,391       62,775  
                 
Total current assets     124,991       81,316  
                 
Property and Equipment, Net     3,695       2,108  
                 
Total assets     128,686       83,424  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
                 
Current Liabilities                
Accounts payable     15,378       8,413  
Other current liabilities     84,365       12,307  
                 
Total current liabilities     99,743       20,720  
                 
Long-Term Liabilities                
Long-Term Loans from shareholders     616,636       659,526  
                 
Total liabilities     716,379       680,246  
                 
Shareholders' Deficit                
                 
Preferred Shares of NIS 0.01 par value:                
10,000,000 shares authorized and 3,000,000 issued at December 31, 2014 and December 31, 2013     8,562       8,562  
                 
Ordinary Shares of NIS 0.01 par value:                
990,000,000 shares authorized at December 31, 2014 and December 31, 2013; and 33,352,500 issued shares at December 31, 2014 and 27,000,000 at December 31, 2013.     89,492       72,444  
Additional paid in capital     345,335       88,543  
Receipts on account of ordinary shares     57,356       -  
Accumulated Deficit     (1,088,438 )     (766,371 )
Total shareholders’ deficit     (587,693 )     (596,822 )
                 
Total liabilities and shareholders’ deficit     128,686       83,424  

 

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RISK FACTORS

 

 Purchasing our securities involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this prospectus, including the financial statements and the related notes appearing at the end of this prospectus, before purchasing our securities. If any of the following risks actually occur, they may materially harm our business and our financial condition and results of operations. In any such event, the market price of our securities could decline and you could lose all or part of your investment

 

Risks Related to Our Business

 

We have a history of losses, may incur future losses and may not achieve profitability.

 

We are a clinical-stage medical diagnostics company with a limited operating history. We have incurred net losses in each fiscal year since we commenced operations in 2010. We incurred net losses of $381,818 in 2013, $322,067 in 2014 and $548,841 in the six months ended June 30, 2015. As of June 30, 2015, our accumulated deficit was $1,637,279. Our losses could continue for the foreseeable future as we continue our investment in research and development and clinical trials to complete the development of our technology and to attain regulatory approvals, begin the commercialization efforts for our cancer screening kits, increase our marketing and selling expenses, and incur additional costs as a result of being a publicly reporting company in the United States. The extent of our future operating losses and the timing of becoming profitable are highly uncertain, and we may never achieve or sustain profitability.

 

We may not succeed in completing the development of our product, commercializing our product and generating significant revenues.

 

Since commencing our operations, we have focused on the research and development and limited clinical trials of our cancer screening kits. Our ability to generate revenues and achieve profitability depends on our ability to successfully complete the development of our product, obtain market approval and generate significant revenues. The future success of our business cannot be determined at this time, and we do not anticipate generating revenues from product sales for the foreseeable future. In addition, we face a number of challenges with respect to our future commercialization efforts, including, among others, that:

 

  ·

we may not have adequate financial or other resources to complete the development of our product including the four stages of clinical development needed before we can commercialize our products (Israel – training; Israel – validation; U.S. – training; and U.S. – validation).;

     
  · we may not be able to manufacture our products in commercial quantities, at an adequate quality or at an acceptable cost;
     
  · we may not be able to meet the timing schedule of (a) completing successful clinical trials in the U.S.; and (b) receiving FDA approval within our goal of approximately two to four years;
     
  · we may not receive regulatory approvals, including that of the FDA, for our intended development plan;
     
  · we may not be able to establish adequate sales, marketing and distribution channels;
     
  · healthcare professionals and patients may not accept our cancer screening kits;
     
  · technological breakthroughs in cancer screening, treatment and prevention may reduce the demand for our products;
     
  · changes in the market for cancer screening, new alliances between existing market participants and the entrance of new market participants may interfere with our market penetration efforts;
     
  · third-party payors may not agree to reimburse patients for any or all of the purchase price of our products, which may adversely affect patients’ willingness to purchase our cancer screening kits;
     
  · uncertainty as to market demand may result in inefficient pricing of our cancer screening kits;
     
  · we may face third-party claims of intellectual property infringement;
     
  · we may fail to obtain or maintain regulatory approvals for our cancer screening kits in our target markets or may face adverse regulatory or legal actions relating to our cancer screening kits even if regulatory approval is obtained; and
     
  · we are dependent upon the results of ongoing clinical studies relating to our cancer screening kits and the products of our competitors.

 

If we are unable to meet any one or more of these challenges successfully, our ability to effectively commercialize our cancer screening kits could be limited, which in turn could have a material adverse effect on our business, financial condition and results of operations.

 

We are in a phase of improving our technology and adaptation to high throughput procedure.

 

We are changing our protocol of measurement as well as our sample handling in order to adapt it to new high throughput methodology. The changes in the protocol and measurement instrument are significant. The new protocol aims to be more robust, reproducible, fast and easy to handle, however, this transformation from the manual older protocol to the new one has some risks. To the knowledge of the Company’s management, the new protocol will not impact the previously obtained CE mark approval of the TBIA test. The results may not be as promising as the former version and although some procedures may be more reproducible, these procedures will unfortunately damage some molecules which were part of the diagnostic features in the previous protocol.

 

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The previous tests we performed were preliminary studies.

 

The tests we conducted so far with our method were regarded as preliminary and included a relatively small number of subjects. Thus, there is a risk in having lower sufficient sensitivity and/or specificity in the trials we plan on conducting with larger populations in comparison to the preliminary data we have so far. Increasing the population can increase the variance in the medical condition of the control patients as well as the cancer patients thus affecting our test performances in cancer detection.

 

If healthcare professionals do not recommend our product to their patients, our cancer screening kits may not achieve market acceptance and we may not become profitable.

 

Cancer screening candidates are generally referred by their healthcare professional to a specified device and screening technologies are purchased by prescription. If healthcare professionals, including physicians, do not recommend or prescribe our product to their patients, our cancer screening kits may not achieve market acceptance and we may not become profitable. In addition, physicians have historically been slow to change their medical diagnostic and treatment practices because of perceived liability risks arising from the use of new products. Delayed adoption of our testing kits by healthcare professionals could lead to a delayed adoption by patients and third-party payors. Healthcare professionals may not recommend or prescribe our testing kits until certain conditions have been satisfied including, among others:

 

  · there is sufficient long-term clinical evidence to convince them to supplement their existing screening methods and device recommendations;
     
  · there are recommendations from other prominent physicians, educators and/or associations that our testing kits are safe and effective;
     
  · we obtain favorable data from clinical studies for our testing kits; and
     
  · reimbursement or insurance coverage from third-party payors is available;

 

We cannot predict when, if ever, healthcare professionals and patients may adopt the use of our testing kits. Even if favorable data is obtained from clinical studies for our testing kits, there can be no assurance that prominent physicians would endorse it or that future clinical studies will continue to produce favorable data regarding our testing kits. In addition, prolonged market exposure may also be a pre-requisite to reimbursement or insurance coverage from third-party payors. If our testing kits do not achieve an adequate level of acceptance by patients, healthcare professionals and third-party payors, we may not generate significant product revenues and we may not become profitable.

 

Our reliance on limited source suppliers could harm our ability to meet demand for our product in a timely manner or within budget.

 

We currently depend on limited source suppliers for some of the components necessary for the production of our product. Our current suppliers have been able to supply the required quantities of such components to date. However, if the supply of these components is disrupted or terminated or if our current suppliers are unable to supply required quantities of components, we may not be able to find alternative sources for these key components in a timely manner. Although we are planning to maintain strategic inventory of key components, the inventory may not be sufficient to satisfy the demand for our products if such supply is interrupted or otherwise affected by catastrophic events such as a fire at our storage facility. As a result, we may be unable to meet the demand for our testing kits, which could harm our ability to generate revenues, lead to customer dissatisfaction and damage our reputation. If we are required to change the manufacturer of any of these key components, there may be a significant delay in locating a suitable alternative manufacturer. The delays associated with the identification of a new manufacturer could delay our ability to manufacture our testing kits in a timely manner or within budget. Furthermore, in the event that the manufacturer of a key component of our testing kits ceases operations or otherwise ceases to do business with us, we may not have access to the information necessary to enable another supplier to manufacture the component. The occurrence of any of these events could harm our ability to meet demand for our testing kits in a timely manner or within budget.

 

  14  
 

 

The use of any of our cancer screening kits could result in product liability or similar claims that could be expensive damage our reputation and harm our business.

 

Our business exposes us to an inherent risk of potential product liability or similar claims related to the manufacturing, marketing and sale of medical devices. The medical device industry has historically been litigious, and we face financial exposure to product liability or similar claims if the use of our kits were to cause or contribute to injury or death, including, without limitation, harm to the body caused by the procedure or inaccurate diagnoses from the procedure that could affect treatment options. There is also the possibility that defects in the design or manufacture of any of these products might necessitate a product recall. Although we plan to maintain product liability insurance, the coverage limits of these policies may not be adequate to cover future claims. In the future, we may be unable to maintain product liability insurance on acceptable terms or at reasonable costs and such insurance may not provide us with adequate coverage against potential liabilities. A product liability claim, regardless of merit or ultimate outcome, or any product recall could result in substantial costs to us, damage to our reputation, customer dissatisfaction and frustration, and a substantial diversion of management attention. A successful claim brought against us in excess of, or outside of, our insurance coverage could have a material adverse effect on our business, financial condition and results of operations.

 

We will require additional funding in order to commercialize our cancer screening kits and to develop and commercialize of any future products.

 

Our total net cash flows used by operating activities from inception through June 30, 2015 were $1,369,761. We expect that we will need to continue to spend substantial amounts in order to complete the development, clinical trial development, regulation and commercialization of our cancer screening kits. We will need to raise additional funds prior to beginning the first stage of clinical development needed before we can commercialize our products (Israel – training) and prior to the eventual commercialization of our product. Additional financing may not be available to us on a timely basis on terms acceptable to us, or at all. In addition, any additional financing may be dilutive to our shareholders or may require us to grant a lender a security interest in our assets.

 

We expect our costs during the initial twelve (12) months following the registration statement of which this prospectus forms a part being declared effective to be approximately $5 million. Completing successful clinical trials and receiving FDA approval within approximately two to four years will require, as an initial step, the raising of this $5 million. If we are unable to raise $5 million but are still able to raise at least $2 million, we anticipate our operations will consist of conducting clinical trials in Israel, India and Singapore to gain the scientific validation to promote the sale of our products in those countries as well as moving forward with a “small pilot” clinical trial with the FDA. The small pilot clinical trial will allow the company to take the initial steps for FDA feedback while avoiding the time and expense for complete FDA approval. If we are unable to raise $2 million, we will focus our current funds on solely completing clinical trials in Israel and India and reaching commercialization of our products in those countries as well as exploring the option of commercialization in the US using a CLIA pathway. By utilizing CLIA, the company would be allowed to sell its products in the US but it would require that the company be limited to using one qualified centralized lab to provide the service.

 

Furthermore, if adequate additional financing on acceptable terms is not available, we may not be able to develop our cancer screening kits at the rate or to the stage we desire and we may have to delay or abandon the commercialization of our cancer screening kits. Alternatively, we may be required to prematurely license to third parties the rights to further develop or to commercialize our cancer screening kits on terms that are not favorable to us. Any of these factors could materially adversely affect our business, financial condition and results of operations.

 

We are entering a potentially highly competitive market.

 

Early detection is vital to the treatment of cancer, which is also the focus area of our products. The diagnostic, pharmaceutical and biopharmaceutical industry is characterized by intense competition and rapid, significant technological changes. Many companies, research institutions and universities are conducting research and development in a number of areas similar to those that we focus on that could lead to the development of new products which could compete with our products. Most of the companies against which we will compete have substantially greater financial, technical, manufacturing, marketing, distribution and other resources. A number of these companies may have or may develop technologies for developing products for detecting various cancers that could prove to be the same or even superior to ours. We expect technological developments in the diagnostic, pharmaceutical and biopharmaceutical and related fields to occur at a rapid rate, and we believe competition will intensify as advances in these fields are made.

 

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If we lose our key personnel or are unable to attract and retain additional personnel, our business and ability to compete will be harmed.

 

We are dependent on the principal members of our management, research and development team and scientific staff. In order to implement our business strategy, we will need to retain our key personnel with expertise in the areas of research and development, clinical testing, government regulation, manufacturing, finance, marketing and sales. Our product development plans depend in part on our ability to retain skilled personnel with expertise in a variety of fields. The loss of a number of these persons or our inability to attract and retain qualified personnel could harm our business and our ability to compete.

 

Any disruption at our facility could materially adversely affect our business, financial condition and results of operations.

 

We take precautions to safeguard our facility, including obtaining insurance coverage and implementing health and safety protocols and off-site storage of computer data. However, a natural or other disaster, such as a fire, flood or an armed conflict involving Israel, as detailed further below, could damage or destroy our facility and our manufacturing equipment or inventory, cause substantial delays in our operations and otherwise cause us to incur additional unanticipated expenses. In addition, the insurance we maintain against fires, floods and other natural disasters may not be adequate to cover our losses in any particular case and it does not cover losses resulting from armed conflicts or terrorist attacks in Israel. Damage to our facility, our other property or to any of our suppliers, whether located in Israel or elsewhere, due to fire, a natural disaster or casualty event or an armed conflict, could materially adversely affect our business, financial condition and results of operations, with or without insurance.

 

We will incur significant increased costs as a result of operating as a publicly reporting company in the United States, and our management will be required to devote substantial time to new compliance initiatives.

 

As a publicly reporting company in the United States, we will incur significant legal, accounting and other expenses that we did not incur as a private company. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a publicly reporting company or the timing of such costs. These rules and regulations could make it more difficult and more expensive for us to obtain certain types of insurance including director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantial costs to maintain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors (the “Board”), our Board committees or as executive officers. We cannot predict or estimate the amount or timing of additional costs we may incur in order to comply with such requirements.

 

If we are unable to protect our intellectual property rights, our competitive position could be harmed.

 

Our success and ability to compete depends in large part upon our ability to protect our intellectual property. We face several risks and uncertainties in connection with our intellectual property rights, including, among others:

 

  pending and future patent applications may not result in the issuance of patents or, if issued, may not be issued in a form that will be advantageous to us;
     
  our issued patents may be challenged, invalidated or legally circumvented by third parties;
     
  our patents may not be upheld as valid and enforceable or prevent the development of competitive products;
     
  the eligibility of certain inventions related to diagnostic medicine, more specifically diagnostic methods and processes, for patent protection in the United States has been limited recently which may affect our ability to enforce our issued patents in the United States or may make it difficult to obtain broad patent protection going forward in the United States;
     
  for a variety of reasons, we may decide not to file for patent protection on various improvements or additional features; and

 

  16  
 

 

  intellectual property protection and/or enforcement may be unavailable or limited in some countries where laws or law enforcement practices may not protect our proprietary rights to the same extent as the laws of the United States, the European Union, or Israel.

 

Consequently, our competitors could develop, manufacture and sell products that directly compete with our products, which could decrease our sales and diminish our ability to compete. In addition, competitors could attempt to develop their own competitive technologies that fall outside of our intellectual property rights. If our intellectual property does not adequately protect us from our competitors’ products and methods, our competitive position could be materially adversely affected.

 

Because the medical device industry is litigious, we are susceptible to intellectual property suits that could cause us to incur substantial costs or pay substantial damages or prohibit us from selling our cancer screening kits.

 

There is a substantial amount of litigation over patent and other intellectual property rights in the medical device industry. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain. The Company’s management is presently unaware of any other parties’ valid patents and proprietary rights which our evolving product designs would infringe. Searches typically performed to identify potentially infringed patents of third parties are often not conclusive and, because patent applications can take many years to issue, there may be applications now pending, which may later result in issued patents which our current or future products may infringe. In addition, our competitors or other parties may assert that our cancer screening kits and the methods it employs may be covered by patents held by them. If any of our products infringes a valid patent, we could be prevented from manufacturing or selling it unless we can obtain a license or redesign the product to avoid infringement. A license may not always be available or may require us to pay substantial royalties. We also may not be successful in any attempt to redesign our product to avoid infringement. Infringement and other intellectual property claims, with or without merit, can be expensive and time-consuming to litigate and could divert our management’s attention from operating our business.

 

The steps we have taken to protect our intellectual property may not be adequate, which could have a material adverse effect on our ability to compete in the market.

 

In addition to filing patent applications, we rely on confidentiality, non-compete, non-disclosure and assignment of inventions provisions, as appropriate, with our employees, consultants and, to some extent, our partners, to protect and otherwise seek to control access to, and distribution of, our proprietary information. These measures may not be adequate to protect our intellectual property from unauthorized disclosure, third-party infringement or misappropriation, for the following reasons:

 

  the agreements may be breached, may not provide the scope of protection we believe they provide or may be determined to be unenforceable;
     
  we may have inadequate remedies for any breach;
     
  proprietary information could be disclosed to our competitors; or
     
  others may independently develop substantially equivalent or superior proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technologies.

 

Specifically with respect to non-compete agreements, we may be unable to enforce these agreements, in whole or in part, and it may be difficult for us to restrict our competitors from gaining the expertise that our former employees gained while working for us. If our intellectual property is disclosed or misappropriated, it could harm our ability to protect our rights and could have a material adverse effect on our business, financial condition and results of operations.

 

  17  
 

 

We may need to initiate lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive and, if we lose, could cause us to lose some of our intellectual property rights, which would harm our ability to compete in the market.

 

We rely on patents to protect a portion of our intellectual property and our competitive position. Patent law relating to the scope of claims in the technology fields in which we operate is still evolving and, consequently, patent positions in the medical device industry are generally uncertain. In order to protect or enforce our patent rights, we may initiate patent and related litigation against third parties, such as infringement suits or interference proceedings. Any lawsuits that we initiate could be expensive, take significant time and divert our management’s attention from other business concerns and the outcome of litigation to enforce our intellectual property rights in patents, copyrights, trade secrets or trademarks is highly unpredictable. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. In addition, we may provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, including attorney fees, if any, may not be commercially valuable. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

 

Our future success relies on the performance and continued service of our current executive officers and directors .

 

Our success is in part dependent upon the retention of our management and other personnel. If our management becomes unable or unwilling to participate in our business, our future business and financial performance could be materially and adversely affected. The loss of services of any of the management staff would have a material adverse effect on the Company’s operations. The Company has not purchased key man insurance policies on the lives of its management.

 

In addition, as our business grows in size and complexity we must be able to continue to attract, develop and retain qualified personnel sufficient to allow us to adequately manage and grow our business. If we are unable to do so, our operating results could be negatively impacted. We cannot guarantee that we will be able to attract and retain personnel as and when necessary in the future.

 

We will incur significant increased costs as a result of operating as a publicly reporting company in the United States, and our management will be required to devote substantial time to new compliance initiatives.

 

As a publicly reporting company in the United States, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules and regulations implemented by the SEC, impose various requirements on publicly reporting companies, including requiring the establishment and maintenance of effective disclosure and financial controls. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a publicly reporting company or the timing of such costs. These rules and regulations could make it more difficult and more expensive for us to obtain certain types of insurance including director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantial costs to maintain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board, its committees or as executive officers. We cannot predict or estimate the amount or timing of additional costs we may incur in order to comply with such requirements.

 

We will be required to develop and maintain proper and effective internal controls over financial reporting. We may not complete our analysis of our internal controls over financial reporting in a timely manner, or these internal controls may have one or more material weaknesses, which may adversely affect investor confidence in our company and, as a result, the value of our ordinary shares.

 

  18  
 

 

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis will be a costly and time-consuming effort that will need to be evaluated frequently. Section 404 of the Sarbanes-Oxley Act requires the management of publicly reporting companies to conduct an annual review and evaluation of their internal controls and to obtain an attestation report from their registered public accounting firm regarding the effectiveness of internal controls. We would be required to perform the annual review and evaluation of our internal controls no later than in connection with the second annual report on Form 20-F filed after the offering to which this prospectus relates. However, if we qualify as a smaller reporting company and/or emerging growth company, which we expect to, we will be exempt from the auditors’ attestation requirement until such time as we no longer qualify as a smaller reporting company and/or emerging growth company. We would no longer qualify as a smaller reporting company if the market value of our public float exceeded $75 million as of the last day of our second fiscal quarter in any fiscal year following this offering. We would no longer qualify as an emerging growth company at such time as described in the risk factor immediately below.

 

We are in the early stages of the costly and challenging process of compiling the system and processing documentation necessary to evaluate and correct a material weakness in internal controls needed to comply with Section 404. The material weakness relates to our being a small company with a limited number of employees which limits our ability to assert the controls related to the segregation of duties. During the evaluation and testing process, if we identify one or more additional material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our ordinary shares to decline.

 

While we currently qualify as an “emerging growth company” under the JOBS Act, we will cease to be an emerging growth company on or before the end of 2021, and at such time our costs and the demands placed upon our management will increase.

 

We will continue to be deemed an emerging growth company until the earliest of (i) the last day of the fiscal year in which our annual gross revenues exceed $1 billion (as indexed for inflation); (ii) the last day of the fiscal year in which the fifth anniversary of the date of the first sale of ordinary shares under the registration statement of which this prospectus forms a part occurs; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed to be a ‘large accelerated filer,’ as defined by the SEC, which would generally occur upon our attaining a public float of at least $700 million. Once we lose emerging growth company status, we expect the costs and demands placed upon our management to increase, as we will be required to comply with additional disclosure and accounting requirements, particularly if we also no longer qualify as a smaller reporting company.

 

Purchasers of our ordinary shares in this offering will not have control of our management.

 

The purchasers in the offering will hold ordinary shares and, accordingly, will not have the ability to elect persons to the Board or otherwise to have control over the operations of the Company. The operations of the Company will be under the control of the Board and the executive officers of the Company. Accordingly, no person should purchase ordinary shares in the offering unless he is willing to entrust the management of the Company to the existing members of the Board and executive officers.

 

There are future financial risks associated with funding our business operations .

 

It is highly likely that the Company will find it necessary to borrow funds from banks or other financial institutions. No assurances can be given that, at the time the Company desires to borrow funds, banks or other financial institutions will be willing to loan funds to the Company or that, if willing, will do so on terms acceptable to management of the Company. As a result, the Company may not be able to acquire data desired by management which might have a material adverse effect on the Company or its business.

 

  19  
 

 

There can be no assurance that we can achieve or maintain profitability.

 

We may not achieve or sustain profitability. We cannot guarantee that we will become profitable. Even if we achieve profitability, given the competitive and evolving nature of the industry in which we operate, we may be unable to sustain or increase profitability and our failure to do so would adversely affect the Company’s business, including our ability to raise additional funds.

 

The Company may become involved in legal proceedings in the ordinary course of business.

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. The Company’s management is currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 

Risks Related to Regulations

 

If we or our future distributors do not obtain and maintain the necessary regulatory clearances or approvals, or CE Certificates of Conformity, or equivalent third country approvals in a specific country or region, we will not be able to market and sell our cancer screening kits or future products in that country or region.

 

We intend to market our cancer screening kits in a number of international markets. To be able to market and sell our cancer screening kits in a specific country or region, we or our distributors must comply with the regulations of that country or region. While the regulations of some countries do not impose barriers to marketing and selling part or all of our products or only require notification, others require that we or our distributors obtain the approval of a specified regulatory authorities or that we obtain CE Certificates of Conformity from a Notified Body. These regulations, including the requirements for approvals or CE Certificates of Conformity, and the time required for regulatory review, vary from country to country. Obtaining regulatory approvals or CE Certificates of Conformity is expensive and time-consuming, and we cannot be certain that we or our distributors will receive regulatory approvals or CE Certificates of Conformity for our cancer screening kits or any future products in each country or region in which we plan to market such products. If we modify our cancer screening kits or any future products, we or our distributors may need to apply for new regulatory approvals or our Notify Body may need to review the planned changes before we are permitted to sell them. We may not meet the quality and safety standards required to maintain the authorizations or CE Certificates of Conformity that we or our distributors have received. If we or our distributors are unable to maintain our authorizations or CE Certificates of Conformity in a particular country or region, we will no longer be able to sell our cancer screening kits or any future products in that country or region, and our ability to generate revenues will be materially and adversely affected.

 

If we are unable to successfully complete clinical trials with respect to our cancer screening kits, we may be unable to receive regulatory approvals or clearances, CE Certificates of Conformity or equivalent third country approvals for our cancer screening kits and/or our ability to achieve market acceptance of our cancer screening kits will be harmed.

 

The development of cancer diagnostics typically includes pre-clinical studies. Certain other devices require the submission of data generated from clinical trials, which can be long, expensive and uncertain processes, subject to delays and failure at any stage. The data obtained from the studies and trials may be inadequate to support regulatory clearances or approvals, or to obtain CE Certificates of Conformity or equivalent third country approval, or to allow market acceptance of the products being studied. Our cancer screening kits are currently undergoing clinical development.

 

We conducted clinical studies in cooperation with leading hospitals in Israel such as Belinson and Soroka, focusing on breast and colorectal cancers, following previous clinical studies that were conducted by Ben Gurion University and Soroka which formed the basis of our methodology.

 

Currently, the Company is engaged in refining the protocols for the aforementioned blood tests in order to undergo clinical trials that are required in order to obtain regulatory approvals for our products including FDA approval. Once the protocols for our tests are refined, we intend to begin clinical trials. There are two types of clinical trials that we will be conducting (training and validation). The first is training our tests so that it is compatible with the population of a country where we perform such clinical trials. If those trials are successful, the second type of clinical trials will be to validate that the tests are able to detect breast cancer and colorectal cancer. The conducting of clinical trials requires the approval of the clinical trial protocol by the relevant ethics committee in each place in which we propose to conduct such clinical trials. The Company estimates that each training clinical trial will require about 200 participants and each validation clinical trial will require at about 200 participants. We further anticipate that in the US, the FDA will require us to perform clinical trials on a much larger group of subjects as a condition for granting its approval prior to commercialization in the U.S. As part of our strategy we plan to approach the FDA with the proposed protocol for the clinical trials in the U.S. in order to receive their comments. Concurrently with the above, we plan to develop new products in the coming three years that will detect other cancers. We hope to complete successful clinical trials in the U.S. and receive FDA approval within approximately two to four years. In the meantime, we plan to commercialize our products in other locations. There is no assurance, however, that we will meet this timing schedule and that all of our efforts will be successful. There is no assurance that our intended development plan will receive regulatory approvals, including that of the FDA.

 

The development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required, and we may not adequately develop such protocols to support clearance, approval, or to obtain CE Certificates of Conformity or equivalent third country approval. Further, the FDA, the competent regulatory authorities of other countries, or our Notified Body in the EU may require us to submit data on a greater number of patients than we originally anticipated and/or for a longer follow-up period or they may change the data collection requirements or data analysis applicable to our clinical trials.

 

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The commencement or completion of any of our clinical studies or trials may be delayed or halted, or be inadequate to support regulatory clearance, approval or product acceptance, or to obtain CE Certificates of Conformity or equivalent third country approval, for numerous reasons, including, among others:

 

  · patients do not enroll in the clinical trial at the rate we expect;
     
  · patients do not comply with trial protocols;
     
  · patient follow-up is not at the rate we expect;
     
  · patients experience adverse side effects;
     
  · patients die during a clinical trial, even though their death may be unrelated to our product;
     
  · FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold;
     
  · institutional review boards, (“IRBs”), Ethics Committees and third-party clinical investigators may delay or reject our trial protocol and Informed Consent Form;
     
  · third-party clinical investigators decline to participate in a study or trial or do not perform a study or trial on our anticipated schedule or consistent with the investigator agreements, study or trial protocol, good clinical practices or other FDA or IRBs, Ethics Committees, or any other applicable requirements;
     
  · third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the study or trial protocol or investigational or statistical plans;
     
  · regulatory inspections of our studies, trials or manufacturing facilities may require us to, among other things, undertake corrective action or suspend or terminate our studies or clinical trials;
     
  · changes in governmental regulations or administrative actions;
     
  · the interim or final results of the study or clinical trial are inconclusive or unfavorable as to safety or efficacy; and
     
  · a regulatory agency or our Notified Body concludes that our trial design is or was inadequate to demonstrate safety and efficacy.

 

The results of pre-clinical and clinical studies do not necessarily predict future clinical trial results, and predecessor clinical trial results may not be repeated in subsequent clinical trials. Additionally, FDA, the competent regulatory authorities of EEU Member States, other third country regulatory entities, or our Notified Body may disagree with our interpretation of the data from our pre-clinical studies and clinical trials, or may find the clinical trial design, conduct or results inadequate to demonstrate safety or efficacy, and may require us to pursue additional pre-clinical studies or clinical trials, which could further delay the clearance, approval, or CE marking of our products. The data we collect from our non-clinical testing, our pre-clinical studies and other clinical trials may not be sufficient to support regulatory clearance, approval or to obtain CE Certificates of Conformity.

 

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If the third parties on which we rely to conduct our clinical trials and clinical development do not perform as contractually required or expected, we may not be able to obtain regulatory clearance or approval, CE Certificates of Conformity, or equivalent third country approval for, or commercialize, our cancer screening kits or future products.

 

We do not have the ability to independently conduct our clinical trials for our cancer screening kits and we must rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct such trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain CE Certificates of Conformity, regulatory clearance, approval for, or successfully commercialize, our cancer screening kits or future products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control.

 

The results of our clinical trials may not support our product candidate claims or may result in the discovery of adverse side effects.

 

Even if our clinical trials are completed as planned, we cannot be certain that their results will support our product claims or that FDA, foreign authorities or our Notified Body will agree with our conclusions regarding them. Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that clinical trials will replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our cancer screening kits, or any future products, are safe and effective for the proposed indicated uses, which could cause us to abandon a product and may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our cancer screening kits, or any future products, and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.

 

Our cancer screening kits may in the future be subject to product recalls that could harm our reputation, business and financial results.

 

FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture. In the case of FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious injury or death. In addition, foreign governmental bodies have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Once marketed, recalls of any of our products, including our cancer screening kits, would divert managerial and financial resources and have an adverse effect on our business, financial condition and results of operations. FDA requires that certain classifications of recalls be reported to FDA within 10 working days after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require us to notify FDA. If FDA disagrees with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, FDA could take enforcement action against us based on our failure to report the recalls when they were conducted.

 

If we are unable to achieve reimbursement and coverage from third-party payors for laboratory tests using our cancer screening kits, or if reimbursement is insufficient to create an economic benefit for purchasing or using our cancer screening kits when compared to alternative tests, demand for our products may not grow at the rate we expect.

 

The demand for our cancer screening kits will depend significantly on the eligibility of the tests performed using our cancer screening kits for reimbursement through government-sponsored healthcare payment systems and private third-party payors. Reimbursement practices vary significantly from country to country and within some countries, by region, and we must obtain reimbursement approvals on a country-by-country and/or region-by-region basis. In general, the process of obtaining reimbursement and coverage approvals has been longer outside of the United States. We may not be able to obtain reimbursement approvals in a timely manner or at all and existing reimbursement and coverage policies may be revised from time to time by third-party payors. If physicians, hospitals and other healthcare providers are unable to obtain sufficient coverage and reimbursement from third-party payors for tests using our cancer screening kits, if reimbursement is, or is perceived by our customers to be, insufficient to create an economic incentive for purchasing or using our cancer screening kits, or if such reimbursement does not adequately compensate physicians and health care providers compared to the other tests they offer, demand for our products may not grow at the rate we expect.

 

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Federal and state privacy laws, and equivalent laws of third countries, may increase our costs of operation and expose us to civil and criminal sanctions.

 

The Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations that have been issued under it, to which we refer collectively as HIPAA, and similar laws outside the United States, contain substantial restrictions and requirements with respect to the use and disclosure of individuals’ protected health information. The HIPAA privacy rules prohibit “covered entities,” such as healthcare providers and health plans, from using or disclosing an individual’s protected health information, unless the use or disclosure is authorized by the individual or is specifically required or permitted under the privacy rules. Under the HIPAA security rules, covered entities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of electronic protected health information maintained or transmitted by them or by others on their behalf. While we do not believe that we will be a covered entity under HIPAA, we believe many of our customers will be covered entities subject to HIPAA. Such customers may require us to enter into business associate agreements, which will obligate us to safeguard certain health information we obtain in the course of our relationship with them, restrict the manner in which we use and disclose such information and impose liability on us for failure to meet our contractual obligations.

 

In addition, under The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), which was signed into law as part of the U.S. stimulus package in February 2009, certain of HIPAA’s privacy and security requirements are now also directly applicable to “business associates” of covered entities and subject them to direct governmental enforcement for failure to comply with these requirements. We may be deemed as a “business associate” of some of our customers. As a result, we may be subject as a “business associate” to civil and criminal penalties for failure to comply with applicable privacy and security rule requirements. Moreover, HITECH created a new requirement obligating “business associates” to report any breach of unsecured, individually identifiable health information to their covered entity customers and imposes penalties for failing to do so.

 

In addition to HIPAA, most U.S. states have enacted patient confidentiality laws that protect against the disclosure of confidential medical information, and many U.S. states have adopted or are considering adopting further legislation in this area, including privacy safeguards, security standards, and data security breach notification requirements. These U.S. state laws, which may be even more stringent than the HIPAA requirements, are not preempted by the federal requirements, and we are therefore required to comply with them to the extent they are applicable to our operations.

 

These and other possible changes to HIPAA or other U.S. federal or state laws or regulations, or comparable laws and regulations in countries where we conduct business, could affect our business and the costs of compliance could be significant. Failure by us to comply with any of the standards regarding patient privacy, identity theft prevention and detection, and data security may subject us to penalties, including civil monetary penalties and in some circumstances, criminal penalties. In addition, such failure may damage our reputation and adversely affect our ability to retain customers and attract new customers.

 

The protection of personal data, particularly patient data, is subject to strict laws and regulations in many countries. The collection and use of personal health data in the EU is governed by the provisions of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, commonly known as the Data Protection Directive. The Directive imposes a number of requirements including an obligation to seek the consent of individuals to whom the personal data relates, the information that must be provided to the individuals, notification of data processing obligations to the competent national data protection authorities of individual EU Member States and the security and confidentiality of the personal data. The Data Protection Directive also imposes strict rules on the transfer of personal data out of the EU to the US. Failure to comply with the requirements of the Data Protection Directive and the related national data protection laws of the EU Member States may result in fines and other administrative penalties and harm our business. We may incur extensive costs in ensuring compliance with these laws and regulations, particularly if we are considered to be a data controller within the meaning of the Data Protection Directive.

 

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Once we commercialize our product, security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

 

Once we commercialize our product, in the ordinary course of our business, it is highly likely we and our third-party providers will collect and store sensitive data, including legally-protected health information and personally identifiable information about patients of patients, our healthcare provider customers and payers. We also may store sensitive intellectual property and other proprietary business information including that of our customers and payers. We plan to manage and maintain our data utilizing a combination of on-site systems and cloud-based data center systems. This data will encompass a wide variety of business critical information, including research and development information, commercial information and business and financial information.

 

We face four primary risks relative to protecting this critical information: loss of access risk, inappropriate disclosure risk, inappropriate modification risk and the risk of our being unable to identify and audit our controls over the first three risks.

 

We will be highly dependent on information technology networks and systems, including the Internet, to securely process, transmit and store this critical information. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure or modification of confidential information. The secure processing, storage, maintenance and transmission of this critical information will be vital to our operations and business strategy, and we plan to devote significant resources to protecting such information. Although we will take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure, and that of our third-party providers, may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other disruptions.

 

A security breach or privacy violation that leads to disclosure or modification of or prevents access to consumer information (including personally identifiable information or protected health information) could harm our reputation, compel us to comply with disparate state breach notification laws, require us to verify the correctness of database contents and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive consumer data. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

 

Any such breach or interruption could compromise our networks or those of our third-party providers, and the information stored there could be inaccessible or could be accessed by unauthorized parties, publicly disclosed, lost or stolen. Any such interruption in access, improper access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as HIPAA, and regulatory penalties. Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to perform tests, provide test results, bill payers or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, provide information about our current and future products and other patient and clinician education and outreach efforts through our website, and manage the administrative aspects of our business and damage our reputation, any of which could adversely affect our business. Any such breach could also result in the compromise of our trade secrets and other proprietary information, which could adversely affect our competitive position.

 

In addition, the interpretation and application of consumer, health-related, privacy and data protection laws in the U.S., Europe and elsewhere are often uncertain, contradictory and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.

 

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If we fail to comply with the U.S. federal Anti-Kickback Statute and similar state and third country laws, we could be subject to criminal and civil penalties and exclusion from federally funded healthcare programs including the Medicare and Medicaid programs and equivalent third country programs, which would have a material adverse effect on our business and results of operations.

 

A provision of the Social Security Act, commonly referred to as the federal Anti-Kickback Statute, prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration, directly or indirectly, in cash or in kind, to induce or reward the referring, ordering, leasing, purchasing or arranging for, or recommending the ordering, purchasing or leasing of, items or services payable, in whole or in part, by Medicare, Medicaid or any other federal healthcare program. Although there are a number of statutory exemptions and regulatory safe harbors to the federal Anti-Kickback Statute protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exemption or safe harbor may be subject to scrutiny. The federal Anti-Kickback Statute is very broad in scope and many of its provisions have not been uniformly or definitively interpreted by existing case law or regulations. In addition, most of the states have adopted laws similar to the federal Anti-Kickback Statute, and some of these laws are even broader than the federal Anti-Kickback Statute in that their prohibitions may apply to items or services reimbursed under Medicaid and other state programs or, in several states, apply regardless of the source of payment. Violations of the federal Anti-Kickback Statute may result in substantial criminal, civil or administrative penalties, damages, fines and exclusion from participation in federal healthcare programs.

 

All of our future financial relationships with U.S. healthcare providers, purchasers, formulary managers, and others who provide products or services to federal healthcare program beneficiaries will potentially be governed by the federal Anti-Kickback Statute and similar state laws. We believe our operations will be in compliance with the federal Anti-Kickback Statute and similar state laws. However, we cannot be certain that we will not be subject to investigations or litigation alleging violations of these laws, which could be time-consuming and costly to us and could divert management’s attention from operating our business, which in turn could have a material adverse effect on our business. In addition, if our arrangements were found to violate the federal Anti-Kickback Statute or similar state laws, the consequences of such violations would likely have a material adverse effect on our business, results of operations and financial condition.

 

There are other federal and state laws that may affect our ability to operate, including the federal civil False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. Moreover, we may be subject to other federal false claim laws, including, among others, federal criminal healthcare fraud and false statement statutes that extend to non-government health benefit programs. Moreover, there are analogous state laws. Violations of these laws can result in substantial criminal, civil or administrative penalties, damages, fines and exclusion from participation in federal healthcare programs.

 

Similar restrictions are imposed by the national legislation of many third countries in which our medical devices will be marketed. Moreover, the provisions of the Foreign Corrupt Practices Act of 1997 and other similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from providing money or anything of value to officials of foreign governments, foreign political parties, or international organizations with the intent to obtain or retain business or seek a business advantage. Recently, there has been a substantial increase in anti-bribery law enforcement activity by U.S. regulators, with more aggressive and frequent investigations and enforcement by both the SEC and the Department of Justice. A determination that our operations or activities violated United States or foreign laws or regulations could result in imposition of substantial fines, interruption of business, loss of supplier, vendor or other third-party relationships, termination of necessary licenses and permits, and other legal or equitable sanctions. In addition, lawsuits brought by private litigants may also follow as a consequence.

 

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Risks Related to Our Operations in Israel

 

Our principal offices, research and development facilities and some of our suppliers are located in Israel and, therefore, our business, financial condition and results of operation may be adversely affected by political, economic and military instability in Israel.

 

We are incorporated under Israeli law and our principal executive offices are located in Israel. Accordingly, political, economic and military conditions in Israel directly affect our business. In addition, all of our employees and officers, and most of our directors, are residents of Israel.  Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries.  Although Israel has entered into various agreements with Egypt, Jordan and the Palestinian Authority, there has been an increase in unrest and terrorist activity, which began in September 2000 and has continued with varying levels of severity into 2013. In mid-2006, Israel was engaged in an armed conflict with Hezbollah in Lebanon, resulting in thousands of rockets being fired from Lebanon and disrupting most day-to-day civilian activity in northern Israel. Starting in December 2008, for approximately three weeks, Israel engaged in an armed conflict with Hamas in the Gaza Strip, which involved missile strikes against civilian targets in various parts of Israel and negatively affected business conditions in Israel. In 2012 and 2014 once again Israel engaged in an armed conflict with Hamas in the Gaza Strip, with missiles reaching as far as Tel-Aviv. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations.

 

Popular uprisings in various countries in the Middle East and North Africa are affecting the political stability of those countries. Such instability may lead to deterioration in the political and trade relationships that exist between the State of Israel and these countries. Furthermore, several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in the region continue or intensify. Such restrictions may seriously limit our ability to sell our products to customers in those countries. Parties with whom we may do business could decline to travel to Israel during periods of heightened unrest or tension. In addition, the political and security situation in Israel may result in parties with whom we may have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. In addition, any hostilities involving Israel could have a material adverse effect on our facilities including our corporate office or on the facilities of our local suppliers, in which event all or a portion of our inventory may be damaged, and our ability to deliver products to customers could be materially adversely affected. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or significant downturns in the economic or financial condition of Israel, could adversely affect our operations and product development, cause our revenues to decrease and adversely affect our share price following this offering. Similarly, Israeli corporations are limited in conducting business with entities from several countries. For example, in 2008 the Israeli legislature adopted a law forbidding any investments in entities that transact business with Iran. Moreover, individuals in certain geographical regions may refrain from doing business with Israel and Israeli companies as a result of their objection to Israeli foreign or domestic policies.

 

Although the Israeli government in the past covered the reinstatement value of certain damages that were caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts, terrorist activities or political instability in the region would likely negatively affect business conditions generally and could harm our results of operations.

 

Our operations could also be disrupted by the obligations of personnel based in Israel to perform military service. Some residents of Israel are called upon to perform military reserve duty each year and, in certain emergency circumstances, may be called to immediate and unlimited active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists and it is possible that there will be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence of personnel related to military service, which could materially adversely affect our business and results of operations.

 

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Your rights and responsibilities as a shareholder will be governed by Israeli law which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.

 

The rights and responsibilities of the holders of our ordinary shares are governed by our amended articles of association (the “Articles”) and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S.-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders, and to refrain from abusing its power in the company, including, among other things, in voting at a general meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions and related party transactions requiring shareholder approval. In addition, a shareholder who is aware that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.

 

It may be difficult to enforce a judgment of a U.S. court against us, our officers and directors or the Israeli experts named in this prospectus in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our officers and directors and these experts.

 

We are incorporated in Israel. All of our executive officers and directors listed in this prospectus reside in Israel, and substantially all of our assets and most of the assets of these persons are located in Israel. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws on the grounds that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court. See “Enforceability of Civil Liabilities” for additional information on your ability to enforce a civil claim against us and our executive officers or directors, or some of the experts named in this prospectus.

 

Provisions of Israeli law and our Articles may delay, prevent or otherwise impede a merger with, or an acquisition of, us, even when the terms of such a transaction are favorable to us and our shareholders.

 

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital and the approval of a majority of the offerees that do not have a personal interest in the tender offer, unless at least 98% of the company’s outstanding shares are tendered. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer (unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek appraisal rights), may, at any time within six months following the completion of the tender offer, petition an Israeli court to alter the consideration for the acquisition. In addition, a merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of the merger was filed by each party with the Israeli Registrar of Companies and at least 30 days have passed from the date on which the merger was approved by the shareholders of each party. See “Description of Share Capital — Acquisitions under Israeli Law” for additional information.

 

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Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.

 

We have received and may continue to receive Israeli governmental grants to assist in the funding of our research and development activities. If we lose our funding from these research and development grants, we may encounter difficulties in the funding of future research and development projects and implementing technological improvements, which would harm our operating results.

 

From inception through June 30, 2015, we have been awarded an aggregate of $162,017 in the form of grants from the Israeli Office of the Chief Scientist, or OCS. The requirements and restrictions for such grants are found in the Research Law. Under the Research Law, royalties of 3% to 3.5% on the revenues derived from sales of products or services developed in whole or in part using these OCS grants are payable to the Israeli government. We developed our technologies, at least in part, with funds from these grants, and accordingly we would be obligated to pay these royalties on sales of any of our product candidates that achieve regulatory approval. The maximum aggregate royalties paid generally cannot exceed 100% of the grants made to us, plus annual interest equal to the 12-month LIBOR applicable to dollar deposits, as published on the first business day of each calendar year. As of June 30, 2015, the balance of the principal and interest in respect of our commitments for future payments to the OCS totaled approximately $167,000. As of June 30, 2015, we had not paid any royalties to the OCS. The Company has applied for an additional $185,000 grant from the OCS for research and development expenses. The grant has been approved in principal, subject to certain further conditions being fulfilled. Pursuant to this grant, OCS will pay 30% of the Company’s research and development expenses over the next year, up to a maximum OCS payment of $185,000 (out of total expenses of $615,000). The Company is responsible for paying any research and development expenses over $615,000.

 

These grants have funded some of our personnel, development activities with subcontractors and other research and development costs and expenses. However, if these awards are not funded in their entirety or if new grants are not awarded in the future, due to, for example, OCS budget constraints or governmental policy decisions, our ability to fund future research and development and implement technological improvements would be impaired, which would negatively impact our ability to develop our product candidates.

 

The Israeli government grants we have received for research and development expenditures restrict our ability to manufacture products and transfer technologies outside of Israel and require us to satisfy specified conditions. If we fail to satisfy these conditions, we may be required to refund grants previously received together with interest and penalties.

 

Our research and development efforts have been financed, in part, through the grants that we have received from the OCS. We, therefore, must comply with the requirements of the Research Law.

 

Under the Research Law, we are prohibited from manufacturing products developed using these grants outside of the State of Israel without special approvals. We may not receive the required approvals for any proposed transfer of manufacturing activities. Even if we do receive approval to manufacture products developed with government grants outside of Israel, the royalty rate may be increased and we may be required to pay up to 300% of the grant amounts plus interest, depending on the manufacturing volume that is performed outside of Israel. This restriction may impair our ability to outsource manufacturing or engage in our own manufacturing operations for those products or technologies. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Research and Development Expenses” for additional information.

 

Additionally, under the Research Law, we are prohibited from transferring, including by way of license, the OCS-financed technologies and related intellectual property rights and know-how outside of the State of Israel, except under limited circumstances and only with the approval of the OCS Research Committee. We may not receive the required approvals for any proposed transfer and, even if received, we may be required to pay the OCS a portion of the consideration that we receive upon any sale of such technology to a non-Israeli entity up to 600% of the grant amounts plus interest. The scope of the support received, the royalties that we have already paid to the OCS, the amount of time that has elapsed between the date on which the know-how or the related intellectual property rights were transferred and the date on which the OCS grants were received and the sale price and the form of transaction will be taken into account in order to calculate the amount of the payment to the OCS. Approval of the transfer of technology to residents of the State of Israel is required, and may be granted in specific circumstances only if the recipient abides by the provisions of applicable laws, including the restrictions on the transfer of know-how and the obligation to pay royalties. No assurance can be made that approval to any such transfer, if requested, will be granted.

 

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These restrictions may impair our ability to sell our technology assets or to perform or outsource manufacturing outside of Israel, engage in change of control transactions or otherwise transfer our know-how outside of Israel and may require us to obtain the approval of the OCS for certain actions and transactions and pay additional royalties and other amounts to the OCS. In addition, any change of control and any change of ownership of our ordinary shares that would make a non-Israeli citizen or resident an “interested party,” as defined in the Research Law, requires prior written notice to the OCS.

 

These restrictions will continue to apply even after we have repaid the full amount of royalties on the grants. For the years ended December 31, 2013 and December 31, 2014, we recorded grants totaling $72,286 and $0 from the OCS, respectively. The grants represented 19.2% and 0%, respectively, of our gross research and development expenditures for the years ended December 31, 2013 and December 31, 2014. Since December 31, 2014, the Company has applied for an additional $185,000 grant from the OCS for research and development expenses. The grant has been approved in principal, subject to certain further conditions being fulfilled. Pursuant to this grant, OCS will pay 30% of the Company’s research and development expenses over the next year, up to a maximum OCS payment of $185,000 (out of total expenses of $615,000). The Company is responsible for paying any research and development expenses over $615,000. If we fail to satisfy the conditions of the Research Law, we may be required to refund certain grants previously received together with interest and penalties.

 

Risks Related to the Company

 

For as long as we are an “emerging growth company,” we will not be required to comply with certain reporting requirements that apply to other publicly reporting companies. We cannot predict whether the reduced disclosure requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors.

 

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may choose to take advantage of certain exemptions from reporting requirements applicable to other publicly reporting companies that are not emerging growth companies. These include: (i) not being required to comply with the auditor attestation requirements for the assessment of our internal controls over financial reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, (ii) not being required to comply with any requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (iii) not being required to comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise, (iv) not being required to provide certain disclosure regarding executive compensation required of larger publicly reporting companies, and (v) not being required to hold a non-binding advisory vote on executive compensation or seek shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years from the end of our current fiscal year, although, if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of any June 30 before the end of that five-year period, we would cease to be an emerging growth company as of the following December 31. We cannot predict if investors will find our ordinary shares less attractive if we choose to rely on these exemptions. If some investors find our ordinary shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our ordinary shares and our share price may be more volatile. Further, as a result of these scaled regulatory requirements, our disclosure may be more limited than that of other publicly reporting companies and you may not have the same protections afforded to shareholders of such companies.

 

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We will be a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to the Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those applicable to a U.S. issuer.

 

Because we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. publicly reporting companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time, and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, while U.S. domestic issuers that are not large accelerated filers or accelerated filers are required to file their annual reports on Form 10-K within 90 days after the end of each fiscal year, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information.

 

Exchange rate fluctuations between the U.S. dollar and the NIS and the Euro and inflation may negatively affect our earnings and we may not be able to hedge our currency exchange risks successfully.

 

The dollar is our functional and reporting currency. However, a significant portion of our operating expenses, including personnel and facilities related expenses, are incurred in NIS. As a result, we are exposed to the risks that the NIS may appreciate relative to the U.S. dollar, or, if the NIS instead devalues relative to the U.S. dollar, that the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. The Israeli rate of inflation has not had a material adverse effect on our financial condition during 2013 and 2014. In addition, we expect to incur operating expenses denominated in various currencies, and therefore, our operating results are also subject to fluctuations due to changes in the various exchange rates. Given our general lack of currency hedging arrangements to protect us from fluctuations in the exchange rates of the NIS, the Euro and other foreign currencies in relation to the U.S. dollar (and/or from inflation of such foreign currencies), we may be exposed to material adverse effects from such movements. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the NIS against any other currency.

 

Risks Related to this Offering and Our Ordinary Shares

 

There is no public trading market for our ordinary shares and our investors may not be able to resell their ordinary shares.

 

There is no established public trading market for our securities. Although we intend to be quoted on a stock exchange in the United States, our shares are not and have not been quoted on any exchange or quotation system. We cannot assure that a market maker will agree to file the necessary documents with the FINRA, nor can there be any assurance that such an application for quotation will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading market, an investor may be unable to liquidate its investment, which will result in the loss of your investment.

 

Future issuance of our ordinary shares could dilute the interests of existing shareholders.

 

We may issue additional shares of our ordinary shares in the future. The issuance of a substantial amount of ordinary shares could have the effect of substantially diluting the interests of our shareholders. In addition, the sale of a substantial amount of ordinary shares in the public market, in the initial issuance, in a situation in which we acquire a company and the acquired company receives ordinary shares as consideration and the acquired company subsequently sells its ordinary shares, or by investors who acquired such ordinary shares in a private placement, could have an adverse effect on the market price of our ordinary shares.

 

We have no plans to pay dividends.

 

To date, we have paid no cash dividends on our ordinary shares. For the foreseeable future, earnings generated from our operations will be retained for use in our business and not to pay dividends.

 

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The potential future application of the SEC’s “penny stock” rules to our ordinary shares could limit trading activity in the market, and our shareholders may find it more difficult to sell their shares.

 

It is expected our ordinary shares, if registered, will be trading at less than $5.00 per share and will therefore be subject to the SEC’s penny stock rules. Penny stocks generally are equity securities with a price of less than $5.00. Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our ordinary shares and may affect your ability to resell our ordinary shares.

 

In the event a market develops for our ordinary shares, the market price of our ordinary shares may be volatile.

 

In the event a market develops for our ordinary shares, the market price of our ordinary shares may be highly volatile, as is the stock market in general, and the market for OTC quoted stocks in particular. Some of the factors that may materially affect the market price of our ordinary shares are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our ordinary shares. These factors may materially adversely affect the market price of our ordinary shares, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our ordinary shares.

 

THE FOREGOING IS MERELY A SUMMARY OF CERTAIN SIGNIFICANT RISKS ASSOCIATED WITH AN INVESTMENT IN THE COMPANY THROUGH THE PURCHASE OF OUR ORDINARY SHARES. A PROSPECTIVE INVESTOR SHOULD CAREFULLY READ THIS DOCUMENT AND ANY EXHIBITS ATTACHED HERETO IN THEIR ENTIRETY AND, WHERE APPROPRIATE, SHOULD CONSULT WITH THEIR INDEPENDENT ADVISORS PRIOR TO MAKING A DECISION TO INVEST IN THE COMPANY. IN ADDITION, AS THE COMPANY’S BUSINESS DEVELOPS AND CHANGES OVER TIME, AN INVESTMENT IN THE COMPANY MAY BE SUBJECT TO ADDITIONAL AND DIFFERENT RISK FACTORS. NO ASSURANCE CAN BE MADE THAT PROFITS WILL BE ACHIEVED OR THAT SUBSTANTIAL LOSSES WILL NOT BE INCURRED BY THE COMPANY.

 

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SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

 

This prospectus contains statements that may be deemed to be “forward-looking statements” within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations and/or future financial performance.  In some cases, you can identify forward-looking statements by their use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “ought to,” “plan,” “possible,” “potentially,” “predicts,” “project,” “should,” “will,” “would,” negatives of such terms or other similar terms. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The forward-looking statements in this prospectus include, without limitation, statements relating to:

 

  · our goals and strategies;
     
  · the timing and conduct of the clinical trials for our cancer screening kits, including statements regarding the timing, progress and results of current and future preclinical studies and clinical trials, and our research and development programs;
     
  · the clinical utility, potential advantages and timing or likelihood of regulatory filings and approvals of our cancer screening kits;
     
  · our future business development, results of operations and financial condition;
     
  · our ability to protect our intellectual property rights;
     
  · our plans to develop and commercialize our pipeline products;
     
  · market acceptance of our product;
     
  · our estimates regarding expenses, future revenues, capital requirements and our need for additional financing;
     
  · our estimates regarding the market opportunity for our cancer screening kits;
     
  · the impact of government laws and regulations;
     
  · our ability to recruit and retain qualified regulatory and research and development personnel;
     
  · unforeseen changes in healthcare reimbursement for any of our approved products;
     
  · difficulties in maintaining commercial scale manufacturing capacity and capability; our ability to generate growth;
     
  · our failure to comply with regulatory guidelines;
     
  · uncertainty in industry demand and patient wellness behavior;
     
  · future sales of large blocks or our ordinary shares, which may adversely impact our share price; and
     
  · depth of the trading market in our ordinary shares.

 

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties, including those described in “Risk Factors.”

 

You should not unduly rely on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus, to conform these statements to actual results or to changes in our expectations. 

 

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USE OF PROCEEDS

 

The selling security holders named in this prospectus are offering all of the ordinary shares offered through this prospectus. The ordinary shares to be sold by the selling security holders as provided in the “Principal and Selling Shareholders” section is 46,288,050 ordinary shares, par value NIS 0.01 per share, that have already been issued and are currently outstanding (including, in the case of one selling security holder, ordinary shares that will be automatically converted from previously issued preferred shares upon our ordinary shares being approved to trade on the OTCQB marketplace of OTC Link (the “Trading Date”)), up to 2,172,034 employee option shares that have not yet been exercised, of which 2.1% are vested as of February 26, 2016, and up to 4,889,406 ordinary shares underlying warrants previously issued to such selling security holders that have not yet been exercised. We will not receive any proceeds from the sale of the ordinary shares by the selling security holders covered by this prospectus.

 

DIVIDEND POLICY

 

We have never declared or paid dividends on our ordinary shares and currently do not intend to pay cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business.

 

Our ability to distribute dividends is limited by the provisions of the Israeli law and also may be limited by future contractual obligations which we may enter into. The Israeli Companies Law restricts our ability to declare dividends. Unless otherwise approved by a court, we can distribute dividends only from “profits” (as defined by the Israeli Companies Law), and only if there is no reasonable concern that the dividend distribution will prevent us from meeting our existing and foreseeable obligations as they become due. Subject to the foregoing, payment of future dividends, if any, will be at the discretion of our Board and will depend on various factors, such as our financial condition, operating results, current and anticipated cash needs and other business and economic factors that our Board may deem relevant.

 

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CAPITALIZATION

 

The following table sets forth our capitalization as of June 30, 2015 on an actual basis:

 

You should read this table in conjunction with “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

 

Cash and cash equivalents     343,552  
         
Shareholders' Deficit:        
Preferred Shares     8,562  
Ordinary Shares     140,668  
Additional paid in capital     1,215,920  
Receipts on account of ordinary shares     -  
Accumulated Deficit     (1,637,279 )
         
Total Shareholders’ Deficit     (272,129 )
         
Total capitalization     (272,129 )

 

  34  
 

 

DILUTION

 

The ordinary shares to be sold by the selling security holders as provided in the “Principal and Selling Shareholders” section are ordinary shares that are currently issued or, in the case of ordinary shares underlying warrants and ordinary shares that will be automatically converted from previously issued preferred shares on the Trading Date, ordinary shares that are considered to have already been issued. Accordingly, there will be no dilution to our existing shareholders.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

 

We are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the Israeli experts named in this prospectus, substantially all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, because substantially all of our assets, and those of our directors and officers and the Israeli experts named herein, are located outside the United States, any judgment obtained in the United States against us or any of these persons may not be collectible within the United States.

 

We have been informed by our legal counsel in Israel, Dana Livneh-Zemer, Law Office, that it may be difficult to assert U.S. securities laws claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws on the grounds that Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact by expert witnesses, which can be a time-consuming and costly process.  Certain matters of procedure will also be governed by Israeli law.

 

Subject to certain time limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter, including a judgment based upon the civil liability provisions of the Securities Act and the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that, among other things:

 

  · the judgment was rendered by a court which was, according to the laws of the state of the court, competent to render the judgment;
     
  · the judgment may no longer be appealed;
     
  · the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and
     
  · the judgment is executory in the state in which it was given.

 

Even if such conditions are met, an Israeli court may not declare a foreign civil judgment enforceable if:

 

  · the judgment was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases);
     
  · the enforcement of the judgment is likely to prejudice the sovereignty or security of the State of Israel;
     
  · the judgment was obtained by fraud;
     
  · the opportunity given to the defendant to bring its arguments and evidence before the court was not reasonable in the opinion of the Israeli court;
     
  · the judgment was rendered by a court not competent to render it according to the laws of private international law as they apply in Israel;
     
  · the judgment is contradictory to another judgment that was given in the same matter between the same parties and that is still valid; or
     
  · at the time the action was brought in the foreign court, a lawsuit in the same matter and between the same parties was pending before a court or tribunal in Israel.

 

Foreign judgments enforced by Israeli courts will generally be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to render judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at that time.  Judgment creditors must bear the risk of unfavorable exchange rates.

 

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SELECTED FINANCIAL DATA

 

The following tables set forth our selected financial data. You should read the following selected financial data in conjunction with, and it is qualified in its entirety by reference to, our historical financial information and other information provided in this prospectus, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus.

 

The summary statements of comprehensive loss data for the six months ended June 30, 2014 and 2015, and the statements of financial position data as of June 30, 2015 are derived from our unaudited financial statements appearing elsewhere in this prospectus. The summary statements of comprehensive loss data for the years ended December 31, 2013 and 2014, and the statements of financial position data as of December 31, 2014 are derived from our audited financial statements appearing elsewhere in this prospectus. The historical results set forth below are not necessarily indicative of the results to be expected in future periods. Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles.

 

Statements of Comprehensive Loss Data

 

    US dollars  
    For the 6 months ended June 30,  
    2015     2014  
Research and development expenses, net     206,247       178,086  
General and administrative expenses     330,291       17,013  
                 
Operating loss     536,538       195,099  
Financing expenses, net     12,303       8,445  
                 
Comprehensive loss for the period     548,841       203,544  

 

    US dollars  
    For the Year ended December 31,  
    2014     2013     2012  
                   
Research and development expenses, net     336,474       305,021       222,438  
General and administrative expenses     64,372       34,512       22,056  
                         
Operating loss     400,846       339,533       244,494  
Financing (income) expenses, net     (78,779 )     42,285       11,626  
                         
Comprehensive loss for the year     322,067       381,818       256,120  

 

  37  
 

 

Statements of Financial Position Data

 

    US dollars  
    June 30,     December 31,  
    2015     2014  
    (Unaudited)        
ASSETS                
Current Assets                
Cash and cash equivalents     343,552       60,600  
Other current assets     20,634       64,391  
Total current assets     364,186       124,991  
Property and Equipment, Net     113,734       3,695  
Total assets     477,920       128,686  
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
Current Liabilities                
Accounts payable     17,639       15,378  
Liability for Minimum Royalties – current maturity     22,500       -  
Other current liabilities     61,141       84,365  
Total current liabilities     101,280       99,743  
Long-Term Liabilities                
Long-Term Loans from shareholders     636,269       616,636  
Liability for Minimum Royalties     12,500       -  
Total long-term liabilities     648,769       616,636  
Total liabilities     750,049       716,379  
Shareholders' Deficit                
Preferred Shares of NIS 0.01 par value:                
10,000,000 shares authorized and 3,000,000 issued at June 30, 2015 and December 31, 2014     8,562       8,562  
Ordinary Shares of NIS 0.01 par value:                
990,000,000 shares authorized at June 30, 2015 and December 31, 2014; and 53,446,233 issued shares at June 30, 2015 and 33,352,200 at December 31, 2014.     140,668       89,492  
Additional paid in capital     1,215,920       345,335  
Receipts on account of ordinary shares     -       57,356  
Accumulated Deficit     (1,637,279 )     (1,088,438 )
Total shareholders' deficit     (272,129 )     (587,693 )
Total liabilities and shareholders’ deficit     477,920       128,686  

 

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    US dollars  
    December 31,  
    2014     2013  
ASSETS                
                 
Current Assets                
Cash and cash equivalents     60,600       18,541  
Other current assets     64,391       62,775  
                 
Total current assets     124,991       81,316  
                 
Property and Equipment, Net     3,695       2,108  
                 
Total assets     128,686       83,424  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
Current Liabilities                
Accounts payable     15,378       8,413  
Other current liabilities     84,365       12,307  
                 
Total current liabilities     99,743       20,720  
                 
Long-Term Liabilities                
Long-Term Loans from shareholders     616,636       659,526  
                 
Total long-term liabilities     616,636       659,526  
                 
Total liabilities     716,379       680,246  
                 
Commitments and Contingent Liabilities (Note 8)                
                 
Shareholders' Deficit                
                 
Preferred Shares of NIS 0.01 par value:                
10,000,000 shares authorized and 3,000,000 issued at December 31, 2014 and December 31, 2013     8,562       8,562  
                 
Ordinary Shares of NIS 0.01 par value:                
990,000,000 shares authorized at December 31, 2014 and December 31, 2013; and 33,352,500 issued shares at December 31, 2014 and 27,000,000 at December 31, 2013.     89,492       72,444  
Additional paid in capital     345,335       88,543  
Receipt on account of ordinary shares     57,356       -  
Accumulated Deficit     (1,088,438 )     (766,371 )
Total shareholders’ deficit     (587,693 )     (596,822 )
                 
Total liabilities and shareholders’ deficit     128,686       83,424  

 

 

 

  39  
 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and related notes included in this prospectus beginning on page F-1. The following discussion and analysis contain forward-looking statements 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 various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

 

Overview

 

We are a cancer IVD firm engaging in the development of a series of patient-friendly blood tests for the detection of a variety of cancers. Our core technology, TBIA, is based on research conducted and technology invented by the research teams at Ben Gurion University (“BGU”) and Soroka Medical Center of Israel, whose intellectual property has been licensed to us in consideration of our contractual obligation to pay certain licensing fees. On December 9, 2013, our TBIA test obtained the CE mark approval.

 

We believe that our clinical results conducted to date demonstrate the capability to simply and rapidly detect malignant breast and colon tumors in comparison to a controlled healthy group. We anticipate that future broad clinical trial studies should reveal the full potential of our technology. We believe our proprietary innovation is conducive to constant improvement in the algorithm as we ascend the learning curve, thereby perfecting our test performances with each test. Accordingly, we will be required to continue to devote substantial resources and efforts to research and development activities in order to potentially achieve and maintain a competitive position in this field. We plan to increase our products portfolio and improve the existing products by improving the algorithms and optimizing the process.

 

One of our objectives in the next two years is to make our products known in the academic field by publishing articles in medical journals about our TBIA test. During this period we plan to begin selling our products in Europe and prepare the groundwork for FDA approval in the United States. We also will focus on enhancing our TBIA proprietary statistical algorithms in order to obtain a higher level of accuracy for the results of the blood tests. In addition, we believe that automating the process will reduce the relevant costs for the general public. We believe that proper robots and optimized spectrometers will enhance our method to the higher productivity levels needed for the TBIA screening tool to be able to perform a higher volume of tests. Our goal is to perform 1 million tests per year starting in 2018.

 

Prior to selling our products, we need to first complete the automation process. This process includes several steps including qualifying a robust new test protocol, making our test measurement more automated to reduce our dependency on the skills of lab technicians, installing the proper web cloud data warehouse, and integrating a full business to business network. We plan to protect the confidentiality of patient medical data and personally identifiable information via: (i) having a secure facility where the data and information we hold will be stored; and (ii) requiring our third-party providers of data storage to comply with HIPAA and applicable state privacy and security laws and regulations. These changes will enable our customers to run the tests with lower costs while obtaining faster results. To the knowledge of the Company’s management, these changes will not impact the previously obtained CE mark approval of the TBIA test. At this point there can be no assurance that our plan will be implemented in accordance with what we currently envision and future clinical results may lead to different conclusions about our products.

 

Currently, the Company is engaged in refining the protocols for the aforementioned blood tests in order to undergo clinical trials that are required in order to obtain regulatory approvals for our products including FDA approval. There are two types of clinical trials that we will be conducting (training and validation). The first is training our tests so that it is compatible with the population of a country where we perform such clinical trials. If those trials are successful, the second type of clinical trials will be to validate that the tests are able to detect breast cancer and colorectal cancer. The conducting of clinical trials requires the approval of the clinical trial protocol by the relevant ethics committee in each place in which we propose to conduct such clinical trials. The Company estimates that each training clinical trial will require about 200 participants and each validation clinical trial will require at about 200 participants. We further anticipate that in the US, the FDA will require us to perform clinical trials on a much larger group of subjects as a condition for granting its approval prior to commercialization in the U.S. As part of our strategy we plan to approach the FDA with the proposed protocol for the clinical trials in the U.S. in order to receive their comments. We believe that if the FDA endorses the proposed protocol, FDA approval of the product itself will be easier. Concurrently with the above, we plan to develop new products in the coming three years that will detect other cancers. We hope to complete successful clinical trials in the U.S. and receive FDA approval within approximately two to four years. In the meantime, we plan to commercialize our products in other locations. There is no assurance, however, that we will meet this timing schedule and that all of our efforts will be successful. There is no assurance that our intended development plan will receive regulatory approvals, including that of the FDA.

 

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Results of Operations

 

Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014

 

Research and Development Expenses . Our expenses for the six months ended June 30, 2015 were $206,247, as compared with $178,086 for the six months ended June 30, 2014, an increase of $28,161, or 16%. The increase was primarily due to accruing $35,000 of minimum royalties due to the licensors of the Company’s technology.

 

General and Administrative Expenses . Our expenses for the six months ended June 30, 2015 were $330,291, as compared with $17,013 for the six months ended June 30, 2014, an increase of $313,278 or 1,841%. The increase was primarily due to recording $200,000 of stock based compensation to Maxim Partners LLC as further described in the “Share History” section below, as well as $111,016 of professional fees, mainly legal and PCAOB audit firm fees. The legal fees were associated with the increased corporate activity during the period and the PCAOB fees were due to the changing of the auditor of the Company, to a PCAOB approved firm.

 

Finance Expenses . Our expense for the six months ended June 30, 2015 was $12,303, as compared with an expense of $8,445 for the six months ended June 30, 2014, an increase of $3,858 or 46%. The increase was primarily due to a larger change in the 2015 period, of the USD / Israeli Shekel exchange rate.

 

Net Loss. Our net loss for the six months ended June 30, 2015 was $548,841, as compared to $203,544 for the six months ended June 30, 2014, a $345,297 increase in the amount of the loss or a 170% increase in the loss.

 

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

 

Research and Development Expenses . Our expenses for the year ended December 31, 2014 were $336,474, as compared with $305,021 for the year ended December 31, 2013, an increase of $31,453, or 10%. The increase was primarily due to the lack of receipts in 2014 of grants from the OCS, which offset the research and development expenses in 2013. The increase was partially offset by a decrease of clinical trial insurance and patent expenses.

 

General and Administrative Expenses . Our expenses for the year ended December 31, 2014 were $64,372, as compared with $34,512 for the year ended December 31, 2013, an increase of $29,860 or 87%. The increase was primarily due to higher rent and office costs as well as due to a smaller increase in the general administration expenses.

 

Finance Income and Expenses . Our income for the year ended December 31, 2014 was $78,779, as compared with an expense of $42,285 for the year ended December 31, 2013, a turnaround of $121,064. The change was almost exclusively due to a reversal of the exchange rate differentials of the balances on the balance sheet.

 

Net Loss. Our net loss for the year ended December 31, 2014 was $322,067, as compared to $381,818 for the year ended December 31, 2013, a $59,751 decrease in the amount of the loss or a 16% reduction in the loss.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

To date, we have funded our operations primarily with shareholder loans, grants from the OCS, issuing ordinary shares to investors and by issuing units (shares and warrants) to investors purchasing ordinary shares and warrants in our Company under our February 2015 private placement memorandum.

 

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Historical Cash Flows

 

The following table summarizes our statement of cash flows for the six months ended June 30, 2015 and June 30, 2014.

 

    US dollars  
    For the 6 months ended June 30,  
    2015     2014  
Cash flows from operating activities:                
Loss for the period     (548,841 )     (203,544 )
Adjustments to reconcile loss for the period to net cash used in operating activities:                
Depreciation     2,248       230  
Liability for minimum royalties     35,000       -  
Stock based compensation     200,000       -  
Financing expenses of long term loans & other Shekel denominated balances     19,633       4,475  
Changes in operating assets and liabilities:                
Decrease in other current assets     43,757       35,542  
Increase in accounts payable     2,261       13,857  
Increase (decrease)  in other current liabilities     (23,224 )     67,836  
Net cash used in operating activities     (269,166 )     (81,603 )
Cash flows from investing activities                
Purchase of property and equipment     (112,287 )     -  
Net cash used in investing activities     (112,287 )     -  
Cash flows from financing activities                
Proceeds from issuance of ordinary shares, net     664,405       -  
Proceeds on receipts on account of ordinary shares     -       57,356  
Proceeds from shareholders loans     -       13,272  
Net cash provided by financing activities     664,405       70,628  
Increase (decrease) in cash and cash equivalents     282,952       (10,975 )
Cash and cash equivalents at beginning of the period     60,600       18,541  
Cash and cash equivalents at end of the period     343,552       7,566  

 

Operating Activities

 

Net cash used in operating activities for the six months ended June 30, 2015 was $269,166 compared to net cash used in the six months ended June 30, 2014 of $81,603 which is an increase of $187,563 or a 230% increase. This was primarily due to the approximately $105,000 increase in professional fees paid during the six month period ended June 30, 2015, as well as the $23,224 reduction in other current liabilities during the same period, whereas in the six month period ended June 30, 2014, the Company allowed the other current liabilities to increase by $67,836.

 

Investing Activities

 

Net cash used in investing activities for the six months ended June 30, 2015 was $112,287 compared to net cash used in the six months ended June 30, 2014 of $0. This was due to the purchase of property and equipment.

 

Financing Activities

 

Net cash provided by financing activities for the six months ended June 30, 2015 was $664,405 compared to net cash generated in the six months ended June 30, 2014 of $70,628 which is an increase of $593,777 or an 841% increase. This was primarily a result of a significant amount of cash received from the issuance of ordinary shares.

 

The following table summarizes our statement of cash flows for the years ended December 31, 2014 and 2013.

 

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STATEMENTS OF CASH FLOWS

 

    US dollars  
    Year ended December 31,  
    2014     2013     2012  
Cash flows from operating activities:                        
Loss for the year     (322,067 )     (381,818 )     (256,120 )
Adjustments to reconcile loss for the year to net cash used in operating activities:                        
Depreciation     434       275       275  
Financing expenses of long term loans from share holders     (73,322 )     26,497       (1,667 )
                         
Changes in operating assets and liabilities:                        
Decrease in other current assets     (1,616 )     (34,774 )     (14,168 )
Increase (decrease) in accounts payable     6,965       (20,399 )     (5,871 )
Increase in other current liabilities     72,058       1,529       10,778  
                         
Net cash used in operating activities     (317,548 )     (408,690 )     (266,773 )
                         
Cash flows from investment activities                        
                         
Purchase of property and equipment     (2,021 )     -       -  
                         
Net cash used in investment activities     (2,021 )     -       -  
                         
Cash flows from financing activities                        
Proceeds from issuance of ordinary shares, net     273,840       -       -  
Proceeds on receipts on account of ordinary shares     57,356       -       -  
Proceeds from shareholders loans     30,432       419,969       252,374  
                         
Net cash provided by financing activities     361,628       419,969       252,374  
                         
Increase (decrease) in cash and cash equivalents     42,059       11,279       (14,399 )
Cash and cash equivalents at beginning of the year     18,541       7,262       21,661  
                         
Cash and cash equivalents at end of the year     60,600       18,541       7,262  

 

Operating Activities

 

Net cash used in operating activities for the year ended December 31, 2014 was $317,548 compared to net cash used in the year ended December 31, 2013 of $408,690 which is a decrease of $91,142 or a 22.3% decrease. This was primarily due to a large increase in other current liabilities.

 

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Investing Activities

 

Net cash used in investing activities for the year ended December 31, 2014 was $2,021 compared to net cash used in the year ended December 31, 2013 of $0 which is an increase of $2,021. This resulted from the absence of the purchase of fixed assets in prior years.

 

Financing Activities

 

Net cash provided by financing activities for the year ended December 31, 2014 was $361,628 compared to net cash generated in the year ended December 31, 2013 of $419,969 which is a decrease of $58,341 or a 13.9% decrease. This was a result of a significant decrease in obtaining shareholder loans, partially offset by an increase in cash received from the issuance of ordinary shares.

 

Contractual Obligations

 

The following table summarizes our contractual obligations as of June 30, 2015:

 

    Payments due by period  
    (US$)  
    Total     Less than
1 year
    1-2 years     2-5 years     More than
5 years
 
                               
Shareholders’ loans (1)     636,269                       636,269          
                                         
Total (2)     636,269                       636,269          

 

(1) During the years 2011-2014, the Company received loans from two shareholders. The loans are denominated in NIS, mature on December 31, 2019 and bear no interest. The loans are linked to the Israeli consumer price index as of January 1, 2015. The loans may be prepaid by the Company from time to time according to the Company's cash availability. As of June 30, 2015, no repayments of the shareholders loans have been made.

 

(2) This does not include the repayment of approximately $167,000 of grants we received from the OCS and interest thereon, which shall be repaid as royalties upon the commercialization of our products.

 

Funding Requirements

 

Upon the registration statement of which this prospectus forms a part being declared effective (the “Effectiveness Date”), we plan to seek access to the capital market in the U.S. to raise funding for the commercialization stage. Our objective is to raise at least $10 million to execute our business plan for the initial 24 months following the Effectiveness Date.

 

We expect our costs during the initial twelve (12) months following the Effectiveness Date to be approximately $5 million. If we are able to raise $5 million, we expect $4 million will be used for continuing our research and development operations, $0.5 million will be used for marketing efforts, and $0.5 million will be used to fund general operational expenses. As of June 30, 2015, the Company’s available funds of $343,552 are not sufficient to fund our activities for those twelve (12) months and we will need to raise cash to implement our strategy and stay in business. If we are unable to raise additional funds to develop and commercialize our products, we may be required to scale back our development plans by reducing expenditures for employees, consultants, business development, and other envisioned expenditures. This could reduce our ability to develop our planned cancer screening tests and implement our business plan. In that event, investors should anticipate that their entire investment may be lost and there may be no ability to profit from this investment. Upon the raising of sufficient additional funds, we will again seek to obtain FDA approval. If we are unable to raise $5 million but are still able to raise at least $2 million, we anticipate our operations will consist of conducting clinical trials in Israel, India and Singapore to gain the scientific validation to promote the sale of our products in those countries as well as moving forward with a “small pilot” clinical trial with the FDA. The small pilot clinical trial will allow the company to take the initial steps for FDA feedback while avoiding the time and expense for complete FDA approval. If we are unable to raise $2 million, we will focus our current funds on solely completing clinical trials in Israel and India and reaching commercialization of our products in those countries as well as exploring the option of commercialization in the US using a CLIA pathway. By utilizing CLIA, the company would be allowed to sell its products in the US but it would require that the company be limited to using one qualified centralized lab to provide the service.

 

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We cannot assure that our cancer screening kits will be commercialized, work, or receive regulatory approval and that we will earn revenues sufficient to support our operations or that we will ever be profitable. Furthermore, since we have no committed source of financing, we cannot assure that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

 

The Company has limited experience with IVD. As such these budget estimates may not be accurate. In addition, the actual work to be performed is not known at this time, other than a broad outline, as is normal with any scientific work. As further work is performed, additional work may become necessary or change in plans or workload may occur. Such changes may have an adverse impact on our estimated budget. Such changes may also have an adverse impact on our projected timeline of drug development

 

If we are unable to raise additional funds, we will need to do one or more of the following:

 

· delay, scale-back or eliminate some or all of our research and product development programs;
· provide licenses to third parties to develop and commercialize products or technologies that we would otherwise seek to develop and commercialize ourselves;
· seek strategic alliances or business combinations;
· attempt to sell our company;
· cease operations; or
· declare bankruptcy

 

Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to secure additional debt or equity financing in a timely manner, or at all, which could require us to scale back our business plan and operations.

 

The above conditions raise substantial doubt about our ability to continue as a going concern. The financial statements included elsewhere herein were prepared under the assumption that we would continue our operations as a going concern. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. Without additional funds from debt or equity financing, sales of our intellectual property or technologies, or from a business combination or a similar transaction, we will soon exhaust our resources and will be unable to continue operations.  If we cannot continue as a viable entity, our shareholders may lose some or all of their investment in us.

 

Our management intends to attempt to secure additional required funding primarily through additional equity or debt financings. We may also seek to secure required funding through sales or out-licensing of intellectual property assets, seeking partnerships with other pharmaceutical companies or third parties to co-develop and fund research and development efforts, or similar transactions. However, there can be no assurance that we will be able to obtain required funding. If we are unsuccessful in securing funding from any of these sources, we will defer, reduce or eliminate certain planned expenditures in our research protocols.  If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that could result in our shareholders losing some or all of their investment in us.

 

Off-balance Sheet Arrangements

 

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

 

Quantitative and Qualitative Disclosure of Market Risks

 

Exchange Rate Risk

 

Some of our assets and liabilities are affected by fluctuations in the exchange rate between the U.S. dollar and the NIS with the primary exposure being the shareholder liabilities denominated in NIS. Salaries and related expenses for Israeli employees are paid in NIS.

 

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As of June 30, 2015, our total assets and liabilities linked to the NIS amounted to $28,731 and $715,049, respectively. A 10% appreciation of the NIS in relation to the dollar would cause an exchange rate loss of $68,632.

 

During the year ended December 31, 2014, the NIS depreciated by 12.0% against the U.S. dollar, resulting in an exchange rate gain. During the six months ended June 30, 2015, the NIS appreciated by 3.1% against the U.S. dollar, resulting in an exchange rate loss. To date, we have not hedged the risks associated with fluctuations in currency exchange rates.

 

Application of Critical Accounting Policies and Estimates

 

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. Significant accounting policies employed by us, including the use of estimates, are presented in the notes to the financial statements included elsewhere in this prospectus. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s subjective or complex judgments, resulting in the need for management to make estimates about the effect of matters that are inherently uncertain and that may have a material impact on our financial condition or results of operations. Actual results may materially differ from these estimates under different assumptions or conditions.

 

Going concern uncertainty

 

The Company devoted substantially all of its efforts to research and development and raising capital, and has not yet generated any revenues. The development and commercialization of the Company's products are expected to require substantial further expenditures. The Company has not yet generated any revenues from operations, and therefore it is dependent upon external sources for financing its operations. Since inception, the Company has incurred substantial accumulated losses and negative operating cash flow and has a significant shareholders’ deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company plans to finance its operations through the sale of equity and, to the extent available, short term and long term loans. There can be no assurance that the Company will succeed in obtaining the necessary financing to continue its operations. From July 1, 2015 through February 26, 2016, the Company raised the gross amount of $477,881.20 of new capital.

 

BUSINESS

 

Overview

 

Our company was incorporated under the laws of the State of Israel on April 22, 2010. Our principal executive office is located at 1 Hamada Street, Rehovot, Israel and our telephone number in Israel is +972-8-633-3964. Our web address is www.todosmedical.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein.

 

Since inception, the Company has focused its efforts on the goal of creating a new methodology for cancer screening tests that make cancer detection more accurate, accessible, and affordable to the general public. Our core technology which serves as the foundation of our company was originally researched and developed by BGU along with Soroka Medical Center. Both institutions are located in Israel. We have the exclusive worldwide rights to use this intellectual property for commercial and research and development purposes. Currently, we are developing cancer screening tests using IVD for both colon cancer and breast cancer. Tests for other types of cancers are under development.

 

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The Marketplace

 

Cancer is the second largest cause of morbidity and mortality worldwide. According to the World Health Organization, in 2012, 14 million people were newly diagnosed with cancer and there were 8.2 million cancer related deaths. This number is expected to rise by 70% in the next twenty years. The World Health Organization further states that early detection can greatly reduce the current mortality rates (see http://www.who.int/mediacentre/factsheets/fs297/en ). The cost of cancer in the European Union alone was stated at over 51 billion Euro for 2009 (Report From The Commission To The European Parliament, The Council, The European Economic And Social Committee And The Committee Of The Regions published September 23, 2014). Meanwhile the cost of cancer in the Unites States of America for the year 2001 was over $88.7 billion (see American Cancer Society http://www.cancer.org/cancer/cancerbasics/economic-impact-of-cancer ). The costs of cancer in lives and suffering as well as financially are staggering on a global basis.

 

While much work must be done on reducing the incidence rates of cancer and the treatment of cancer itself, we believe the early detection of cancer is a critical step to saving lives. The European Union has established a target of conducting cancer screening for 300 million people annually. In 2008, only 56 million cancer screenings were preformed (International Agency for Research on Cancer, Cancer Screening in EU 2008). Similarly, the United States has set a target to screen 200 million people per year (American Cancer Society, Cancer Screening in 2008).

 

Although cancer screenings are necessary if not vital, there are many reasons that they are not more widely used. We believe these reasons include:

 

High cost per screen

 

Uncomfortable for the patient (mammogram, colonoscopy, MRI)

 

Not accessible to large segments of the population

 

Risk is involved (Radiation and Invasive tests)

 

Requires specialists to interpret results

 

Low sensitivity or specificity

 

In summary, we believe that a large segment of world-wide population who need to be checked regularly for cancer forego the screening process due to the above reasons.

 

Our Technology

 

In the last decade many scientific articles have been published showing that the body’s immune system detects the existence of cancer but, for various reasons, fails to attack it.

 

For our screening methodology, only a small amount of peripheral blood from the patient is needed. The method is based on infrared spectroscopy measurements of the blood sample and computerized analysis.

 

The basic concept in our technology is to measure the biochemical changes in the peripheral blood mononuclear cells (“PBMC”) and plasma, due to cancer presence.

 

As the PBMC are part of the body’s immune system, we believe our methodology will detect overall biochemical changes of the immune system due to cancer presence. The technology involves special infrared (“IR”) measurement of a simple blood sample.

 

We are using the Fourier Transform Infrared Analysis (“FTIR”) spectrometer for reading the biochemical content of the PBMC and plasma. We believe the FTIR has some unique advantages in this aspect as it requires no reagents and the reading is swift. Most of the biochemical materials can be detected using the FTIR. The test uses conventional lab methods and the mathematical analysis is made automatically by proprietary algorithms.

 

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We believe there is a scientific consensus that many different biomarkers have to be taken into consideration to detect cancer existence. Our approach addresses this need since we check the total biochemical construction on the PBMC and plasma.

 

Our method can be adapted to identify other cancers, and new products can be readily developed using our existing technology. It is our assessment that we can offer screenings that provide faster results and lower costs compared to the current competing technologies in today’s market.

 

Developing our technology requires a uniquely skilled team. Our team includes consultants who have expertise in physics, biochemistry, engineering, medicine, and data processing. We believe our management has the proper education and experience to run such an operation in today’s marketplace.

 

Past Clinical Studies

 

Four clinical studies whose results were published in what we believe to be well-known peer-reviewed journals have been conducted to date. The first of these studies was conducted by B.G. Negev Technologies and Applications Ltd. (“BGU”, a wholly owned subsidiary of Ben Gurion University – Israel) and the other three studies were conducted by us. The goal of these studies was to evaluate TBIA as what we believe to be a novel, simple, and low cost method for the early detection of cancer.

 

“Sensitivity” as used below is the number of detected cancers divided by the full population having cancer that participated in the study. A sensitivity of 100% means that our product detected cancer in all of the people with cancer that were diagnosed using our product. A sensitivity of 80% means that out of 100 people with cancer the test will detect 80 people as being diagnosed with the relevant cancer and the rest will be defined as healthy.

 

“Specificity” as used below is the number of detected healthy subjects divided by the full population of healthy subjects that participated in the study. A specificity of 80% means that out of 100 healthy people who participated in the study – we diagnosed 80 people as healthy. The 20 other healthy subjects were falsely diagnosed as having cancer.

 

  · The first study was conducted by BGU. This study included 15 acute leukemic children, 19 children who had a high fever with a diagnosis of infection or inflammation, and 27 healthy volunteers.

 

The first objective of the study was to distinguish between children diagnosed as having acute leukemia and healthy subjects by FTIR spectroscopy analysis of PBMCs.

 

The second objective was to follow and analyze leukemic patients’ response to chemotherapy by FTIR spectroscopy of PBMCs in comparison to what we believe to be the standard practice of bone marrow examination by flow cytometry.

 

A third objective of the clinical trial was to distinguish between leukemic children and children with similar clinical symptoms such as high fever and white blood count (which also appears following infection or inflammation) using FTIR technology.

 

Results of study:

 

The first objective was achieved successfully – all subjects, healthy and acute leukemia, were diagnosed correctly – 100% sensitivity and specificity.

 

The second objective of follow-up treatment was achieved by identifying three different responses to treatment by FTIR method – good, intermediate and unfavorable response. FTIR identified responses to treatment earlier (33 days vs. 100 days) than flow-cytometry analysis of bone marrow.

 

The third objective was achieved as well. The children having similar symptoms to leukemia were successfully distinguished from acute leukemia children by FTIR analysis– 100% sensitivity and specificity.

 

These results were published in the Biochimica et Biophysica Acta (Zelig et al. Biochimica et Biophysica Acta 1810 (2011) 827–835).

 

  · Below are details regarding three other studies all of which the Company conducted.

 

o

The first study included 41 cancer patients and 45 healthy volunteers. This study was intended to evaluate the utility of our method to detect several types of cancers using advance computerized algorithm. The performances of the algorithm presented what we believe were promising results for breast and colorectal cancer as well as other cancers. Following these results, the Company chose to put our efforts into the screening of breast and colorectal cancers.

 

The first objective of the study was to distinguish between cancer patients of multiple types and healthy subjects by FTIR spectroscopy analysis of PBMCs and plasma – we refer to this as the TM-T1 method – our product for diagnosing multiple types of cancers. All patients were diagnosed by standard practice such as histopathology of tissue samples taken from the tumor.

 

The second objective was to distinguish between different types of cancers utilizing FTIR spectroscopy analysis of PBMCs and plasma.

 

Results of study:

 

The first objective of the study was achieved successfully – 93% sensitivity for detecting different types of cancers and 80% specificity for identifying correctly the healthy population.

 

The second objective was partly obtained – different spectral patterns were observed for each type of cancer indicating there is the potential of successful classification between the various cancers. The statistical parameters were not established due to low patient numbers for each individual type of cancer preventing reliable statistical analysis.  

 

The results of the study were published in the IEEE (Ostrovsky et al. IEEE Transactions on Biomedical Engineering, Vol. 60, No. 2, February 2013, 343-353).

 

o

The second study was conducted between April 27, 2011 and April 26, 2013 at Rabin Medical Center in Israel. The number of the study was 0336-10-RMC and its purpose was evaluation of our screening method for breast cancer. This study included 29 breast cancer patients and 30 subjects who were healthy or had benign tumors. All subjects were tested for breast cancer by standard screening procedures (mammography / ultrasound) and had not yet undergone surgical treatment, chemotherapy or radiotherapy.

 

The first objective of the study was to distinguish between cancer patients and healthy subjects or patients having benign tumor using FTIR spectroscopy analysis of PBMCs and plasma – we refer to this as the TM-B1 method – our product for diagnosing breast cancer.

 

The second objective was to distinguish between three groups: cancer patients, patients having benign tumors, and healthy subjects without pathological findings related to breast tumors.

 

Results of study:

 

The first objective of the study was achieved successfully – approximately 90% sensitivity for detection of breast cancer and approximately 80% specificity for identifying correctly the healthy patients and patients with benign tumors.

 

The second objective was partly obtained – different spectral patterns were observed for each group – healthy, benign, and malignant. The statistical parameters were not established due to low patient numbers in each group.

 

The results of the study were published in the BMC Cancer (Zelig et al. BMC Cancer (2015) 15:408).

  

o

The third study was conducted between April 27, 2011 and April 26, 2013 at Rabin Medical Center in Israel. The number of the study was 0336-10-RMC and its purpose was evaluation of our screening method for colorectal cancer. This study included 30 colorectal cancer and high-grade dysplasia (“HGD”) patients, 10 patients with benign polyps and 18 healthy subjects, all tested for colorectal cancer by colonoscopy. The premalignant HGD was joined with the malignant group.

 

The first objective of the study was to distinguish between cancer patients vs. healthy subjects using FTIR spectroscopy analysis of PBMCs and plasma – we refer to this as the TM-C1 method – our product for diagnosing colorectal cancer.

 

The second objective was to distinguish between three groups: colorectal cancer patients, patients having benign tumors, and healthy subjects without pathological findings related to colorectal tumors such as polyps.

 

Results of study:

 

The first objective of the study was achieved successfully – approximately 82% sensitivity for detection of colorectal cancer and approximately 71% specificity for detecting healthy populations without pathological findings. The benigns were classified in between the cancer and healthy groups.

 

The second objective was partly obtained – different spectral patterns were observed for each group – healthy, benign, and malignant. The statistical parameters were not established due to low patient numbers in each group.

 

The results of the study were published in the Journal of Gastroenterology (Barlev et al. Journal of Gastroenterology (First Online: 26 June 2015): 1-8.).

 

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A fifth clinical study began on June 6, 2013 at Kaplan Medical Center in Israel. This study is currently ongoing. The number of the study is 0152-12-KMC.

 

The study is expected to include 400 patients – 200 healthy, 100 benign, and 100 breast cancer patients. All subjects are tested for breast cancer by standard screening procedures (mammography / ultrasound) and have not yet undergone surgical treatment, chemotherapy or radiotherapy.

 

The first objective of the study is to distinguish between cancer patients and healthy subjects or patients having benign tumor using FTIR spectroscopy analysis of PBMCs and plasma – TM-B1 method.

 

The second objective is to distinguish between three groups: cancer patients, patients having benign tumor and healthy subjects without pathological findings related to breast tumors.

 

This study is currently ongoing.

 

An international study at multiple healthcare locations with multiple healthcare providers that is based on an updated robust protocol is expected to be initiated in the first quarter of 2016. There are negotiations to conduct this trial in multiple countries (including Singapore, India, U.S, Germany and Israel). To date, these locations have not been finalized and locations may be deleted or added. The scope of the trial is expected to be in the range of 500 - 1,000 individuals. This potential trial would be in addition to and not in replacement of the training and validation clinical trials to be conducted in Israel and the U.S.

 

Intellectual Property

 

In order to protect our proprietary technologies, we rely on combinations of application for patent and trade secret protection, as well as confidentiality agreements with employees, consultants, and third parties.

 

We have filed and own all rights in the following patent applications, all of which are currently pending

 

Category I : These applications relate to analysis of an IR spectrum of a PBMC sample. Claims are generally directed to indicating the presence of a solid tumor based on analysis of an IR spectrum of a PBMC sample:

 

(1)

US Patent Application 13/701,262. This has claims for a method (process) and is expected to expire on June 1, 2031.

(2) European Patent Application No. 11789348.7. This has claims for a method (process) and a system and is expected to expire on June 1, 2031.
(3) Israel Patent Application 223,237. This has claims for a method (process), a system, and for a computer program product and is expected to expire on June 1, 2031.

Category II : These applications relate to analysis of an IR spectrum of a blood plasma sample. Claims are generally directed to indicating the presence of a solid tumor based on analysis of an IR spectrum of a blood plasma sample:

 

(4) US Patent Application 14/116,506. This has claims for a method (process), a system, and for a computer program product and is expected to expire on May 10, 2032.
(5)

European Patent Application No. 12782256.7. This has claims for a method (process) and a system and is expected to expire on May 10, 2032.

(6) Israel Patent Application 229,109. This has claims for a method (process), a system, and for a computer program product and is expected to expire on May 10, 2032.

Category III : These applications relate to analysis of an IR spectrum of a blood plasma sample and PBMC samples:
(7)

US Patent Application 14/894,128. This has claims for a method (process), and is expected to expire on November 14, 2033.

  (8) 

European Patent Application No. 13885931.9. This has claims for a method (process), a system, and for a computer program product and is expected to expire on November 14, 2033.

 

There are no patents or patent applications which are licensed to the Company pursuant to the Company’s License agreement with BGU and Mor referenced below. There are no patents or patent applications which are licensed to the Company from any other entity.

 

To the knowledge of the Company’s management, there are no contested proceedings or third-party claims over any of our patent applications. Our success depends upon our ability to protect our technologies through intellectual property agreements including patents, trademarks, know-how, and confidentiality agreements. However, there can be no assurance that the above mentioned patent applications will be approved by the appropriate agencies.

 

All of the technology for which the patents are sought is owned by the Company. The patents are entirely owned by the Company.

 

Licensing Agreement

 

We entered into a research and license agreement in April 2010 with BGU and Mor Research Applications Ltd. (a wholly owned subsidiary of Clalit Medical Services – Israel) (together with BGU, the “Licensor”). The Licensor, pursuant to the agreement, granted us an exclusive, worldwide, license to commercialize certain intellectual property covered by the agreement (i.e. research, develop, manufacture, market, distribute, and sell any product containing the licensable IP under the agreement). This agreement is attached as Exhibit 10.1 to the registration statement of which this prospectus forms a part.

 

Pursuant to the agreement, we are under an obligation to pay to the Licensor a minimum annual royalty of $10,000 in 2015, $25,000 in 2016 and, from 2017 through the termination of the agreement, $50,000 per year. Once there are sales of products or sublicensing receipts based on the licensed intellectual property, the Company is under an obligation to pay the Licensor a certain percentage of such sales or sublicensing receipts, as running royalties. Once there are sales, the Company is obligated to pay not less than the minimum annual royalties. These minimum amounts will be credited against the running royalties.

 

According to the license agreement the royalty rates are:

 

On net sales of:        
o   leukemia related products     3.0 %
o   other products     2.5 %
o   in certain limited circumstances, rates may be reduced to     2.0 %
On fixed sublicense income (with no Company income on sales by the sub licensee, the rates below would be the only amounts due to the Licensor. The net sales rates listed above will not be owed if there is no Company income on sales by the sub licensee.):        
o   leukemia related products     20.0 %
o   other products     15.0 %
On fixed sublicense income (with Company income on sales by the sub licensee. These rates are in addition to the net sales rates listed above.):        
o    leukemia related products     10.0 %
o   other products     7.5 %

 

The minimum royalties will be paid to the Licensor regardless of whether the Company is able to generate sales from the products arising from the usage of the license.

 

The license agreement is for an unlimited term, unless terminated earlier by either of the parties. Each party is entitled to terminate the agreement as a result of a material breach or a failure to comply with a material term by the other party, as a result of liquidation or insolvency of the other party. In addition, the Company is entitled to terminate the agreement if at any time, during the period of 7 years following the effective date of the transaction, the Company, at its sole discretion, determines that commercialization of the leukemia licensed products is not commercially viable.

 

Plan of Operation

 

Our main goals in the first six months of 2016 are to: (i) update the measurement protocol; (ii) approach the FDA for protocol approval (as of February 26, 2016, we have never communicated with the FDA); (iii) make our products known in the academic field by publishing articles in medical journals about our TBIA test; and (iv) appoint a scientific advisory board.

 

During this period we plan to begin the needed preparations for getting FDA approval. This includes writing the needed protocols for the pilot and validation studies. In addition, we will continue developing the measurement protocol and algorithms needed for the analysis of the blood test results. The new measurement protocol will be designed to increase the test performances.

 

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We expect our costs during the initial twelve (12) months following the Effectiveness Date to be approximately $5 million. If we are able to raise $5 million, we expect $4 million will be used for continuing our research and development operations, $0.5 million will be used for marketing efforts, and $0.5 million will be used to fund general operational expenses. As of June 30, 2015, the Company’s available funds of $343,552 are not sufficient to fund our activities for those twelve (12) months and we will need to raise cash to implement our strategy and stay in business.

 

If we are able to raise additional capital, our goals for 2016 include:

 

Establish U.S. and EU distribution channels/partners for our products;

 

Begin the TC (Todos colon cancer screening product) and TB (Todos breast cancer screening product) training to appropriate personnel;

 

Begin the U.S. and EU reimbursement process;

 

Qualify new TC software versions;

 

Begin the process of getting regulatory approval of our products in India; and

 

Begin the development of additional products.

 

At this point we are not able to provide any assurance that we will meet the schedule above or that we will be successful in meeting our abovementioned goals.

 

Currently, the Company is engaged in refining the protocols for the aforementioned blood tests in order to undergo clinical trials that are required in order to obtain regulatory approvals for our products including FDA approval. There are two types of clinical trials that we will be conducting (training and validation). The first is training our tests so that it is compatible with the population of a country where we perform such clinical trials. If those trials are successful, the second type of clinical trials will be to validate that the tests are able to detect breast cancer and colorectal cancer. The conducting of clinical trials requires the approval of the clinical trial protocol by the relevant ethics committee in each place in which we propose to conduct such clinical trials. The Company estimates that each training clinical trial will require about 200 participants and each validation clinical trial will require at about 200 participants. We further anticipate that in the US, the FDA will require us to perform clinical trials on a much larger group of subjects as a condition for granting its approval prior to commercialization in the U.S. As part of our strategy we plan to approach the FDA with the proposed protocol for the clinical trials in the U.S. in order to receive their comments. We believe that if the FDA endorses the proposed protocol, FDA approval of the product itself will be easier. Concurrently with the above, we plan to develop new products in the coming three years that will detect other cancers. We hope to complete successful clinical trials in the U.S. and receive FDA approval within approximately two to four years. In the meantime, we plan to commercialize our products in other locations. There is no assurance, however, that we will meet this timing schedule and that all of our efforts will be successful. There is no assurance that our intended development plan will receive regulatory approvals, including that of the FDA.

 

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Products – Cancer Screening Kits

 

 

Our Proprietary Technology

 

We developed the TBIA method, a proprietary method for screening of solid tumors using peripheral blood analysis by infrared spectroscopy. The method is multidisciplinary and incorporates hematology, biochemistry, physics and signal processing. TBIA screening method is based on the cancer’s influence on the immune system which triggers cellular and biochemical changes in the PBMC and plasma. These biochemical changes are detected by the FTIR whose results undergo rigorous testing of sophisticated signal processing in order to detect if the entire biochemical signature under detection have the typical biochemical indications for cancer existence.

 

The principle behind our proprietary technology, TBIA, is to observe the immune system response to tumor presence anywhere in the body rather than looking for the tumor cells themselves. We analyze multiple elements of the biochemical signature (including proteins, lipids, nucleic acids and carbohydrates) of the effected immune cells from the peripheral blood in conjunction with plasma using infrared spectroscopy, instead of focusing on a single specific protein as a biomarker.

 

Our research, using spectral analysis, thus far indicates that the “IR signatures” of several types of cancer are significantly distinct from the “infrared signatures” of healthy patients. These differences can be related to several biological effects which exist during malignancy.

 

Our cancer screening kit includes a special glass slide upon which the PBMC and the plasma are placed. Some tests might also include a salt solution that is needed for the blood separation process. There is a different test for each cancer type.

 

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The Todos Medical Innovation Solution:

 

- The immune system and plasma undergoes biochemical changes due to cancer existence.
- Mid infrared spectroscopy can detect these biochemical changes (“spectral signature”).
- The result is generated automatically by a sophisticated mathematical algorithm which enhances the efficiency for handling massive amounts of tests per year.

 

Distribution Channels

 

We currently have no distributors to our products but evaluate engaging distributors in Europe and Asia. Our goal is to collaborate with well-established partners that could provide us with access to different markets around the world.

 

Raw Materials and Suppliers

 

We have several vendors that provide us raw materials from various geographic locations. While we are currently relying on these suppliers, we plan to locate other suppliers upon strict inspection. We plan to have a minimum of two vendors for each component in our system and it is our intention to eventually produce the raw material internally. However, because we are in a highly specialized industry, there can be no assurance that we will be able to achieve that.

 

Listed below are our current material suppliers. There is no assurance that they will be able to continue supply our raw materials or that, if necessary, we will be able find replacement vendors on a timely basis on favorable terms.

 

List of the raw material suppliers for kits

 

SUPPLIERS   MATERIAL
Sigma Aldrich   Histopaque-1077
guylop   Desiccators
Crystaltechno ltd., Alkor Technologies   ZnSe uncoated
LA MEDIMARKET   Saline solution (0.9% NaCl)
ALEX RED   Slide Safe Box
SAGAM   TM FABRIC
BD   BD Vacutainer K2EDTA 3ml 13*75P LAVEND 1K/c

 

Suppliers for our cancer screening kits

 

Manufacturer Name   Supplier Name   Service Description / Component Description
BD   Bactlab diagnostic ltd.   BD Vacutainer K2EDTA 3ml 13*75P LAVEND 1K/c
Sigma Aldrich   Sigma Aldrich Israel ltd.   Histopaque-1077
Aguettant, Lyon, France.   Medi-Market   Sodium Chloride Solution, 0.9%, Embryo
Sigma Aldrich   Sigma Aldrich Israel ltd.   Ethanol Absolut, Spectranal

 

Customers

 

Our goal is to have a diversified pool of customers worldwide, including the United States. However, we plan to only focus on the Western EU nations and Israel in the near future since we have the CE mark and it will require more time and effort to achieve FDA approval.

 

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Competition

 

Company   Symbol   Company Description
         
Exact Sciences   EXAS   Marketing Cologuard stool based screening test for the detection of colorectal cancer
         
Volition Rx   VNRX   Developing blood-based diagnostic tests for colorectal, lung, prostate, ovarian and other cancer types based on nucleosomics
         
Epigenomics   EPGNF   Engages in developing and commercializing in vitro diagnostic tests for the screening and diagnosis of cancer (EpiproColon – methylated Septin9 DNA in human plasma)
         
Cancer Genetics   CGIX   Focuses on developing and commercializing proprietary genomic tests to improve and personalize the diagnosis and response to treatment of cancer

 

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Competitive Advantage:

 

Current prevailing cancer screening tests utilize the standard procedures which, we believe, are typically uncomfortable, such as colonoscopy for colorectal cancer and mammography for breast cancer. In addition, we believe, these tests generally have medium to low sensitivities/specificity, along with adverse risks. Furthermore, many of the existing screening methods depend on the technician’s or the physician’s capabilities, knowledge and interpretation. The existing screening methods also carry a high cost.

 

In light of these drawbacks, we believe our competitive advantage is three-fold: (i) the low cost of TBIA cancer screening tests; (ii) the simple score generated by the Todos Medical algorithm telling the medical professional and patient whether cancer is present; and (iii) detecting cancer at an early stage.

 

Web Domain

 

Our official website is currently under the domain of www.todosmedical.com.

 

Description of Property

 

We do not own any real property. We currently maintain our corporate offices at 1 Hamada Street, Rehovot, Israel under a lease agreement for the lease of 108 square meters for a monthly consideration of NIS 6,780 (approximately $1,750). The lease was for a term of one year. In November 2015, the lease was renewed by the Company for an additional term of two years for monthly payments of NIS 7,000 (approximately $1,800). Lease payments are linked to the Israeli CPI based on the CPI published on February 15, 2015. We believe that this space will be sufficient until we commence full operations.

 

Employees and Consultants

 

We have 3 full-time employees (Chief Executive Officer, Chief Technology Officer, and a lab technician).

 

In addition, we engage specialists and consultants in fields such as optics, physics, medicine, mathematical algorithms, biochemistry, regulatory and patents from time to time as required by our operations. Furthermore, Mr. Uri Sher, our Chief Financial Officer (“CFO”), is engaged by us as an external consultant.

 

Mr. Sher provides part-time CFO services to companies as an external consultant and charges the companies on an hourly basis. Beyond remuneration and being covered by directors and officers insurance, the Company has no further commitments to Mr. Sher and the Company has no commitment to retain his services for any specified period. In 2015, the average time that Mr. Sher has devoted to the Company is 25 hours per month. There is no employer – employee relationship between the Company and Mr. Sher.

 

Legal Proceedings

 

The Company’s management is currently not aware of any lawsuits, legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

 

There are no material proceedings in which any of our directors, officers or affiliates or any registered or beneficial shareholder of more than 5% of our ordinary shares, or any associate of any of the foregoing is an adverse party or has a material interest adverse to our interest.

 

Subsidiary

 

On January 27, 2016, the Company incorporated a wholly owned subsidiary in Singapore under the name: Todos (Singapore) Lte Ltd. This entity has not yet commenced operations. This entity was formed for the purpose of conducting clinical trials in the future in Singapore and to obtain possible Singapore government grants to partially finance the conducting of such operations.

 

MANAGEMENT

 

Executive Officers and Directors

 

The following table sets forth information for our executive officers and directors as of February 26, 2016. Unless otherwise stated, the address for our directors and executive officers is c/o Todos Medical Limited, 1 Hamada Street, Rehovot, Israel.

 

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Name   Age   Position(s)
Rami Zigdon   53   Chief Executive Officer
Udi Zelig   37   Chief Technology Officer
Uri Sher   47   Chief Financial Officer
Alon Ostrovitzky   32   Director
Judith Weingut   24   Director
Eliezer Marmarosh   36   Director

 

Executive Officers and Directors

 

Rami Zigdon, Chief Executive Officer

 

Mr. Zigdon has served as our Chief Executive Officer (“CEO”) since our inception in 2010. From May 12, 2011 through June 3, 2015, Mr. Zigdon also served as a director. Mr. Zigdon is an experienced business manager of technology-based companies. From 2003 to 2009, Mr. Zigdon served as sales manager for Israel of Renesas Technology, a leading Japanese semiconductors corporation. Prior to his position at Renesas, Mr. Zigdon served as the manager of Hitachi Semiconductors Israel and as embedded systems group manager at RDT. Mr. Zigdon has held various technical and management positions at Scitex (in Belgium), NI Medical and Spectronix. Mr. Zigdon graduated with honors from the Hebrew University in Jerusalem and holds a Bachelor Degree of Science in Biology from the Hebrew University, a B.S. in Electrical Engineering from the Ben Gurion University of the Negev, Beer-Sheva, and a MBA from the Heriot-Watt University, Edinburgh.

 

Udi Zelig , Chief Technology Officer

 

Dr. Zelig was our Chief Technology Officer as a non-employee from inception through December 31, 2011 while employed by Crow Technologies (a company in which Shmuel Melman, one of our principal shareholders, and, from February 2, 2012 through June 3, 2015, one of the Company’s directors, is one of the controlling shareholders). On January 1, 2012 we entered into an employment agreement with Dr. Zelig for him to serve as our full-time Chief Technology Officer. Dr. Zelig is a biomedical engineer with research experience of more than a decade in the conducting and managing of in-vitro and clinical experiments. His main research field is applications of infrared spectroscopy for blood cancer detection and investigation of chemotherapeutic drugs influence on blood cells. Dr. Zelig is author of numerous scientific publications in leading journals for medicine and biophysics. He holds a Bachelor Degree of Science in Nuclear Engineering, a Master of Science and Ph.D. in bio-medical engineering, all from the Ben-Gurion University of the Negev, Beer-Sheva.

 

Uri Sher , Chief Financial Officer

 

Mr. Sher started assisting our Company with our financial affairs in November 2014. In August 2015, he was appointed as chief financial officer. Mr. Sher practices as a certified public accountant in Israel, focusing his practice on providing CFO services to development stage companies, general tax advice and planning, and specialized financial services mainly in the property and investment sectors. From 2000 to 2013 Mr. Sher also advised a hedge fund which focused on investing in private placements of development stage companies listed on United States stock exchanges. Before qualifying as a CPA in Israel, Mr. Sher met the requirements to become a Chartered Accountant in South Africa. He gained almost five years of experience in the Johannesburg office of Grant Thornton.

 

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Alon Ostrovitzky , Director

 

Mr. Ostrovitzky was appointed as a director of our Company on December 5, 2013. Since 2008 he has acted as the President of Ostrovitzky Holdings Company, a company which has developed a variety of real estate projects in the Czech Republic, Germany, and Israel. As President, Mr. Ostrovitzky supervised sub-contractors and service providers. Mr. Ostrovitzky also developed and led renewable energy projects in Greece, planned and oversaw construction of Photo-voltaic parks in Greece, and provided management for a medical center (Dialysis and specialists) in the Czech Republic. He received a BA in business administration at the Interdisciplinary Center Herzliya, Israel, where he specialized in finance, and studied Economics at the Tel Aviv University, Israel.

 

Judith Weingut , Director

 

Mrs. Weingut was appointed as a director of our Company on July 16, 2015. Mrs. Weingut provides ongoing tax planning and accounting services to Israeli companies. Mrs. Weingut the daughter of Mr. Ben Zion Hasid, a member of the Board from April 28, 2015 through July 15, 2015.

 

Eliezer Marmarosh , Director

 

Mr. Marmarosh was appointed as a director of our Company on July 16, 2015. Mr. Marmarosh is an entrepreneur and invests in numerous real estate and high-tech companies.

 

Board Practices

 

Board of Directors

 

Under the Israeli Companies Law, the management of our business, including strategy and policies, is vested in our Board. Our Board may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual responsibilities established by our Board. Our chief executive officer is appointed by, and serves at the discretion of, our Board, subject to the employment agreement that we have entered into with him.  All other executive officers are appointed by our chief executive officer, and are subject to the terms of any applicable employment agreements that we may enter into with them.

 

External Directors

 

We plan on applying to have our ordinary shares quoted on the OTCQB marketplace of OTC Link. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which regulates the OTCQB marketplace of OTC Link, nor can there be any assurance that such an application for quotation will be approved.

 

Assuming the Company’s ordinary shares are publicly traded, the Company will be considered an Israeli public company under the Israeli Companies Law on the first day of trading. We will be require to nominate, within 90 days of the first day of trading, at least two members who qualify as external directors (within the meaning of the Israeli Companies Law).

 

The provisions of the Israeli Companies Law set forth special approval requirements for the election of external directors.  External directors must be elected by a majority vote of the shares present and voting on the matter at a shareholders meeting, provided that either:

 

  · such majority includes at least a majority of the shares held by all shareholders who are non-controlling shareholders and shareholders who do not have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions, which we refer to as a disinterested majority; or

 

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  · the total number of shares held by shareholders who are non-controlling shareholders and shareholders who do not have a personal interest in the election of the external director (other than a personal interest not derived from a relationship with a controlling shareholder) voted against the election of the external director does not exceed 2% of the aggregate voting rights in the company.

 

The term “controlling shareholder” is defined in the Israeli Companies Law as a shareholder with the ability to direct the activities of a company, other than by virtue of being an office holder. A shareholder is deemed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in the company or has the right to appoint 50% or more of the directors of a company or its general manager.

 

The term “personal interest” is defined in the Israeli Companies Law as a person’s or entity’s personal interest in an act or a transaction of a company, (i) including the personal interest of (a) any spouse, sibling, parent, grandparent or descendant of the persons, any descendant, sibling or parent of a spouse of the person and the spouse of any of the foregoing; and (b) an entity in which the person or entity or any of the foregoing relatives of the person serves as a director or the chief executive officer, owns at least 5% of its issued share capital or voting rights or has the right to appoint one or more directors or the chief executive officer, but (ii) excluding a personal interest arising solely from the ownership of shares. In the case of a person voting by proxy, “personal interest” includes the personal interest of the proxy holder or the shareholder granting the proxy (even if the proxy holder has no personal interest in the matter), whether or not the proxy holder has discretion how to vote.

 

The initial term of an external director is three years.  Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to two additional three-year terms, provided that either:

 

  · his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company, and provided further that the external director is not an affiliated or competing shareholder, as defined in the Israeli Companies Law, or a relative of such a shareholder at the time of the appointment, and is not affiliated with such a shareholder at the time of appointment or within the two years preceding the date of appointment; or
     
  · his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the same majority required for the initial election of an external director (as described above).

 

If the board of directors has determined that an external director ceases to meet the statutory qualifications for appointment or if he or she violates his or her duty of loyalty to the company, the board of directors is required to call a special general meeting of shareholders for the removal of the external director.  In such circumstances, the removal of the external director by the shareholders requires the same special shareholder majority that is required for the election of an external director, as described above.  An external director may also be removed by order of an Israeli court, at the request of a director or shareholder, if the court finds that the external director has ceased to meet the statutory qualifications for his or her appointment or has violated his or her duty of loyalty to the company.  If an external directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is required under the Israeli Companies Law to call a shareholders’ meeting as soon as practicable to appoint a replacement external director.

 

Each committee of the board of directors that exercises the powers of the board of directors must include at least one external director, except that the audit committee and the compensation committee must include all external directors then serving on the board of directors.  Under the Israeli Companies Law, external directors of a company are prohibited from receiving, directly or indirectly, any compensation for their services as external directors other than pursuant to the Israeli Companies Law and the regulations promulgated thereunder.  Compensation of an external director is determined prior to his or her appointment and may not be changed during any three-year term subject to certain exceptions.

 

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The Israeli Companies Law provides that a person is not qualified to serve as an external director if (i) the person is a relative of a controlling shareholder of the company, or (ii) if that person or his or her relative, partner, employer, another person to whom he or she was directly or indirectly subordinate, or any entity under the person’s control, has or had, during the two years preceding the date of appointment as an external director: (a) any affiliation with the company, with any person or entity controlling the company or a relative of such person at the time of appointment, or with any entity controlled by or under common control with the company at the time of appointment or during the two years preceding the appointment; or (b) in the case of a company with no controlling shareholder or a shareholder holding 25% or more of its voting rights, had at the date of appointment as an external director, any affiliation with a person then serving as chairman of the board or chief executive officer, a holder of 5% or more of the issued share capital or voting power in the company or the most senior financial officer.

 

The term “relative” is defined as a spouse, sibling, parent, grandparent or descendant; spouse’s sibling, parent or descendant; and the spouse of each of the foregoing persons.

 

The term “affiliation” includes (subject to certain exceptions): an employment relationship; a business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships); control; and service as an office holder, excluding service as a director in a private company prior to the initial public offering of its shares if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.

 

The term “office holder” is defined under the Israeli Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director and any other manager directly subordinate to the general manager.

 

In addition, no person may serve as an external director if that person’s positions or professional or other activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise interfere with that person’s ability to serve as a director or if the person is an employee of the Israel Securities Authority or of an Israeli stock exchange. A person may furthermore not continue to serve as an external director if he or she received direct or indirect compensation other than as permitted by the Israeli Companies Law and the regulations promulgated thereunder.

 

Following the termination of an external director’s service on a board of directors, such former external director and his or her spouse and children and other relatives may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity under its controlling shareholder’s control. This includes engagement as an officer or director of the company or a company controlled by its controlling shareholder or employment by, or provision of services to, any such company for consideration, either directly or indirectly, including through a corporation controlled by such person.  This restriction extends for a period of two years with regard to the former external director and his or her spouse or child and for one year with respect to other relatives of the former external director.

 

If at the time at which an external director is appointed all members of the board of directors who are not controlling shareholders or relatives of controlling shareholders of the company are of the same gender, the external director to be appointed must be of the other gender. A director of one company may not be appointed as an external director of another company if a director of the other company is acting as an external director of the first company at such time.

 

According to the Israeli Companies Law and regulations promulgated under the Israeli Companies Law, a person may be appointed as an external director only if he or she has professional qualifications or if he or she has accounting and financial expertise (each, as defined below).  At least one of the external directors must be determined by our board of directors to have accounting and financial expertise.

 

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A director with accounting and financial expertise is a director who, due to his or her education, experience and skills, possesses an expertise in, and an understanding of, financial and accounting matters and financial statements, such that he or she is able to understand the financial statements of the company and initiate a discussion about the presentation of financial data.  A director is deemed to have professional qualifications if he or she has any of (i) an academic degree in economics, business management, accounting, law or public administration, (ii) an academic degree or has completed another form of higher education in the primary field of business of the company or in a field which is relevant to his/her position in the company, or (iii) at least five years of experience serving in one of the following capacities, or at least five years of cumulative experience serving in two or more of the following capacities: (a) a senior business management position in a company with a significant volume of business; (b) a senior position in the company’s primary field of business; or (c) a senior position in public administration or service. The board of directors is charged with determining whether a director possesses financial and accounting expertise or professional qualifications.

 

Audit Committee

 

Israeli Companies Law Requirements

 

Following our becoming an Israeli public company, under the Israeli Companies Law, we will be required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all of the external directors, one of whom must serve as chairman of the committee. The audit committee may not include the chairman of the board, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder or a director who derives most of his or her income from a controlling shareholder.

 

In addition, under the Israeli Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors, within the meaning of the Israeli Companies Law. In general, an “unaffiliated director” under the Israeli Companies Law is defined as either an external director or a director who meets the following criteria:

 

· the audit committee has determined that he or she meets the qualifications for being appointed as an external director, except for (i) the requirement that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed outside of Israel); and (ii) the requirement for accounting and financial expertise or professional qualifications; and

 

· he or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of less than two years in the service shall not be deemed to interrupt the continuation of the service.

 

Audit Committee Role

 

Our Board will adopt an audit committee charter to be effective on the Trading Date that will set forth the responsibilities of the audit committee consistent with the regulations of the SEC, as well as the requirements for audit committees under the Israeli Companies Law, including the following:

 

· oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors or shareholders for their approval, as applicable, in accordance with the requirements of the Israeli Companies Law;

 

· recommending the engagement or termination of the person filling the office of our internal auditor; and;

 

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· recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors or shareholders for their approval, as applicable, in accordance with the requirements of the Israeli Companies Law.

 

Our audit committee will provide assistance to our Board in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also will oversee the audit efforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.

 

Under the Israeli Companies Law, our audit committee will be responsible for:

 

· determining whether there are deficiencies in the business management practices of our company, including in consultation with our internal auditor or the independent auditor, and making recommendations to the board of directors to improve such practices;

 

· determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest) and whether such transaction is extraordinary or material under Israeli Companies Law (see “— Approval of Related Party Transactions under Israeli Law”);

 

· determining whether a competitive process must be implemented for the approval of certain transactions with controlling shareholders or its relative or in which a controlling shareholder has a personal interest (whether or not the transaction is an extraordinary transaction), under the supervision of the audit committee or other party determined by the audit committee and in accordance with standards determined by the audit committee, or whether a different process determined by the audit committee should be implemented for the approval of such transactions;

 

· determining the process for the approval of certain transactions with controlling shareholders or in which a controlling shareholder has a personal interest that the audit committee has determined are not extraordinary transactions but are not immaterial transactions;

 

· where the Board approves the working plan of the internal auditor, to examine such working plan before its submission to the board of directors and proposing amendments thereto;

 

· examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities;

 

· examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors or shareholders, depending on which of them is considering the compensation of our auditor; and

 

· establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to such employees.

 

Our audit committee may not approve any actions requiring its approval (see “— Approval of Related Party Transactions under Israeli Law”), unless at the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.

 

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Financial Statement Examination Committee

 

Under the Israeli Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists of members with accounting and financial expertise or the ability to read and understand financial statements. Following our becoming an Israeli public company, we plan to assign to our audit committee the responsibilities and duties of a financial statement examination committee, as permitted under the relevant regulations promulgated under the Israeli Companies Law. From time to time, as necessary and required in order to approve our financial statements, the audit committee will hold separate meetings prior to the scheduled meetings of the Board in respect of the financial statements. The function of a financial statement examination committee is to discuss and provide recommendations to the board of directors (including reporting any deficiencies found) with respect to the following issues: (a) estimations and assessments made in connection with the preparation of financial statements; (b) internal controls related to the financial statements; (c) completeness and appropriateness of the disclosure in the financial statements; (d) the accounting policies adopted and the accounting treatment implemented in material matters of the Company; and (e) value evaluation, including the assumptions and assessments on which evaluations are based and the supporting data in the financial statements.

 

Compensation Committee and Compensation Policy

 

Following our becoming an Israeli public company, we intend to appoint a compensation committee as required by the Israeli Companies Law. The compensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of the compensation committee. Each compensation committee member that is not an external director must be a director whose compensation does not exceed an amount that may be paid to an external director under regulations promulgated under the Israeli Companies Law. The compensation committee is subject to the same Israeli Companies Law restrictions as the audit committee as to who may not be a member of the committee. See “— Audit Committee — Israeli Companies Law Requirements.”

 

Compensation Committee Role

 

Our Board will adopt a compensation committee charter to be effective on the Trading Date. Responsibilities of the compensation committee consistent with the requirements for compensation committees under the Israeli Companies Law which includes the following:

 

· recommending to the board of directors for its approval (i) a compensation policy; (ii) whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years); and (iii) periodic updates to the compensation policy. See “— Compensation Policy.” In addition, the compensation committee is required to periodically examine the implementation of the compensation policy;

 

· the approval of the terms of employment and service of office holders (including determining whether the compensation terms of a candidate for chief executive officer of the company need not be brought to approval of the shareholders); and

 

· reviewing and approving grants of options and other incentive awards to persons other than office holders to the extent such authority is delegated by our board of directors, subject to the limitations on such delegation as provided in the Israeli Companies Law

 

Compensation Policy

 

Under the Israeli Companies Law, the duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagement of office holders, as such term is defined in the Israeli Companies Law, to which we refer to as a compensation policy, and any extensions and updates thereto. The compensation policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a Special Approval for Compensation (as defined below under “— Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions”).

 

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We will be required to adopt a compensation policy within 90 days following the Trading Date.

 

The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company’s objectives, the company’s business plan and its long-term strategy, and creation of appropriate incentives for office holders, and must consider (among other things) the company’s risk management, size and the nature of its operations. The compensation policy must also consider the following additional factors:

 

  the knowledge, skills, expertise and accomplishments of the relevant office holder;
     
  the office holder’s roles and responsibilities and prior compensation agreements with him or her;
     
  the relationship between the terms offered and the average compensation of the other employees of the company (including any employees employed through manpower companies);
     
  the impact of disparities in salary upon work relationships in the company;
     
  the possibility of reducing variable compensation at the discretion of the board of directors, and the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and
     
  as to severance compensation, the period of employment or service of the office holder, the terms of his or her compensation during such period, the company’s performance during such period, the person’s contribution towards the company’s achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company.

 

The compensation policy must also include the following principles:

 

  the link between variable compensation and long-term performance and measurable criteria;
     
  the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;
     
  the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was required to be restated in the company’s financial statements;
     
  the minimum holding or vesting period for variable, equity-based compensation; and
     
  maximum limits for severance compensation.

 

Internal Auditor

 

Under the Israeli Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee. An internal auditor may not be:

 

  a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;

 

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  a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;
     
  an office holder, within the meaning of the Israeli Companies Law (including a director and the general manager) of the company (or a relative thereof); or
     
  a member of the company’s independent accounting firm, or anyone on his or her behalf.

 

The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. We intend to appoint an internal auditor within 90 days following the Trading Date.

 

Approval of Related Party Transactions under Israeli Law

 

Fiduciary Duties of Directors and Executive Officers

 

The Israeli Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “— Executive Officers and Directors” is an office holder under the Israeli Companies Law.

 

An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances.  The duty of care includes a duty to use reasonable means to obtain:

 

  · information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and
     
  · all other important information pertaining to any such action.

 

The duty of loyalty requires an office holder to act in good faith and in the best interests of the company, and includes, among other things, the duty to:

 

  · refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;
     
  · refrain from any activity that is competitive with the company;
     
  · refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and
     
  · disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder.

 

We may approve an act specified above which would otherwise constitute a breach of the office holder’s duty of loyalty, provided that the office holder acted in good faith, the act or its approval does not harm the company and the office holder discloses his or her personal interest a sufficient amount of time before the date for discussion of approval of such act.

 

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Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions

 

Disclosure of Personal Interests of an Office Holder

 

The Israeli Companies Law requires that an office holder promptly disclose to the company any “personal interest” that he or she may be aware of and all related material information or documents concerning any existing or proposed transaction with the company.  An interested office holder’s disclosure must be made promptly and in any event no later than the first meeting of the board of directors at which the transaction is considered.  A personal interest includes an interest of any person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate entity in which such person or a relative of such person holds 5% or more of the outstanding shares or voting rights, is a director or general manager or in which he or she has the right to appoint at least one director or the general manager, but excluding a personal interest arising from one’s ownership of shares in the company.  A personal interest includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter.  An office holder is not, however, obliged to disclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction.  Under the Israeli Companies Law, an extraordinary transaction is defined as any of the following:  a transaction other than in the ordinary course of business; a transaction that is not on market terms; or a transaction that may have a material impact on a company’s profitability, assets or liabilities.

 

Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not be present at such a meeting or vote on that matter unless, with respect to an office holder, the chairman of the audit committee or board of directors (as applicable) determines that the office holder should be present in order to present the transaction that is subject to approval.  If a majority of the members of the audit committee or the board of directors (as applicable) has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors (as applicable) on such transaction and the voting on approval thereof.  If a majority of the members of the board of directors has a personal interest in the approval of a transaction, shareholder approval is also required for such transaction.

 

Approval of Transactions with Officer Holders

 

If it is determined that an office holder has a personal interest in a transaction that is not an extraordinary transaction, approval by the board of directors is required for the transaction, unless the company’s articles of association provide for a different method of approval.  Further, so long as an office holder has disclosed his or her personal interest in a transaction, the board of directors may approve an act by the office holder that would otherwise be deemed a breach of his or her duty of loyalty, provided that the transaction is in the company’s best interest and the office holder acted in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s audit committee and subsequently by the board of directors.

 

Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions

 

Pursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controlling shareholder of a public company. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder who holds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, the holdings of all shareholders who have a personal interest in the same transaction will be aggregated. Extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest, and the terms of engagement with a controlling shareholder or a relative thereof, directly or indirectly (including through a corporation controlled by a controlling shareholder), for the provision of services to the company and his or her terms of employment or service as an office holder or employment as other than an office holder, require the approval of each of (i) the audit committee or the compensation committee with respect to the terms of service or employment by the company as an office holder, an employee or service provider; (ii) the board of directors; and (iii) the shareholders, in that order. The shareholder approval requires one of the following, which we refer to as a Special Majority:

 

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  at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting on the matter approves the transaction, excluding abstentions; or
     
  the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at the meeting do not exceed 2% of the voting rights in the company.

 

Each shareholder voting on the approval of an extraordinary transaction with a controlling shareholder must inform the company prior to voting whether or not he or she has a personal interest in the approval of the transaction, otherwise, the shareholder is not eligible to vote on the proposal and his or her vote will not be counted for purposes of the proposal.

 

To the extent that any such transaction with a controlling shareholder is for a period of more than three years, approval is required once every three years, unless, with respect to any such extraordinary transactions, the audit committee determines that the duration of the transaction is reasonable given the related circumstances.

 

The compensation committee and board approval for arrangements regarding the terms of service or employment of a controlling shareholder must be in accordance with the company’s compensation policy. In special circumstances the compensation committee and board of directors may approve a compensation arrangement that is inconsistent with the company’s compensation policy, provided that they have considered the same considerations and matters required for the approval of a compensation policy in accordance with the Israeli Companies Law and that shareholder approval was obtained by the Special Majority.

 

Pursuant to regulations promulgated under the Israeli Companies Law, certain transactions with a controlling shareholder or his or her relative, or with directors, relating to terms of service or employment that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the audit committee and board of directors. Under these regulations, a shareholder holding at least 1% of the issued share capital or voting power of the company may require, within 14 days of the publication or announcement of such determinations, that despite such determinations by the audit committee and the board of directors, such transaction will require shareholder approval under the same majority requirements that would otherwise apply to such transactions.

 

In addition, disclosure of a personal interest in a private placement of a public company (including disclosure of any material fact or document) is required by (i) a shareholder holding 5% or more of the company’s issued and outstanding capital or its voting rights whose holdings will increase as result of the private placement and a shareholder who will hold 5% or more of the company’s issued and outstanding capital or its voting rights as a result of the private placement, if 20% or more of the company’s outstanding share capital prior to the private placement is issued in the private placement and the payment for which is not only in cash or listed securities or the transaction is not on market terms; and (ii) a person or entity that will become a controlling shareholder as a result of the private placement.

 

Shareholder Duties

 

Pursuant to the Israeli Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at a meeting of shareholder with respect to the following matters:

 

  an amendment to the company’s articles of association;
     
  an increase of the company’s authorized share capital;
     
  a merger; and

 

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  the approval of related party transactions and acts of office holders that require shareholder approval.

 

In addition, a shareholder has a general duty to refrain from discriminating against other shareholders.

 

Certain shareholders have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that he or she has the power to determine the outcome of a shareholder vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Israeli Companies Law does not define the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness.

 

Exculpation, Insurance and Indemnification of Directors and Officers

 

Under the Israeli Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care, but only if a provision authorizing such exculpation is included in its articles of association. Our Articles include such a provision, to the fullest extent permitted by law.  The company may not exculpate in advance a director from liability arising out of a prohibited dividend or other distribution to shareholders.

 

Under the Israeli Companies Law and the Israeli Securities Law, 5728-1968 (the “Israeli Securities Law”), a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of any such event or following an event, provided its articles of association include a provision authorizing such indemnification:

 

  · a financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court.  However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;
     
  · reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction;
     
  · reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent; and
     
  · expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law.

 

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Under the Israeli Companies Law and the Israeli Securities Law, a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:

 

  · a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
     
  · a breach of the duty of care to the company or to a third party, to the extent such a breach does not arise out of the negligent conduct of the office holder;
     
  · a financial liability imposed on the office holder in favor of a third party; and
     
  · expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder or certain compensation payments to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Securities Law.

 

Under the Israeli Companies Law, a company may not indemnify, exculpate or enter into an insurance contract for office holder liability, for any of the following:

 

  · a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
     
  · a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;
     
  · an act or omission committed with intent to derive illegal personal benefit; or
     
  · a fine, monetary sanction or forfeit levied against the office holder.

 

Under the Israeli Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to the chief executive officer or a director or under certain circumstances, also by the shareholders.

 

Our Articles, permits us to exculpate, indemnify and insure our office holders to the fullest extent permitted under the Israeli Companies Law. We have entered into indemnification and exculpation agreements with each of our directors. This indemnification is limited to events determined as foreseeable by our board of directors based on our activities, as set forth in the indemnification agreements. We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay all premiums thereunder to the fullest extent permitted by the Israeli Companies Law.

 

Code of Business Conduct and Ethics

 

The Company has not currently adopted a code of ethics, however, we plan to adopt such a code within 90 days following the Trading Date.

 

Compensation of Executive Officers and Directors

 

The aggregate compensation paid and share-based compensation and other payments expensed by us to our directors and executive officers with respect to the year ended December 31, 2014 was $47,561 to our CEO, Mr. Zigdon.

 

In the year ended December 31, 2015, the Company paid the following to its executive officers (all in the form of salary and benefits): $57,799 to Mr. Zigdon, $86,521 to Dr. Zelig, and $21,720 to Mr. Sher (a consultant). The aggregate compensation paid was $166,040. Our directors are not entitled to any compensation for their service as directors. Therefore, in the year ended December 31, 2015, we did not pay any compensation to our directors.

 

We do not have any written agreements with any director providing for benefits upon the termination of such director’s relationship with us.

 

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Pursuant to the Israeli Companies Law, arrangements regarding the compensation of a director of an Israeli public company requires the approval of the compensation committee, board of directors and (except for a number of exceptions) shareholders by ordinary majority, in that order. The approval of the compensation committee and board of directors must be in accordance with the compensation policy. In special circumstances the compensation committee and board of directors may approve a compensation arrangement that is inconsistent with the company’s compensation policy, provided that they have considered the same considerations and matters required for the approval of a compensation policy in accordance with the Israeli Companies Law and that shareholder approval was obtained by the Special Approval for Compensation.

 

With respect to compensation of an officer (including chief executive officer) or director who is also a controlling shareholder, see “— Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions.”

 

Employment Agreements with Executive Officers

 

We have entered into written employment agreements with each of our executive officers, other than with our directors. These agreements contain provisions regarding non-competition, confidentiality of information and assignment of inventions. The enforceability of covenants not to compete in Israel and the United States is subject to limitations. For example, Israeli courts have recently required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or its intellectual property.

 

Effective as of May 1, 2015, we entered into an employment agreement with Mr. Rami Zigdon, our chief executive officer. The agreement was approved by our Board on August 16, 2015. Prior to the effective date of the agreement, Mr. Zigdon provided us with management services as an independent contractor since our inception. As of the effective date of the agreement, Mr. Zigdon is employed as our chief executive officer on a full time basis. The agreement may be terminated by either party by a ninety days prior written notice or by us under exceptional circumstances as detailed in the agreement. Pursuant to the agreement, Mr. Zigdon is entitled to a gross monthly salary of NIS 15,000 (approximately $3,900) linked to the Israeli CPI known at the effective date of the agreement as well as reimbursement of vehicle expenses up to an annual amount of NIS 16,000 (approximately $4,200). The gross monthly salary shall be increased to NIS 25,000 (approximately $6,600) as from the date on which the Company shall have cash at its bank account at least NIS 3,500,000 (approximately $920,000 (the “Triggering Date”) that is sourced from capital injections/non-repayable amounts only, as confirmed by the Company’s CFO in writing. In the event that during the term of the Agreement, on a certain date, the Company shall have at least NIS 4 million (approximately $1.05 million) cash at its bank account that is sourced from capital injection/non-repayable amounts only, as confirmed by the Company’s CFO, Mr. Zigdon shall be entitled to a payment in the sum of NIS 12,333 (approximately $3,200) multiplied by the number of calendar months that had passed from the effective date of the agreement and until the month ending prior to the Triggering Date. In addition, Mr. Zigdon is entitled to participate in our incentive program that will be adopted by the appropriate organs of the Company. Furthermore, Mr. Zigdon will be entitled to options to purchase our shares, subject to an option plan to be adopted by the appropriate organs of the Company. Under these plans, Mr., Zigdon has been granted 1,241,163 employee options, of which 25,857 employee options have vested as of February 26, 2016. Mr. Zigdon is entitled to customary fringe benefits under Israeli laws. If the agreement is terminated by us, other than for "cause" as defined in the agreement, Mr. Zigdon shall be entitled to an adjustment bonus equal to 3 times the last gross monthly salary or in the event that we will have more than $3 million cash at hand, the adjustment bonus shall be equal to 6 times the last gross monthly salary. The agreement contains provisions regarding non-competition, confidentiality of information and assignment of inventions.

 

On January 1, 2012 we entered into an employment agreement with Dr. Zelig, our Chief Technology Officer. Pursuant to the agreement, Dr. Zelig is employed by us on a full time basis. The agreement may be terminated by either party by a 30 days prior written notice or by us under exceptional circumstances as detailed in the agreement. Under the agreement, Dr. Zelig is entitled to a gross monthly compensation of NIS 15,000 (approximately $4,000) as well as global monthly gross payment for overtime of NIS 2,500 (approximately $700). Dr. Zelig is entitled to a company car and cellular phone in connection with his employment with us. Dr. Zelig is entitled to customary fringe benefits under Israeli laws as well as contributions (by us and by Dr. Zelig) to an education fund, at the rates specified in the agreement. Under the Company’s employee option plan, Dr, Zelig has been granted 620,581 employee options, of which 12,928 employee options have vested as of February 26, 2016.

 

Todos Medical Ltd. 2015 Share Option Plan

 

The Todos Medical Ltd. 2015 Share Option Plan was adopted by the Board on December 3, 2015 (the “Option Plan”). The Option Plan generally permits the granting of share options to our employees, directors or consultants. As of February 26, 2016, 2,172,034 options to purchase ordinary shares were outstanding under the Option Plan and 3,827,966 ordinary shares were available for future option grants under the Option Plan. Unless terminated earlier by the Board, the Option Plan will terminate ten years from its date of adoption.

 

Our Board administers the Option Plan, including (i) designating participants in the Option Plan; (ii) determining the terms and provisions of respective option agreements, including the number of shares to be covered by each option, exercisability, transferability, and other terms and conditions of the option; (iii) accelerating the right of an optionholder to exercise any previously granted option; (iv) determining the fair market value of the shares; and (v) interpreting the provisions and supervising the administration of the Option Plan. Our Board may amend or discontinue the Option Plan at any time, except that generally no amendment may impair the rights of an optionholder without his or her written consent.

 

Share options granted to Israeli employees under the Option Plan may be granted pursuant to the provisions of Section 102 of the Israeli Income Tax Ordinance. Any options granted pursuant to such provision will be issued to a trustee and be held by the trustee for at least two years from the date of grant of the options, as required under the Israeli tax ordinance.

 

Upon termination of employment or service for any reason, other than for cause or death or disability, the optionholder may exercise his or her vested options within 90 days of the date of termination. If we terminate an optionholder’s employment or service for cause, all of the employee’s options, whether vested or unvested, expire on the termination date. Upon termination of employment or service due to death or disability, the optionholder or his or her estate may exercise his or her vested options within twelve months from the date of death or disability. An option may not, however, be exercised after the option’s expiration date.

 

Options are non-transferable except in the event of an optionholder’s death.

 

If we are party to a merger or consolidation, outstanding options and shares acquired under the Option Plan will be subject to the agreement of merger or consolidation, which will provide for one or more of the following: (i) the continuation of such options by us, (ii) the assumption of such options by the surviving corporation or its parent, (iii) the substitution by the surviving corporation or its parent of new options, (iv) the cancellation of the such options in exchange for payment equaling the market value of the shares subject to the option less the exercise price, or (v) full exercisability of the option and full vesting of the shares subject to the option.

 

In the event of any variation in our share capital, including a share dividend, share split, combination or exchange of shares, recapitalization, or any other like event, the number, class and kind of shares subject to the Option Plan and outstanding options, and the exercise prices of the options, will be appropriately and equitably adjusted so as to maintain the proportionate number of shares without changing the aggregate exercise price of the options.

 

On January 11, 2016, the Board approved the issuance of share options to three employees at an exercise price of NIS 0.01 per share. The Board approved the granting of 1,241,163 options (25,857 have vested as of February 26, 2016) to Mr. Zigdon, 620,581 options (12,928 have vested as of February 26, 2016) to Dr. Zelig, and 310,290 options (6,464 have vested as of February 26, 2016) to Mrs. Rachel Segev, another employee of the Company. Half of the options vest over a period of twenty four months, and half of the options vest upon the achievement of certain milestones. As of February 26, 2016, 2.1% of these options have vested.

 

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Indemnification Agreements with Directors and Executive Officers

 

Please see disclosure under “— Exculpation, Insurance and Indemnification of Directors and Officers.”

 

RELATED PARTY TRANSACTIONS

 

Other than the executive and director compensation and indemnification and exculpation arrangements discussed in “Management,” and the transactions described below, we have not entered into any transactions since January 1, 2012 to which we have been or are a party to and in which any of our directors, executive officers or holders of more than 10% of our share capital, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.

 

Transactions with Related Persons

 

Although the transactions described below took place prior to the 1:10 forward split that took place in February 2015 and prior to the second forward share split by way of an issuance of bonus shares of 1:29 that took place in February 2015, the number of shares listed below reflects both forward share splits.

 

Crow Technologies (a company in which Shmuel Melman, one of our principal shareholders, and, from February 2, 2012 through June 3, 2015, one of the Company’s directors, is one of the controlling shareholders) currently engages in plastics and electronics components manufacturing and the Company’s products do not have any electronic parts. While the Company’s products do have plastic parts, these parts cost approximately $0.10 per unit. We believe the exclusive right held by Crow Technologies is immaterial to the ultimate price for which we will sell our products or even the overall cost of production of our products.

 

On February 2, 2012, 26,100,000 ordinary shares were issued to Mr. Melman as conversion of a loan previously made by him to the Company. On such date, our shareholders adopted a resolution to create a new class of shares – preferred shares and converted Mr. Zigdon's holdings in the Company from ordinary shares to preferred shares.

 

Our current Articles give holders of preferred shares anti-dilution rights. Mr. Zigdon owns all of the Company’s issued preferred shares. For every 100 ordinary shares issued by the Company, 5.25 preferred shares are issued to the holders of preferred shares. Following the adoption of our amended and restated articles of association on the Trading Date (whose form has not yet been approved by the Company’s shareholders), none of our shareholders will have rights different from the rights of other shareholders.

 

On October 7, 2014, David Wasserman became a member of the Board in connection with D.P.H. Investments Ltd. (“DPH”) investing NIS 1,300,000 (approximately $350,000) in the Company in a share purchase agreement (the “Share Purchase Agreement”). DPH received 8,280,000 ordinary shares as a result of this investment. DPH will be issued another 720,000 ordinary shares of the Company if the Effectiveness Date is after June 7, 2016. These shares have already been issued by the Company to a trustee pending the conclusion of the registration process. If the Effectiveness Date is prior to June 7, 2016, the trustee will transfer 295,776 shares to Adeline Holding Limited (“Adeline”) (an entity over whose shares Yitzhak Ostrovitzky has sole voting and sole investment control),295,776 shares to Mr. Melman, 72,000 shares to Mr. Zigdon, 34,848 shares to Yehezkel Machlev, and 21,600 shares to Dr. Zelig. The registration statement of which this prospectus forms a part assumes the Effectiveness Date will be prior to June 7, 2016. As of July 16, 2015 Mr. Wasserman is no longer a member of the Board. DPH is an entity that has 13 shareholders none of whom own more than 17% of DPH. Mr. Wasserman is one of the shareholders. At least 5 shareholders need to agree before any action with regard to these shares can be taken by DPH.

 

Pursuant to this investment, DPH has the right to appoint two members of the Board. Eliezer Marmarosh and Judith Weingut were appointed to the Board as DPH’s representatives. Following the adoption of our amended and restated articles of association on the Trading Date, none of our shareholders will have rights different from the rights of other shareholders and DPH will no longer have the right to appoint two members of the Board.

 

The Company issued 18,120,000 ordinary shares to a trustee for a group of investors (including Mr. Wasserman and Mr. Ben Zion Hasid, a member of the Board from April 28, 2015 through July 15, 2015) pursuant to the Share Purchase Agreement dated October 7, 2014, as amended in August 2015, for an aggregate consideration of $150,000. As of December 31, 2014, the investors were not entitled to any of these shares. As of June 30, 2015, approximately $110,000 had been paid to the Company. Subsequently the remaining amount has been paid to the Company and the trustee has released the shares to the group of investors. The other investors were Ephraim Schlisser, Aaron Shpritzer, Yehezkel Machlev, Abram Bancrot, Yehuda Broiner, Aryeh LeBlanc, and Daniel Hirsch.

 

Ephraim Schlisser is a manager of an entity named Iberica Investments LLC (“Iberica”). Iberica and the Company are parties to a 2015 consulting agreement pursuant to which Iberica agreed to provide assistance with the Company’s fundraising. From January 1, 2015 through February 26, 2016, the Company has paid Iberica and its assigns approximately $97,000 pursuant to this consulting agreement.

 

Mr. S. Melman and Mr. Yitzhak Ostrovitzky granted the Company loans in order to fund its ongoing operations. As of December 31, 2014, the loans collectively amounted to NIS 2,398,097 (approximately $620,000). The loans mature on December 31, 2019 and bear no interest. The loans are linked to the Israeli consumer price index as of January 1, 2015. The loans may be prepaid by us from time to time according to our cash availability. These loans have not been memorialized in a written document. Rather, the lenders were present during meetings of the Board at which the repayment terms were approved and agreed to these repayment terms. Mr. Ostrovitzky is the father of a member of the Board, Alon Ostrovitzky. Mr. Melman served as one of our directors until June 3, 2015.

 

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On September 29, 2015 the Company made a 60 day loan of $45,731 (180,000 NIS) to Mr. Yitzhak Ostrovitzky. Mr. Ostrovitzky agreed not to offset this loan against the long-term loans that he has provided to the Company. As collateral for this loan, Mr. Ostrovitzky transferred 6,162,600 ordinary shares in the Company held by Adeline to a trustee, who upon default was to return these shares to the Company or sell them to a third party, the proceeds of which would repay to the Company this short-term loan. The loan was later extended to mature on December 24, 2015. On the maturity date, Mr. Ostrovitzky repaid NIS 123,000 (approximately $31,250) and the trustee returned 4,211,110 ordinary shares to Adeline. Pursuant to a separate agreement between Daniel Margalit and Mr. Ostrovitzky, on the maturity date, Mr. Margalit repaid, on behalf of Mr. Ostrovitzky, NIS 57,000 (approximately $14,481) to the Company and the trustee transferred 1,951,490 ordinary shares to Mr. Margalit.

 

In December 2015 and January 2016, due to the Company’s 2015 and 2016 sales of its ordinary shares pursuant to its private placement memorandum (as described in the “Share History” section below), Mr. Zigdon was issued 189,952 preferred shares in accordance with his anti-dilution rights as a holder of preferred shares.

 

PRINCIPAL AND SELLING SHAREHOLDERS

 

The following table sets forth information regarding beneficial ownership of our ordinary shares as of (i) immediately prior to this offering and (ii) as adjusted to give effect to this offering, by:

 

  · each person, or group of affiliated persons, known to us to be the beneficial owner of 5% or more of our outstanding shares (principal shareholders);
     
  ·

each person selling shares pursuant to the registration statement of which this prospectus forms a part;

 

each of our directors and executive officers; and

     
  · all of our directors and executive officers as a group.

 

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting or investment power with respect to those securities, and include shares subject to options and warrants that are exercisable within 60 days following February 26, 2016.  The percentage of beneficial ownership of our ordinary shares before and after the offering is based on 68,818,564 ordinary shares issued and outstanding as of February 26, 2016. This amount includes the ordinary shares issuable upon the exercise of the currently outstanding warrants, all of which are currently exercisable. This amount also includes the ordinary shares that will be automatically converted from previously issued preferred shares on the Trading Date. For purposes of computing the percentage of outstanding ordinary shares held by the three persons who currently hold employee option shares (Mr. Zigdon, Dr. Zelig, and Mrs. Segev) any vested employee option shares are deemed to be owned by that employee, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.

 

As of February 26, 2016, to the knowledge of the Company’s management, there were 35 record holders of our ordinary shares.  To the knowledge of the Company’s management, as of February 26, 2016, four of the record holders of our ordinary shares were in the United States, which held, in the aggregate approximately 7.3% of our outstanding ordinary shares as of such date.  With the exception of the shares underlying warrants, all ordinary shares offered through this prospectus have been issued to the selling shareholders and the consideration has been received by the Company. Following the adoption of our amended and restated articles of association, none of our shareholders will have voting rights different from the voting rights of other shareholders. To the knowledge of the Company’s management, we are not owned or controlled, directly or indirectly, by another corporation or by any government. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

 

Except as indicated in the footnotes below, we believe that the persons named in the table below have sole voting and investment power with respect to the ordinary shares indicated in the table as being beneficially owned by them. Unless otherwise noted below, each shareholder’s address is c/o Todos Medical Limited, 1 Hamada Street, Rehovot, Israel.

 

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    Ordinary Shares Beneficially
Owned
Prior to Offering
    Shares Being
Sold
    Ordinary Shares Beneficially
Owned
After the Offering (1)
 
    Number     Percent     in the Offering     Number     Percent  
Principal Shareholders                                        
Adeline Holding Limited (2) (3)     10,669,486 (4)(5)      15.5 %     4,270,000       6,399,486       9.3 %
Melman, Shmuel (3) (6)     12,620,976 (7)     18.3 %     5,050,000       7,570,976       11.0 %
D.P.H. Investments Ltd. (8)     8,280,000       12.0 %     8,280,000       0       0 %
Schlisser, Ephraim     5,021,327       7.3 %     5,021,327       0       0 %
Shpritzer, Aaron     3,861,857       5.6 %     3,861,857       0       0 %
Hasid, Ben Zion (3) (9)     3,861,857       5.6 %     3,861,857       0       0 %
Wasserman, David (3) (10)     3,558,858       5.2 %     3,558,858       0       0 %
Non-Principal Selling Shareholders                                        
Krohn, Avner     2,000,000 (11)     2.9 %     2,000,000       0       0 %
Lim Kwee Lan     2,000,000 (11)     2.9 %     2,000,000       0       0 %
Margalit, Daniel     1,951,490 (4)      2.8 %     1,951,490       0       0 %
Machlev, Yehezkel     1,484,448 (12)     2.2 %     1,484,448       0       0 %
Bancrot, Abram     1,287,286       1.9 %     1,287,286       0       0 %
Bel Har Investments Ltd. (13)     1,000,000 (11)     1.5 %     1,000,000       0       0 %
Kirschenbaum, Seth     1,000,000 (11)     1.5 %     1,000,000       0       0 %
Goh Mou Kit     1,000,000 (11)     1.5 %     1,000,000       0       0 %
Loevinger, Eugene and Margaret,     1,000,000 (11)     1.5 %     1,000,000       0       0 %
Maxim Partners, LLC (14)     1,000,000       1.5 %     1,000,000       0       0 %
Klikstein, Ruth     606,000         *     606,000       0       0 %
Dee Em and Y Em Enterprises Inc. (15)     500,000 (11)       *     500,000       0       0 %
Five In One PTE Ltd. (16)     500,000 (11)       *     500,000       0       0 %
Goldfarb, Gary     500,000 (11)       *     500,000       0       0 %
Segev, Rachel     315,352 (17)       *     315,352 (17)     0       0 %
Broiner, Yehuda     303,000         *     303,000       0       0 %
LeBlanc, Aryeh     155,815         *     155,815       0       0 %
Hirsch, Daniel     70,000         *     70,000       0       0 %
Lowenthal, Rachel     50,200 (11)       *     50,200       0       0 %
Shachor, Netanel     50,000 (11)       *     50,000       0       0 %
Shnur, Ester     50,000 (11)       *     50,000       0       0 %
Wolfson, Hadassa     50,000 (11)       *     50,000       0       0 %
Wolfson, Michal     50,000 (11)       *     50,000       0       0 %
Sher, Avi (18)     10,000 (11)       *     10,000       0       0 %
Zigdon, Amit (19)     2,000 (11)        *     2,000       0       0 %
Directors and Executive Officers                                        
Zigdon, Rami (20)       4,503,015 (21)      6.4 %     1,770,000 (22)     2,733,015       3.9 %
Zelig, Udi     1,553,731 (23)     2.2 %     740,000 (24)     813,731       1.2 %
Marmarosh, Eliezer     0       0 %     0       0       0 %
Ostrovitzky, Alon     0       0 %     0       0       0 %
Sher, Uri     0       0 %     0       0       0 %
Weingut, Judith     0       0 %     0       0       0 %
(All directors and executive officers as a group – 6 persons)     6,056,746       8.6 %     2,510,000       3,546,746       5.1 %

 

 

 

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* Less than 1% of our outstanding ordinary shares.

 

(1) Assumes that, upon the offering’s effectiveness, all warrant shares will be exercised and sold.

 

(2) Mr. Yitzhak Ostrovitzky, the father of a member of the Board, Alon Ostrovitzky, has sole voting and sole investment control of these shares.

 

(3) Affiliate of the Company.

 

(4) On September 29, 2015 the Company made a 60 day loan of $45,731 (180,000 NIS) to Mr. Yitzhak Ostrovitzky. Mr. Ostrovitzky had agreed not to offset this loan against the long-term loans that he has provided to the Company. As collateral for this loan, Mr. Ostrovitzky transferred 6,162,600 ordinary shares in the Company held by Adeline to a trustee, who upon default was to return these shares to the Company or sell them to a third party, the proceeds of which would repay to the Company this short-term loan. The loan was later extended to mature on December 24, 2015. On the maturity date, Mr. Ostrovitzky repaid NIS 123,000 (approximately $31,250) and the trustee returned 4,211,110 ordinary shares to Adeline. Pursuant to a separate agreement between Daniel Margalit and Mr. Ostrovitzky, on the maturity date, Mr. Margalit repaid, on behalf of Mr. Ostrovitzky, NIS 57,000 (approximately $14,481) to the Company and the trustee transferred 1,951,490 ordinary shares to Mr. Margalit.

 

(5) In October 2014, the company signed the Share Purchase Agreement with an investor for $350,000 in exchange for 8,280,000 ordinary shares. The investor will be issued another 720,000 ordinary shares of the Company if the Effectiveness Date is after June 7, 2016. These shares have already been issued by the Company to a trustee pending the conclusion of the registration process. If the Effectiveness Date is prior to June 7, 2016, the trustee will transfer 295,776 shares to Adeline. The registration statement of which this prospectus forms a part assumes the Effectiveness Date will be prior to June 7, 2016 and is including these 295,776 shares as part of the shares being registered.

 

(6) Shmuel Melman was a member of the Board from February 2, 2012 to June 3, 2015.

 

(7) If the Effectiveness Date is prior to June 7, 2016, the trustee will transfer 295,776 shares to Mr. Melman. The registration statement of which this prospectus forms a part assumes the Effectiveness Date will be prior to June 7, 2016.

 

(8) The management does not consider DPH, despite holding more than 10% of the Company’s ordinary shares, to be an affiliate of the Company because DPH is an entity that has 13 shareholders none of whom own more than 17% of DPH. Mr. Wasserman is one of the shareholders. At least 5 shareholders need to agree before any action with regard to these shares can be taken by DPH. Pursuant to this investment, DPH has the right to appoint two members of the Board. Eliezer Marmarosh and Judith Weingut were appointed to the Board as DPH’s representatives. Following the adoption of our amended and restated articles of association on the Trading Date, none of our shareholders will have rights different from the rights of other shareholders and DPH will no longer have the right to appoint two members of the Board.

 

(9) Mr. Hasid was a member of the Board from April 28, 2015 through July 15, 2015.

 

(10) Mr. Wasserman was a member of the Board from October 7, 2014 through July 16, 2015.

 

(11) Of the amount listed, the shareholder has half in ordinary shares and half in shares underlying a warrant which is currently exercisable.

 

(12) If the Effectiveness Date is prior to June 7, 2016, the trustee will transfer 34,848 shares to Mr. Machlev. The registration statement of which this prospectus forms a part assumes the Effectiveness Date will be prior to June 7, 2016 and is including these 34,848 shares as part of the shares being registered.

 

(13) Harry Cooper has sole voting and sole investment control of these shares.

 

(14) Michael Rabinowitz has sole voting and sole investment control of these shares.

 

(15) Joseph Fried has sole voting and sole investment control of these shares.

 

(16) Wong Wei Siong Derrick has sole voting and sole investment control of these shares.

 

(17) Consists of 310,290 employee option shares, 2,531 ordinary shares, and 2,531 warrant shares. As of February 26, 2016, 2.1% of the employee option shares have vested. All shares owned by Mrs. Segev are being registered.

 

(18) Avi Sher is the brother of our CFO, Uri Sher.

 

(19) Amit Zigdon is the brother of our CEO, Rami Zigdon.

 

(20) In December 2015 and January 2016, due to the Company’s 2015 and 2016 sales of its ordinary shares pursuant to its private placement memorandum (as described in the “Share History” section below), Mr. Zigdon was issued 189,852 preferred shares in accordance with his anti-dilution rights as a holder of preferred shares. This represents all of the issued preferred shares. These previously issued preferred shares will automatically convert into ordinary shares on the Trading Date.

 

(21) Includes 1,241,163 employee option shares granted in January 2016 to Mr. Zigdon. If the Effectiveness Date is prior to June 7, 2016, the trustee will transfer 72,000 shares to Mr. Zigdon. The registration statement of which this prospectus forms a part assumes the Effectiveness Date will be prior to June 7, 2016 and is including these 72,000 shares as part of the shares being registered.

 

(22) All 1,241,163 employee option shares are being registered as well as 528,837 ordinary shares. As of February 26, 2016, 2.1% of the employee option shares have vested.

 

(23) Includes 5,775 shares underlying a warrant which is currently exercisable. Also includes 620,581 employee option shares granted in January 2016 to Dr. Zelig. If the Effectiveness Date is prior to June 7, 2016, the trustee will transfer 21,600 shares to Dr. Zelig. The registration statement of which this prospectus forms a part assumes the Effectiveness Date will be prior to June 7, 2016 and is including these 21,600 shares as part of the shares being registered.

 

(24) All 620,581 employee option shares are being registered as well as 5,775 warrant shares, and 113,644 ordinary shares. As of February 26, 2016, 2.1% of the employee option shares have vested.

 

DESCRIPTION OF SHARE CAPITAL

 

The following description of our share capital and provisions of our Articles is a summary. This summary is subject to the Israeli Companies Law and to the complete text of our amended articles of association (which we will adopt substantially in the form attached as Exhibit 3.3 to the registration statement, of which this prospectus is a part, on the Trading Date).

 

General

 

As of February 22 2016, our authorized share capital consists: (1) 990,000,000 ordinary shares, par value NIS 0.01 per share, of which 65,628,712 shares are issued and outstanding. This amount includes the ordinary shares issuable upon the exercise of the currently outstanding warrants, all of which are currently exercisable; and (2) 10,000,000 preferred shares, par value NIS 0.01 per share, of which 3,189,852 shares are issued and outstanding. On the Trading Date, these preferred shares will automatically be converted into ordinary shares. Our current Articles give holders of preferred shares anti-dilution rights. Mr. Zigdon owns all of the Company’s issued preferred shares. For every 100 ordinary shares issued by the Company, 5.25 preferred shares are issued to the holders of preferred shares. Following the adoption of our amended and restated articles of association on the Trading Date, none of our shareholders will have rights different from the rights of other shareholders.

 

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All of our outstanding ordinary shares will be validly issued, fully paid and non-assessable.  Pursuant to our amended and restated articles of association, our ordinary shares are not redeemable and will not have any preemptive rights.

 

Warrants

 

As of February 26, 2016, warrants to purchase 4,889,406 ordinary shares at an exercise price of $0.50 per share were outstanding. Each of these warrants was purchased between March 2015 and January 2016 and has a termination date three years after purchase. All of the ordinary shares underlying these warrants have registration rights and are currently scheduled to be registered in the registration statement of which this prospectus forms a part. If any of the ordinary shares underlying these warrants are not registered, persons holding a combined 51% of the warrant shares can demand registration of their warrant shares. After registration pursuant to these rights, these shares will become freely tradable without restriction under the Securities Act.

 

Share History

 

On January 29, 2012 the Company issued to an investor 27,000,000 ordinary shares, in exchange for the conversion of a $160,987 (NIS 600,000) loan.

 

Effective as at March 31, 2014, an investor was to be issued 123,900 shares in exchange for $57,356 (200,000 NIS) received by the Company in February, 2014. As these shares had not yet formally been issued by December 31, 2014, they were included in the shareholders’ deficit as "Receipts on account of shares" and were taken into account for the calculation of loss per ordinary share.

 

The shares were issued on June 24, 2015. Accordingly the amount presented as "Receipts on account of shares" was allocated to "Shares" and "Additional paid in capital" as applicable. 

 

In October 2014, an investor invested NIS 1,300,000 (approximately $350,000) in the Company pursuant to the Share Purchase Agreement. The investor received 8,280,000 ordinary shares as a result of this investment. The investor will be issued another 720,000 ordinary shares of the Company if the Effectiveness Date is after June 7, 2016. These shares have already been issued by the Company to a trustee pending the conclusion of the registration process. If the Effectiveness Date is prior to June 7, 2016, the trustee will transfer 295,776 shares to Adeline, 295,776 shares to Mr. Melman, 72,000 shares to Mr. Zigdon, 34,848 shares to Yehezkel Machlev, and 21,600 shares to Dr. Zelig. The registration statement of which this prospectus forms a part assumes the Effectiveness Date will be prior to June 7, 2016. Pursuant to this investment, the investor has the right to appoint two members of the Board. Eliezer Marmarosh and Judith Weingut were appointed to the Board as the investor’s representatives. Following the adoption of our amended and restated articles of association on the Trading Date, none of our shareholders will have rights different from the rights of other shareholders and the investor will no longer have the right to appoint two members of the Board.

 

Mr. Wasserman was a member of the Board from October 7, 2014 through July 16, 2015.

 

The Company issued 18,120,000 ordinary shares to a trustee for a group of investors (including Mr. Wasserman and Mr. Ben Zion Hasid, a member of the Board from April 28, 2015 through July 15, 2015) pursuant to the Share Purchase Agreement dated October 7, 2014, as amended in August 2015, for an aggregate consideration of $150,000. As of June 30, 2015, approximately $110,000 had been paid to the Company. Subsequently the remaining amount has been paid to the Company and the trustee has released the shares to the group of investors.

 

On December 30, 2014 the Company signed a share purchase agreement with an investor for $50,000 in exchange for 606,000 ordinary shares.

 

From March 2015 through May 2015, the Company raised the gross amount of $500,000 through its private placement memorandum, issuing 2,500,000 units to six investors. In August 2015, the Company raised the gross amount of $100,000 through its private placement memorandum, issuing 500,000 units to one investor. In December 2015 and January 2016, the Company raised the gross amount of $377,881.20 through its private placement memorandum, issuing 1,889,406 units to twelve investors. Each unit consists of one ordinary share in addition to a warrant for one ordinary share exercisable for three years at a $0.50 price. All of the ordinary shares underlying these warrants have registration rights and are currently scheduled to be registered in the registration statement of which this prospectus forms a part. If any of the ordinary shares underlying these warrants are not registered, persons holding a combined 51% of the warrant shares can demand registration of their warrant shares.

 

In June 2015 the Company approved the issuance of 1,000,000 ordinary shares to Maxim Partners, LLC pursuant to an agreement entered with Maxim in April 2015 engaging Maxim to provide financial advisory and investment banking services to the Company. Maxim is entitled to unlimited piggyback registration rights.

 

In December 2015 and January 2016, due to the Company’s 2015 and 2016 sales of its ordinary shares pursuant to its private placement memorandum, Mr. Zigdon was issued 189,852 preferred shares in accordance with his anti-dilution rights as a holder of preferred shares. 

 

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Registration Number and Purposes of the Company

 

Our registration number with the Israeli Registrar of Companies is 51-443712-8. Our purpose as set forth in our amended articles of association is to engage in any lawful activity. Our Articles state that the liability of our shareholders is limited, subject to the provisions of the Israeli Companies Law.

 

Transfer of Shares

 

Our fully paid ordinary shares are issued in registered form and may be freely transferred under our amended articles of association, unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of a stock exchange on which the shares are listed for trade. The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our amended articles of association or the laws of the State of Israel, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.

 

Election of Directors

 

Our ordinary shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of the voting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors described under “Management — Board Practices — External Directors.”

 

Under our amended articles of association to be effective upon the Trading Date, our Board must consist of at least three directors but no more than seven directors, in addition to two external directors as required by the Israeli Companies Law. Pursuant to our amended articles of association, other than the external directors, for whom special election requirements apply under the Israeli Companies Law, each of our directors will be appointed by a simple majority vote of holders of our voting shares, participating and voting at an annual general meeting of our shareholders. Each director (other than external directors) will hold office until the next annual general meeting following the annual general meeting at which they were elected and until his or her successor is elected and qualified, or until the occurrence of certain events, in accordance with the Israeli Companies Law and our amended and restated articles of association, including his or her earlier resignation, death or removal by a vote of the majority of the voting power of our shareholders at a general meeting of until his or her office expires by operation of law. In addition, our amended articles of association allow our Board to appoint directors (other than external directors) to fill vacancies on the Board to serve for a term of office equal to the remaining period of the term of office of the directors(s) whose office(s) have been vacated. External directors are elected for an initial term of three years, may be elected for additional terms of three years each under certain circumstances, and may be removed from office pursuant to the terms of the Israeli Companies Law. See “Management — Board Practices — External Directors.”

 

Dividend and Liquidation Rights

 

We may declare a dividend to be paid to the holders of our ordinary shares in proportion to their respective shareholdings. Under the Israeli Companies Law, dividend distributions are determined by the board of directors and do not require the approval of the shareholders of a company unless the company’s articles of association provide otherwise. Our amended articles of association do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our board of directors.

 

Pursuant to the Israeli Companies Law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that the distribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Israeli Companies Law, the distribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distribution according to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date of distribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we must seek the approval of the court in order to distribute a dividend. The court may approve our request if it is convinced that there is no reasonable concern that the payment of a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.

 

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In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion to the nominal value of their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

 

Exchange Controls

 

There are currently no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a state of war with Israel.

 

Shareholder Meetings

 

Under Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year that must be held no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to in our amended articles of association as special general meetings. Our board of directors may call special general meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Israeli Companies Law provides that our board of directors is required to convene a special general meeting upon the written request of (i) any two of our directors or one-quarter of the serving members of our board of directors; or (ii) one or more shareholders holding, in the aggregate, either (a) 5% or more of our outstanding shares and 1% of our outstanding voting power or (b) 5% or more of our outstanding voting power.

 

Furthermore, the Israeli Companies Law requires that resolutions regarding the following matters be approved by our shareholders at a general meeting:

 

  amendments to our articles of association;
     
  appointment, terms of service and termination of service of our auditors;
     
  appointment of external directors;
     
  approval of certain related party transactions;
     
  increases or reductions of our authorized share capital;
     
  mergers; and
     
  the exercise of our board of director’s powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is essential for our proper management.

 

Subject to the provisions of the Israeli Companies Law and regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which, as a company listed on an exchange outside Israel, may be between four and 40 days prior to the date of the meeting.

 

The Israeli Companies Law requires that a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes, among other things, the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, an approval of a merger or the approval of the compensation policy, notice must be provided at least 35 days prior to the meeting.

 

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Under the Israeli Companies Law, our shareholders are not permitted to take action via written consent in lieu of a meeting.

 

Voting Rights

 

Quorum Requirements

 

Pursuant to our amended articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before the shareholders at a general meeting. The quorum required for general meetings of our shareholders is at least two shareholders present in person, by proxy or written ballot, who hold or represent between them at least 25% of the total outstanding voting rights (or if a higher percentage is required by law, such higher percentage), within half an hour of the time fixed for the commencement of the meeting. A meeting adjourned for lack of a quorum is adjourned either to the same day in the following week at the same time and place or to such day, time and place as specified in the notice of the meeting or to such day, time and place as the chairman of the general meeting shall determine. At the reconvened meeting, at least two shareholders present in person or by proxy shall constitute a lawful quorum, unless the meeting of shareholders was convened at the demand of shareholders, in which case, the quorum shall be the presence of one or more shareholders holding at least 5% of our issued share capital and at least one percent of the voting power of our shares, or one or more shareholders with at least 5% of the voting power of our shares.

 

Vote Requirements

 

Our amended articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by the Israeli Companies Law or by our amended articles of association. Under the Israeli Companies Law, certain actions require a special majority, including: (i) appointment of external directors, requiring the approval described above under “Management — Board Practices — External Directors”; (ii) approval of an extraordinary transaction with a controlling shareholder or in which the controlling shareholder has a personal interest and the terms of employment or other engagement of the controlling shareholder or a relative of the controlling shareholder (even if not extraordinary), requiring the approval described above under “Management —Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions”; (iii) approval of a compensation policy, requiring the approval described under “Management — Board Practices — Compensation Committee and Compensation Policy”; and (iv) approval of executive officer compensation inconsistent with our office holder compensation policy or the compensation of our chief executive officer (subject to limited exceptions), requiring the approval described above under “Management— Approval of Related Party Transactions under Israeli Law— Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions.”

 

In addition, under the Israeli Companies Law the authorization of the chairman of the board to assume the role or responsibilities of the chief executive officer, or the authorization of the chief executive officer or his or her relative thereof to assume the role or responsibilities of the chairman of the board, for periods of no longer than three years each, is subject to receipt of the approval of a majority of the shares voting on the matter, provided that either (i) included in such majority are at least two-thirds of the shares of shareholders who are non-controlling shareholders and shareholders who do not have a personal interest in the resolution that are voted at the meeting on the matter (excluding any abstentions); or (ii) the total number of shares of shareholders specified in clause (i) who voted against the resolution does not 2% of the voting rights in the company.

 

Another exception to the simple majority vote requirement is a resolution for the voluntary winding up, or an approval of a scheme of arrangement or reorganization, of the company pursuant to Section 350 of the Israeli Companies Law, which requires the approval of holders of 75% of the voting rights represented at the meeting and voting on the resolution.

 

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Access to Corporate Records

 

Under the Israeli Companies Law, shareholders are provided access to: minutes of the general meetings of our shareholders; our shareholders register and principal shareholders register, articles of association and financial statements; and any document that we are required by law to file publicly with the Israeli Companies Registrar or the Israel Securities Authority. In addition, shareholders may request to be provided with any document in the company’s possession related to an action or transaction requiring shareholder approval under the related party transaction provisions of the Israeli Companies Law. We may deny this request if we believe it has not been made in good faith or if such denial is necessary to protect our interest or protect a trade secret or patent.

 

Modification of Class Rights

 

Under the Israeli Companies Law and our amended articles of association, the rights attached to any class of shares, such as voting, liquidation and dividend rights, may be modified or cancelled by adoption of a resolution by the holders of a majority of all shares as one class, without any required separate resolution of any class of shares, or otherwise in accordance with the rights attached to such class of shares, as set forth in our amended articles of association.

 

Registration Rights

 

For a discussion of registration rights we have granted to our existing shareholders prior to this offering, please see “Description of Share Capital — Warrants.”

 

Acquisitions under Israeli Law

 

Full Tender Offer

 

A person wishing to acquire shares of an Israeli public company, and who would as a result hold over 90% of the target company’s issued and outstanding share capital, is required by the Israeli Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a Israeli public company, and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares of the company, is required to make a tender offer to all of the shareholders who hold shares of the relevant class for the purchase of all of the issued and outstanding shares of that class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest in the offer accept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares.

 

Upon a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition an Israeli court to determine whether the tender offer was for less than fair value and that the fair value should be paid as determined by the court. However, under certain conditions, the offeror may include in the terms of the tender offer that an offeree who accepted the offer will not be entitled to petition the Israeli court as described above.

 

If (a) the shareholders who did not respond or accept the tender offer hold at least 5% of the issued and outstanding share capital of the company, or of the applicable class, or the shareholders who accept the offer constitute less than a majority of the offerees that do not have a personal interest in the acceptance of the tender offer, or (b) the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or of the applicable class), the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.

 

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Special Tender Offer

 

The Israeli Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company, if there is no other shareholder that holds 25% or more of the voting rights in the company, subject to exceptions. Similarly, the Israeli Companies Law provides that an acquisition of shares in an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company, subject to certain exceptions. No tender offer is required if the acquisition of shares: (i) occurs in the context of a private placement, that was approved by the company’s shareholders and whose purpose is to give the acquirer at least 25% of the voting rights in the company if there is no person who holds 25% or more of the voting rights in the company, or as a private placement whose purpose is to give the acquirer 45% of the voting rights in the company, if there is no person who holds 45% of the voting rights in the company; (ii) was from a holder of 25% or more of the voting rights in the company following which the purchaser will hold 25% or more of the voting rights in the company; or (iii) was from a holder of more than 45% of the voting rights in the company following which the purchaser will hold more than 45% of the voting rights in the company.

 

A special tender offer must be extended to all shareholders of a company but the offeror is not required to purchase shares representing more than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror; and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer (excluding the purchaser, its controlling shareholders, holders of 25% or more of the voting rights in the company or any person having a personal interest in the acceptance of the tender offer, or anyone on their behalf, including any such person’s relatives and entities under their control). If a special tender offer is accepted, then the purchaser or any person or entity controlling it, at the time of the offer, and any person or entity under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.

 

Merger

 

The Israeli Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under the Israeli Companies Law are met, by a majority vote of each party’s shares, and, in the case of the target company, a majority vote of each class of its shares, voted on the proposed merger at a shareholders meeting. The board of directors of a merging company may not approve the merger if it determines that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of the merging entities.

 

For purposes of the shareholder vote of a merging company whose shares are held by the other merging company or a person or entity holding 25% or more of any of the means of control of the other merging entity, unless a court rules otherwise, the merger will not be deemed approved if a majority of the votes of shares voting on the matter at the shareholders meeting (excluding abstentions) that are held by parties other than the other party to the merger, or by any other person or entity who holds 25% or more of the voting rights or the right to appoint 25% or more of the directors of the other party, or any one on their behalf including their relatives or corporations controlled by any of them, vote against the merger. If, however, the merger involves a merger with a company’s own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same Special Majority approval that governs all extraordinary transactions with controlling shareholders (as described under “Management — Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions”).

 

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If the transaction would have been approved by the shareholders of a merging company but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the valuation of the merging companies and the consideration offered to the shareholders.

 

Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of the merging entities, and may further give instructions to secure the rights of creditors.

 

 In addition, a merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of the merger was filed by each party with the Israeli Registrar of Companies and at least 30 days have passed from the date on which the merger was approved by the shareholders of each party.

 

Anti-Takeover Measures under Israeli Law

 

The Israeli Companies Law allow us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred rights with respect to voting, distributions or other matters and shares having preemptive rights. As of the Trading Date, no preferred shares will be authorized under our amended articles of association. In the future, if we do authorize, create and issue a specific class of preferred shares, such class of shares, depending on the specific rights that may be attached to it, may have the ability to frustrate or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization and designation of a class of preferred shares will require an amendment to our amended articles of association, which requires the prior approval of the holders of a majority of the voting power attached to our issued and outstanding shares at a general meeting. The convening of the meeting, the shareholders entitled to participate and the majority vote required to be obtained at such a meeting will be subject to the requirements set forth in the Israeli Companies Law and our articles of association as described above in “— Voting Rights.”

 

Borrowing Powers

 

Pursuant to the Israeli Companies Law and our amended articles of association, our board of directors may exercise all powers and take all actions that are not required under law or under our amended articles of association to be exercised or taken by our shareholders, including the power to borrow money for company purposes.

 

Changes in Capital

 

Our amended articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Israeli Companies Law and must be approved by a resolution duly passed by our shareholders at a general meeting by voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings or profits, require the approval of both our board of directors and an Israeli court.

 

Transfer Agent and Registrar

 

VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598, phone number: 212-828-8436, and fax number: 646-536-3179.

 

Admission to Quotation on the OTCQB marketplace of OTC Link

 

We plan on applying to have our ordinary shares quoted on the OTCQB marketplace of OTC Link. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which regulates the OTCQB marketplace of OTC Link, nor can there be any assurance that such an application for quotation will be approved.

 

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If our securities are not quoted on the OTCQB marketplace of OTC Link, a security holder may find it more difficult to dispose of, or to obtain accurate quotations, as to the market value of our securities. The OTCQB marketplace of OTC Link differs from national and regional stock exchanges in that it

 

(1) is not situated in a single location but operates through communication of bids, offers and confirmations between broker-dealers, and

 

(2) securities admitted to quotation are offered by one or more broker-dealers rather than the “specialist” common to stock exchanges.

 

To qualify for quotation on the OTCQB marketplace of OTC Link, an equity security must have one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor the company listing. If it meets the qualifications for trading securities on the OTCQB marketplace of OTC Link our securities will trade on the OTCQB. We may not now or ever qualify for quotation on the OTCQB.

 

SHARES ELIGIBLE FOR FUTURE SALE

 

Rule 144

 

In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.

 

In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:

 

  · 1% of the number of ordinary shares then outstanding, which will equal approximately 688,186 shares immediately after this offering; or
     
  · the average weekly trading volume of our ordinary shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.

 

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

 

Registration Rights

 

For a discussion of registration rights we have granted to our existing shareholders prior to this offering, please see “Description of Share Capital — Warrants.”

 

TAXATION

 

The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership and disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.

 

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Israeli Tax Considerations

 

The following is a brief summary of the material Israeli tax laws applicable to us, and certain Israeli Government programs that benefit us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition of our ordinary shares purchased by investors in this offering. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. Because parts of this discussion are based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below.

 

General Corporate Tax Structure in Israel

 

Israeli resident companies are generally subject to corporate tax, currently at the rate of 25% of a company’s taxable income (26.5% in 2015 and 2014). However, the effective tax rate payable by a company that derives income from an Approved Enterprise, a Benefited Enterprise or a Preferred Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli resident company are subject to tax at the prevailing corporate tax rate.

 

Taxation of our Shareholders

 

Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders . A non-Israeli resident who derives capital gains from the sale of shares in an Israeli resident company that were purchased after the company was listed for trading on a stock exchange outside of Israel will be exempt from Israeli tax so long as the shares were not held through a permanent establishment that the non-resident maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest of 25% or more in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. In addition, such exemption is not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income.

 

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Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the Convention Between the Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended, or the United States-Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder who (i) is a U.S. resident (for purposes of the treaty); (ii) holds the shares as a capital asset; and (iii) is entitled to claim the benefits afforded to such person by the treaty, is generally exempt from Israeli capital gains tax. Such exemption will not apply if, among other things: (i) the capital gain arising from such sale, exchange or other disposition is treated as industrial or commercial profits attributed to a permanent establishment in Israel, subject to certain conditions; (ii) the shareholder holds, directly or indirectly, shares representing 10% or more of the voting capital of the corporation during any part of the 12-month period preceding the disposition, subject to certain conditions; (iii) the capital gain arising from such sale, exchange or disposition is treated as royalties; or (iv) such U.S. resident is an individual and was present in Israel for 183 days or more during the relevant taxable year. In such case, the sale, exchange or disposition of our ordinary shares would be subject to Israeli tax, to the extent applicable; however, under the United States-Israel Tax Treaty, the taxpayer would be permitted to claim a credit for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations under U.S. law applicable to foreign tax credits. The United States-Israel Tax Treaty does not relate to U.S. state or local taxes.

 

In some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale.

 

Taxation of Non-Israeli Shareholders on Receipt of Dividends . Non-Israeli residents are generally subject to Israeli withholding tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, unless relief is provided in a treaty between Israel and the shareholder’s country of residence (subject to the receipt of a valid certificate from the Israeli Tax Authority allowing for a reduced tax rate). With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or at any time during the preceding 12 months, the applicable withholding tax rate is 30%, unless such “substantial shareholder” holds such shares through a nominee company, in which case the rate is 25%. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right.

 

Under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ordinary shares who is a U.S. resident (for purposes of the United States-Israel Tax Treaty) is 25%.  With respect to dividends paid to a U.S. corporation that held 10% or more of our outstanding voting capital throughout the tax year in which the dividend is distributed and the preceding tax year and provided that not more than 25% of the gross income of the paying corporation for such prior taxable year (if any) consists of certain interest or dividends, the maximum rate of tax withheld at source is 12.5%.

 

U.S. residents who are subject to Israeli withholding tax on a dividend may be entitled to a credit or deduction for U.S. federal income tax purposes in the amount of the taxes withheld, subject to detailed rules contained in U.S. tax legislation.

 

Surtax

 

Subject to the provisions of an applicable tax treaty, individuals who are subject to tax in Israel are also subject to an additional tax at a rate of 2% on annual income (including, but not limited to, dividends, interest and capital gain) exceeding NIS 811,560 for 2014, which amount is linked to the annual change in the Israeli consumer price index.

 

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Estate and Gift Tax

 

Israeli law presently does not impose estate or gift taxes.

 

U.S. Federal Income Taxation

 

General

 

The following are the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares covered by this prospectus.

 

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of our ordinary shares that is for U.S. federal income tax purposes:

 

  · an individual citizen or resident of the United States;
     
  · a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;
     
  · an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
     
  · a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

 

A beneficial owner of our ordinary shares that is described above is referred to herein as a “U.S. Holder.”  If a beneficial owner of our ordinary shares is not described as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder.”  The material U.S. federal income tax consequences applicable specifically to Non-U.S. Holders are described below under the heading “Non-U.S. Holders”.

 

This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, Treasury regulations promulgated thereunder, published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations, possibly on a retroactive basis.

 

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular holder based on such holder’s individual circumstances. In particular, this discussion considers only holders that purchase our ordinary shares pursuant to this offering and own and hold the ordinary shares as capital assets within the meaning of Section 1221 of the Code, and does not address the potential application of the alternative minimum tax or the U.S. federal income tax consequences to holders that are subject to special rules, including:

 

  · financial institutions or financial services entities;
     
  · broker-dealers;
     
  · persons that are subject to the mark-to-market accounting rules under Section 475 of the Code;
     
  · tax-exempt entities;
     
  · governments or agencies or instrumentalities thereof;
     
  · insurance companies;
     
  · regulated investment companies;

 

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  · real estate investment trusts;
     
  · certain expatriates or former long term residents of the United States;
     
  · persons that actually or constructively own 5% or more of our voting shares;
     
  · persons that acquired the ordinary shares pursuant to an exercise of employee options, in connection with employee incentive plans or otherwise as compensation;
     
  · persons that hold the ordinary shares as part of a straddle, constructive sale, hedging, conversion or other integrated transaction;
     
  · persons whose functional currency is not the U.S. dollar;
     
  · passive foreign investment companies; or
     
  · controlled foreign corporations.

 

This discussion does not address any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, or state, local or non-U.S. tax laws or, except as discussed herein, any tax reporting obligations applicable to a holder of our ordinary shares.  Additionally, this discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our ordinary shares through such entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our ordinary shares, the U.S. federal income tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. This discussion also assumes that any distribution made (or deemed made) to a holder in respect of our ordinary shares and any consideration received (or deemed received) by a holder in connection with the sale or other disposition of our ordinary shares will be in U.S. dollars.

 

We have not sought, and will not seek, a ruling from the Internal Revenue Service (the “IRS”) or an opinion of counsel as to any U.S. federal income tax consequence described herein. The IRS may disagree with the description herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.

 

EACH PROSPECTIVE INVESTOR IN OUR ORDINARY SHARES IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND ANY APPLICABLE TAX TREATIES.

 

U.S. Holders

 

Taxation of Cash Distributions

 

Subject to the passive foreign investment company (“PFIC”) rules discussed below, a U.S. Holder generally will be required to include in gross income as ordinary income the amount of any cash dividend paid in respect of our ordinary shares. A cash distribution on our ordinary shares generally will be treated as a dividend for U.S. federal income tax purposes to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). Such dividend generally will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. The portion of such cash distribution, if any, in excess of such earnings and profits will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in the ordinary shares. Any remaining excess generally will be treated as gain from the sale or other taxable disposition of such ordinary shares.

 

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With respect to non-corporate U.S. Holders, any such cash dividends may be subject to U.S. federal income tax at the lower applicable regular long term capital gains tax rate (see “— Taxation on the Disposition of Ordinary Shares” below) provided that (a) our ordinary shares are readily tradable on an established securities market in the United States or we are eligible for the benefits of the United States-Israel Tax Treaty, (b) we are not a PFIC, as discussed below, for either the taxable year in which the dividend was paid or the preceding taxable year, and (c) certain holding period requirements are met. Therefore, if our ordinary shares are not readily tradable on an established securities market, and we are not eligible for the benefits of the United States-Israel Tax Treaty, then cash dividends paid by us to non-corporate U.S. Holders will not be subject to U.S. federal income tax at the lower regular long term capital gains tax rate. Under published IRS authority, shares are considered for purposes of clause (a) above to be readily tradable on an established securities market in the United States only if they are listed on certain exchanges. U.S. Holders should consult their own tax advisors regarding the availability of the lower rate for any cash dividends paid with respect to our ordinary shares.

 

Dividends paid to a U.S. Holder with respect to our ordinary shares generally will be foreign source income, which may be relevant in calculating such U.S. Holder’s foreign tax credit limitations. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted from such U.S. Holder’s taxable income or credited against such U.S. Holder’s U.S. federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends that we distribute generally should constitute “passive category income,” or, in the case of certain U.S. Holders, “general category income.” A foreign tax credit for foreign taxes imposed on distributions may be denied if a U.S. Holder does not satisfy certain minimum holding period requirements. The rules relating to the determination of the foreign tax credit are complex, and U.S. Holders should consult their tax advisors to determine whether and to what extent they will be entitled to this credit.

 

Taxation on the Disposition of Ordinary Shares

 

Upon a sale or other taxable disposition of our ordinary shares, and subject to the PFIC rules discussed below, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in the ordinary shares.

 

The regular U.S. federal income tax rate on capital gains recognized by U.S. Holders generally is the same as the regular U.S. federal income tax rate on ordinary income, except that long term capital gains recognized by non-corporate U.S. Holders generally are subject to U.S. federal income tax at a maximum regular rate of 20%. Capital gain or loss will constitute long term capital gain or loss if the U.S. Holder’s holding period for the ordinary shares exceeds one year. The deductibility of capital losses is subject to various limitations.  Any such gain or loss that a U.S. Holder recognizes generally will be treated as U.S. source income or loss for foreign tax credit limitation purposes.

 

If an Israeli capital gains tax applies to any gains from the disposition of our ordinary shares by a U.S. Holder, as discussed in “Israeli Tax Considerations and Government Programs – Taxation of our Shareholders” above, such tax may be treated as a foreign tax eligible for a deduction from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to certain conditions and limitations).  In addition, if such Israeli tax applies to any such gain, a U.S. Holder may be entitled to certain benefits under the United States-Israel Tax Treaty, if such holder is considered a resident of the United States for purposes of, and otherwise meets the requirements of, the United States-Israel Tax Treaty.  U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such Israeli tax and their eligibility for the benefits of the United States-Israel Tax Treaty.

 

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Additional Taxes

 

U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally will be subject to a 3.8% Medicare contribution tax on unearned income, including, without limitation, dividends on, and gains from the sale or other taxable disposition of, our ordinary shares, subject to certain limitations and exceptions.  U.S. Holders should consult their own tax advisors regarding the effect, if any, of such tax on their ownership and disposition of our ordinary shares.

 

Passive Foreign Investment Company Rules

 

A foreign ( i.e. , non-U.S.) corporation will be a PFIC if either (a) at least 75% of its gross income in a taxable year of the foreign corporation, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income, or (b) at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than certain rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.

 

Our actual PFIC status for our current taxable year or any subsequent taxable year is uncertain and will not be determinable until after the end of such taxable year. Accordingly, there can be no assurance with respect to our status as a PFIC for our current taxable year or any subsequent taxable year.

 

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of the ordinary shares, and the U.S. Holder did not make either a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) the ordinary shares, a QEF election along with a purging election, or a mark-to-market election, each as described below, such holder generally will be subject to special rules for regular U.S. federal income tax purposes with respect to:

 

  · any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares; and
     
  · any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the ordinary shares).

 

Under these rules,

 

  · the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares;
     
  · the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution or to the period in the U.S. Holder’s holding period before the first day of our first taxable year in which we qualified as a PFIC will be taxed as ordinary income;
     
  · the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest ordinary tax rate in effect for that year and applicable to the U.S. Holder; and
     
  · the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.

 

In general, if we are determined to be a PFIC, a U.S. Holder may avoid the PFIC tax consequences described above with respect to the ordinary shares by making a timely QEF election (or a QEF election along with a purging election). Pursuant to the QEF election, a U.S. Holder will be required to include in income its pro rata share of our net capital gains (as long term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends. However, a U.S. Holder may make a QEF election only if we agree to provide certain tax information to such holder annually.  At this time, we do not intend to provide U.S. Holders with such information as may be required to make a QEF election effective.

 

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Alternatively, if a U.S. Holder, at the close of its taxable year, owns ordinary shares in a PFIC that are treated as marketable stock, the U.S. Holder may make a mark-to-market election with respect to such ordinary shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first taxable year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) the ordinary shares and for which we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above with respect to its ordinary shares. Instead, in general, the U.S. Holder will include as ordinary income for each year that we are treated as a PFIC the excess, if any, of the fair market value of its ordinary shares at the end of its taxable year over the adjusted tax basis in its ordinary shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted tax basis of its ordinary shares over the fair market value of its ordinary shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holder’s adjusted tax basis in its ordinary shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the ordinary shares will be treated as ordinary income.  In the case of a U.S. Holder that has held our ordinary shares during any taxable year in respect of which we were classified as a PFIC and continues to hold such ordinary shares (or any portion thereof) and has not previously determined to make a mark-to-market election, and that is now considering making a mark-to-market election, special tax rules may apply relating to purging the PFIC taint of such ordinary shares.

 

The mark-to-market election is available only for stock that is regularly traded on a national securities exchange that is registered with the SEC, or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election with respect to our ordinary shares under their particular circumstances.

 

If we are a PFIC and, at any time, have a foreign subsidiary that is classified as a PFIC, a U.S. Holder of our ordinary shares generally should be deemed to own a portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all or part of our interest in, or the U.S. Holder were otherwise deemed to have disposed of an interest in, the lower-tier PFIC. A mark-to-market election generally would not be available with respect to such a lower-tier PFIC. U.S. Holders are urged to consult their own tax advisors regarding the tax issues raised by lower-tier PFICs.

 

A U.S. Holder that owns (or is deemed to own) ordinary shares in a PFIC during any taxable year of the U.S. Holder may have to file an IRS Form 8621 (whether or not a mark-to-market election is or has been made) with such U.S. Holder’s U.S. federal income tax return and provide such other information as may be required by the U.S. Treasury Department.

 

The rules dealing with PFICs and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. Holders of our ordinary shares should consult their own tax advisors concerning the application of the PFIC rules to our ordinary shares under their particular circumstances.

 

Non-U.S. Holders

 

Cash dividends paid or deemed paid to a Non-U.S. Holder with respect to our ordinary shares generally will not be subject to U.S. federal income tax unless such dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States).

 

  87  
 

 

In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other taxable disposition of the ordinary shares unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of such sale or other disposition and certain other conditions are met (in which case, such gain from U.S. sources generally is subject to U.S. federal income tax at a 30% rate or a lower applicable tax treaty rate).

 

Cash dividends and gains that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) generally will be subject to regular U.S. federal income tax at the same regular U.S. federal income tax rates as applicable to a comparable U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.

 

Backup Withholding and Information Reporting

 

In general, information reporting for U.S. federal income tax purposes should apply to cash distributions made on our ordinary shares within the United States to a U.S. Holder (other than an exempt recipient) and to the proceeds from sales and other dispositions of the ordinary shares by a U.S. Holder (other than an exempt recipient) to or through a U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the United States will be subject to information reporting in limited circumstances.  In addition, certain information concerning a U.S. Holder’s adjusted tax basis in its ordinary shares and adjustments to that tax basis and whether any gain or loss with respect to such ordinary shares is long term or short term also may be required to be reported to the IRS, and certain holders may be required to file an IRS Form 8938 (Statement of Specified Foreign Financial Assets) to report their interest in our ordinary shares.

 

Moreover, backup withholding of U.S. federal income tax at a rate of 28% generally will apply to cash dividends paid on the ordinary shares to a U.S. Holder (other than an exempt recipient) and the proceeds from sales and other dispositions of the ordinary shares by a U.S. Holder (other than an exempt recipient), in each case who:

 

  · fails to provide an accurate taxpayer identification number;
     
  · is notified by the IRS that backup withholding is required; or
     
  · in certain circumstances, fails to comply with applicable certification requirements.

 

A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.

 

Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS.

 

Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedures for obtaining an exemption from backup withholding in their particular circumstances.

 

LEGAL MATTERS

 

Certain legal matters concerning this offering will be passed upon for us by Szaferman, Lakind, Blumstein & Blader, PC, Lawrenceville, New Jersey. Certain legal matters with respect to matters of Israeli law including the validity of the ordinary shares offered by this prospectus will be passed upon for us by Dana Livneh-Zemer, Law Office, Tel Aviv, Israel.

 

  88  
 

 

EXPERTS

 

The financial statements included in this prospectus and elsewhere in the registration statement have been so included in reliance upon the report of Fahn Kanne & Co. Grant Thornton Israel, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the ordinary shares offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules that are part of the registration statement. For further information about us and about the ordinary shares, you should refer to our registration statement and its exhibits. Statements made in this prospectus concerning the contents of any contract, agreement or other document are summaries of all material information about the documents summarized, but are not complete descriptions of all terms of these documents. If we filed any of these documents as an exhibit to the registration statement, you may read the document itself for a complete description of its terms.

 

Upon the completion of this offering, we will become subject to periodic reporting and other information requirements of the Exchange Act as applicable to foreign private issuers and will file reports, including annual reports on Form 20-F, and other information with the SEC. As we are a foreign private issuer, we are exempt from some of the Exchange Act reporting requirements, namely, the rules prescribing the furnishing and content of proxy statements to shareholders and Section 16 short swing profit reporting for our officers and directors and for holders of more than 10% of our shares. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. You may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms and their copy charges. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding issuers, such as us, who file electronically with the SEC. The address of that website is http://www.sec.gov .

 

EXPENSES RELATING TO THIS OFFERING

 

The following table sets forth all expenses to be paid by us in connection with the offering described in this Registration Statement.  All amounts shown are estimates except for the SEC registration fee:

 

SEC registration fee   $ 1,074.45  
Legal fees and expenses   $ 70,750  
Accounting fees and expenses   $ 7,000  
Transfer agent and registrar’s fees and expenses   $ 1,939  
Printing expenses   $ 7,124  
Miscellaneous fees and expenses   $ 20,000  
Total   $ 107,887.45  

 

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TODOS MEDICAL LIMITED

 

FINANCIAL STATEMENTS AS OF DECEMBER 31, 2014

 

 

TODOS MEDICAL LIMITED

Financial Statements

As of December 31, 2014

 

  90  
 

 

TODOS MEDICAL LIMITED

 

Financial Statements

As of December 31, 2014

 

Table of Contents

 

    Page
     
Report of Independent Registered Public Accounting Firm   F-2
     
Financial Statements    
     
Balance Sheets   F-3
     
Statements of Comprehensive Loss   F-4
     
Statements of Changes in Shareholders’ Deficit   F-5
     
Statements of Cash Flows   F-6
     
Notes to Financial Statements   F-7 – F-19

 

 

 

   

 

  Fahn Kanne & Co.
  Head Office
  Levinstein Tower
  23 Menachem Begin Road
  Tel-Aviv 66184, ISRAEL
  P.O.B. 36172, 61361
   
  T +972 3 7106666
  F +972 3 7106660
  www.gtfk.co.il

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board of Directors and Shareholders

Todos Medical Limited

 

We have audited the accompanying balance sheets of Todos Medical Limited (the “Company”) as of December 31, 2014 and 2013, and the related statements of comprehensive loss, changes in shareholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Todos Medical Limited as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America.

 

The financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1, the Company has not yet generated any revenues from its operations to fund its activities and is therefore dependent upon external sources for financing its operations.  As of December 31, 2014, the Company has incurred an accumulated deficit of $1,088,438 and negative cash flows from operating activities.  These factors among others, as discussed in Note 1 to the financial statements raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ FAHN KANNE & CO. GRANT THORNTON ISRAEL

 

Tel-Aviv, Israel

August 24, 2015

 

Certified Public Accountants

Fahn Kanne & Co. is the Israeli member firm of Grant Thornton International Ltd

 

  F- 2  
 

 

TODOS MEDICAL LIMITED

 

BALANCE SHEETS

 

    US dollars  
    December 31,  
    2014     2013  
             
ASSETS                
Current Assets                
Cash and cash equivalents     60,600       18,541  
Other current assets     64,391       62,775  
Total current assets     124,991       81,316  
                 
Property and Equipment, Net     3,695       2,108  
                 
Total assets     128,686       83,424  
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
Current Liabilities                
Accounts payable     15,378       8,413  
Other current liabilities     84,365       12,307  
Total current liabilities     99,743       20,720  
                 
Long-Term Liabilities                
Long-Term loans from shareholders     616,636       659,526  
                 
Total liabilities     716,379       680,246  
                 
Commitments and Contingent Liabilities (Note 7)                
                 
Shareholders' Deficit                
Preferred Shares of NIS 0.01 par value:                
10,000,000 shares authorized and 3,000,000 issued at December 31, 2014 and at December 31, 2013     8,562       8,562  
Ordinary Shares of NIS 0.01 par value:                
990,000,000 shares authorized at December 31, 2014 and December 31, 2013; and 33,352,500 issued shares at December 31, 2014 and 27,000,000 at December 31, 2013     89,492       72,444  
Additional paid in capital     345,335       88,543  
Receipts on account of ordinary shares     57,356       -  
Accumulated Deficit     (1,088,438 )     (766,371 )
Total shareholders' deficit     (587,693 )     (596,822 )
                 
Total liabilities and shareholders’ deficit     128,686       83,424  

 

The accompanying notes are an integral part of the financial statements.

 

  F- 3  
 

 

TODOS MEDICAL LIMITED

 

STATEMENTS OF COMPREHENSIVE LOSS

 

    US dollars  
    For the Year ended December 31,  
    2014     2013     2012  
                   
Research and development expenses, net     336,474       305,021       222,438  
General and administrative expenses     64,372       34,512       22,056  
Operating loss     400,846       339,533       244,494  
                         
Financing (income) expenses, net   (78,779 )     42,285       11,626  
                         
Comprehensive loss for the year   322,067       381,818       256,120  
                         
Loss per share (Basic and Diluted)   0.010       0.013       0.009  
                         
Basic and diluted weighted average number of ordinary shares outstanding   28,450,908     27,000,000     24,901,639  

 

The accompanying notes are an integral part of the financial statements.

 

  F- 4  
 

  

TODOS MEDICAL LIMITED

 

STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

 

   

US Dollars

 
   

Preferred Shares

   

Ordinary Shares

                         
    Number
of Shares
    Amount     Number
of Shares
    Amount     Receipts on
account of
shares
    Additional
Paid in Capital
    Accumulated
Deficit
    Total
Shareholders'
deficit
 
                                                 
Balance as of January 1, 2012   -     -     3,000,000     8,562     -     -     (128,433 )   (119,871 )
                                                                 
Conversion of loan to ordinary shares     -       -       27,000,000       72,444       -       88,543       -       160,987  
Conversion of ordinary  shares to preferred shares     3,000,000       8,562       (3,000,000 )     (8,562 )     -       -       -       -  
Loss for the Year   -       -       -       -       -       -       (256,120 )     (256,120 )
                                                                 
Balance as of December 31, 2012     3,000,000       8,562       27,000,000       72,444       -       88,543       (384,553 )     (215,004 )
Loss for the year   -       -       -       -       -       -       (381,818 )     (381,818 )
                                                                 
Balance as of December 31, 2013     3,000,000       8,562       27,000,000       72,444       -       88,543       (766,371 )     (596,822 )
                                                                 
Issuance of ordinary shares     -       -       6,352,500       17,048       -       256,792       -       273,840  
Proceeds on account of ordinary shares     -       -       -       -       57,356       -       -       57,356  
Loss for the year     -       -       -       -       -       -       (322,067 )     (322,067 )
                                                               
Balance as of December 31, 2014   3,000,000       8,562       33,352,500       89,492       57,356       345,335       (1,088,438 )     (587,693 )

 

The accompanying notes are an integral part of the financial statements.

 

  F- 5  
 

   

TODOS MEDICAL LIMITED

 

STATEMENTS OF CASH FLOWS

 

    US dollars  
    Year ended December 31,  
    2014     2013     2012  
Cash flows from operating activities:                        
Loss for the year     (322,067 )     (381,818 )     (256,120 )
Adjustments to reconcile loss for the year to net cash used in operating activities:                        
Depreciation     434       275       275  
                         
Currency differences of long term loans and other shekel denominated balances     (73,322 )     26,497       (1,667 )
                         
Changes in operating assets and liabilities:                        
Increase in other current assets     (1,616 )     (34,774 )     (14,168 )
Increase (decrease) in accounts payable     6,965       (20,399 )     (5,871 )
Increase in other current liabilities     72,058       1,529       10,778  
Net cash used in operating activities     (317,548 )     (408,690 )     (266,773 )
                         
Cash flows from investing activities                        
Purchase of property and equipment     (2,021 )     -       -  
Net cash used in investing activities     (2,021 )     -       -  
                         
Cash flows from financing activities :                        
Proceeds from issuance of ordinary shares, net     273,840       -       -  
Receipts on account of ordinary shares     57,356       -       -  
Proceeds from shareholders loans     30,432       419,969       252,374  
Net cash provided by financing activities     361,628       419,969       252,374  
Increase (decrease) in cash and cash equivalents     42,059       11,279       (14,399 )
Cash and cash equivalents at beginning of the year     18,541       7,262       21,661  
Cash and cash equivalents at end of the year     60,600       18,541       7,262  

 

Supplementary information on financing activities not involving cash flows:

 

During 2012, an amount of $8,562 representing 3,000,000 ordinary shares was converted into 3,000,000 preferred shares and a loan from a shareholder in the amount of $160,987 was converted into 27,000,000 ordinary shares.

 

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

 

  F- 6  
 

  

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS

 

NOTE 1         – GENERAL

 

A. Operations

 

Todos Medical Limited. (the "Company") was incorporated under the laws of Israel and commenced its operations on April 22 nd , 2010. The Company engages in the development of a series of patient-friendly blood tests for the purpose of early detection of a variety of cancers. The method incorporates biochemistry, physics and signal processing and is based on the cancer’s influence on the immune system which triggers biochemical changes in peripheral blood mononuclear cells. These changes are measured by spectroscopy and examined through a processing algorithm.

 

The Company’s products currently consist of individual kits developed for blood test detection of breast cancer (TB), and colorectal cancer (TC). Since inception, the Company’s operations have been limited to developing the products and raising capital to fund this development. The Company has not generated any revenues to date.

 

B. Share split and bonus

 

In March 2015, the board of directors approved a split of shares so that each 1 share of par value NIS 0.1 was split to 10 shares of par value NIS 0.01. In addition in March 2015, the board of directors approved the grant of 29 bonus shares for each 1 share of the Company held by every shareholder. Unless otherwise noted, all shares and per share amount for all periods presented have been retroactively restated to reflect the split and bonus shares issuance.

 

C. Going concern uncertainty

 

The Company devoted substantially all of its efforts to research and development and raising capital, and has not yet generated any revenues. The development and commercialization of the Company's products are expected to require substantial further expenditures. The Company has not yet generated any revenues from operations, and therefore it is dependent upon external sources for financing its operations. Since inception, the Company has incurred accumulated losses of $1,088,438, shareholders’ deficit of $587,693 and cumulative negative operating cash flow of $1,100,595. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company plans to finance its operations through the sale of equity and, to the extent available, short term and long term loans. There can be no assurance that the Company will succeed in obtaining the necessary financing to continue its operations. Subsequent to December 31, 2014, the Company raised $500,000 of new capital - see Note 15 for further details.

 

D. Risk factors

 

The Company has a limited operating history and faces a number of risks, including uncertainties regarding finalization of the development process, demand and market acceptance of the Company's products, the effects of technological changes, competition and the development of products by competitors. Additionally, other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Company's future results. In addition, the Company expects to continue incurring significant operating costs and losses in connection with the development of its products and marketing efforts. The Company has not yet generated any revenues from its operations to fund its activities and therefore the Company is dependent on the receipt of additional funding from its shareholders and investors in order to continue as a going concern (See Note 1 C).

 

  F- 7  
 

   

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 2         – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The financial statements were 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 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 relate to the going concern assumptions.

 

B. Functional currency

 

The currency of the primary economic environment in which the operations of the Company are conducted is the US dollar ("$" or "dollars"). Thus, the functional currency of the Company is the dollar (which is also the reporting currency of the Company).

 

Balances denominated in, or linked to, foreign currencies are stated on the basis of the exchange rates prevailing at the balance sheet date. For foreign currency transactions included in the Statement of Comprehensive Loss, the exchange rates applicable to the relevant transaction dates are used. Transaction gains or losses arising from changes in the exchange rates used in the translation of such balances, are accounted for under Financing income or expenses.

 

    December 31,  
    2014     2013     2012  
Official exchange rate of NIS 1 to US dollar     0.257       0.288       0.268  

 

C. Cash and cash equivalents

 

The Company considers all short-term investments, which are highly liquid investments and have original maturities of three months or less at the date of purchase, to be cash equivalents

 

D. Property and equipment, net

 

1. 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 Comprehensive Loss.

 

2. Rates of depreciation:

 

  %
   
Furniture and equipment 7-15

 

  F- 8  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

   

NOTE 2         – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

E. Impairment of long-lived assets

 

The Company's long-lived assets are reviewed for impairment in accordance with Accounting Standards Codification (“ASC”) Topic 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. To date the Company did not incur any material impairment losses.

 

F. Deferred income taxes

 

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 allowances in respect of deferred tax assets are provided for, if necessary, to reduce deferred tax assets to 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 2014, 2013 and 2012 financial statements and did not recognize any liability with respect to an unrecognized tax position in its balance sheet.

 

G. Liability for employee rights upon retirement

 

Israeli employees are entitled to severance pay of one month's salary for each year of employment, or a portion thereof. The Company satisfies its full obligation with respect to its Israeli employees by contributing one month of the employees’ salary for each year of service into a fund managed by a third party. Neither the obligation, nor the amounts deposited on behalf of the employees for such obligation are recorded on the Balance Sheet, as the Company is legally released from the obligation to the employees once the amounts have been deposited.

 

Severance expenses for the year ended December 31, 2014, 2013 and 2012 amounted to $10,252 $10,511 and $9,976, respectively.

 

H. Research and development expenses

 

Research and development expenses, are charged to operations as incurred. Grants received by the Company from the Government of Israel through the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor (the "OCS") for the development of approved projects are recognized as a reduction of expenses against the related costs incurred.

 

  F- 9  
 

  

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 2        – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

I. Royalty-bearing grants

 

Royalty-bearing grants from the OCS for funding approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and reduce research and development costs. The cumulative research and development grants received by the Company from inception through December 2014 amounted to $162,017

 

As of December 31, 2014, 2013 and 2012, the Company did not accrue for or pay any royalties to the OCS as no revenue was generated.

 

J. Basic and diluted loss per share

 

Basic loss per share is computed by dividing the loss for the period applicable to ordinary shareholders, by the weighted average number of ordinary shares outstanding during the period. Securities that may participate in dividends with the ordinary shares (such as the convertible preferred shares) are included in the computation of basic loss per share using the two class method. The convertible preferred shares are considered also in periods of net loss, since such shares have a contractual obligation to share in the losses of the Company.

 

In computing diluted loss per share, basic loss per share is adjusted to reflect the potential dilution that could occur upon the exercise of potential shares. Accordingly, in periods of net loss, no potential shares are considered.

 

K. Fair Value Measurements

 

The Company measures and discloses fair value in accordance with the Financial Accounting Standards Board ("FASB"), Accounting Standards Codification 820, Fair Value Measurements and Disclosures ("ASC Topic 820"). ASC Topic 820 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. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

 

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.

 

  F- 10  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 2        – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

L. Concentrations of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents 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.

 

M. Contingencies

The Company records accruals for loss contingencies arising from claims, litigation and other sources when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Legal costs incurred in connection with loss contingencies are expensed as incurred.

 

N. Recently issued accounting pronouncements

 

ASC Topic 915 "Development Stage Entities"

 

In June 2014 the Financial Accounting Standards Board (FASB) published Accounting Standards Update No. 2014-10 ( the “Amendments ") in which it was decided to remove the guidance under Accounting Codification Topic 915 (ASC 915), "Development Stage Entities".

 

The Development Stage Entities Topic specifies the guidelines for identifying an entity in the development stage, addresses the applicability of generally accepted accounting principles (GAAP) to development stage entities, and provides guidance on financial reporting requirements for development stage entities, including additional information required to be presented in the basic financial statements of development stage entities.

 

A development stage entity is defined as an entity that is both: 1) devoting substantially all of its efforts to establishing a new business and 2) that has not commenced planned principal operations or that has begun principal operations, but has not had significant revenue from those operations. In accordance with current GAAP, an entity meeting the definition is required to disclose in its financial statements, information about its status as a development stage entity and to present inception-to-date information for the statements of income, cash flows and shareholders' equity. The Amendments remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the Amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholders' equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The Amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations.

 

The Amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public business entities, those Amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company decided to early adopt the Amendment in the year 2014.

 

  F- 11  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 2        – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

N. Recently issued accounting pronouncements (cont.)

 

ASC Topic 205 " Presentation of Financial Statements"

 

In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). ASU 2014-15 provides guidance on management's responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 also provide guidance related to the required disclosures as a result of management’s evaluation.

 

The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

 

NOTE 3        – OTHER CURRENT ASSETS

 

    US dollars  
    December 31,  
    2014     2013  
             
Receivables – from OCS (*)     21,983       47,046  
Advance payment to suppliers     34,511       -  
Others     7,897       15,729  
                 
      64,391       62,775  
(*) See Note 2. I.                

 

NOTE 4        – PROPERTY AND EQUIPMENT, NET

 

    US dollars  
    December 31,  
    2014     2013  
             
Furniture and equipment     4,770       2,749  
                 
Less – accumulated depreciation     (1,075 )     (641 )
                 
Total Property and equipment, net     3,695       2,108  

 

Related depreciation expense was $434 in 2014, $275 in 2013 and $275 in 2012.

 

  F- 12  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 5        – OTHER CURRENT LIABILITIES

 

    US dollars  
    December 31,  
    2014     2013  
             
Accrued payroll and related taxes     14,116       11,194  
Provision for vacation     10,096       -  
Government institution     14       -  
Accrued expenses and other     40,649       1,113  
Related parties (*)     19,490       -  
      84,365       12,307  

 

(*) the related party debt is for accrued expenses payable to a company controlled by one of the shareholders.

 

NOTE 6        – LONG-TERM LOANS FROM SHAREHOLDERS

 

During the years 2011-2014, the Company received loans from shareholders (two separate lenders). The loans mature on December 31, 2019 and bear no interest. The loans are denominated in New Israel Shekels (NIS) and are linked to the Israeli consumer price index as of January 1, 2015. The loans may be prepaid by the Company from time to time according to the Company's cash availability.

As of December 31, 2014, no repayments of the shareholders loans have been made.

 

NOTE 7        – COMMITMENTS AND CONTINGENT LIABILITIES

 

A. During 2012 and 2013, the Company was entitled to receive grants from the OCS (Office of the Chief Scientist) in the total amount of $89,731 and $72,286 respectively, for its plan to develop a series of patient-friendly blood tests that enable the early detection of a variety of cancers (the “Development Plan”). The Company is required to pay royalties to the OCS at a rate of 3% in the first three years and 3.5% starting 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 $162,017, plus interest from the date of the grant. The total amount including interest is approximately $165,000. Such contingent obligation has no expiration date.

 

B. At inception of the Company, the Company entered into a license agreement with B.G. Negev Technologies and Applications Ltd (a wholly owned subsidiary of Ben Gurion University – Israel) & Mor Research Applications Ltd. (a wholly owned subsidiary of Clalit Medical Services – Israel) [the “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 license agreement the royalty rates are:

 

On net sales of:        
o   leukemia related products     3.0 %
o   other products     2.5 %
o   in certain limited circumstances, rates may be reduced to     2.0 %

 

On fixed sublicense income (with no sublicense income on sales by sub licensee):
o   leukemia related products     20.0 %
o   other products     15.0 %

 

  F- 13  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 7        – COMMITMENT AND CONTINGENT LIABILITIES (cont.)

 

B. (Cont.)

 

On fixed sublicense income (with sublicense income on sales by sub licensee):      
o    leukemia related products     10.0 %
o   other products     7.5 %

 

Without any connection to the Company’s income, the Company is required to pay minimum royalties to the Licensors according to the following schedule (subject to the termination clause described below):

 

1.        Year 2015 - $ 10,000

2.        Year 2016 - $25,000

3.        Year 2017 and on - $ 50,000 per year.

 

In any specific year, the total royalties payable to the Licensors shall be the higher of:

o    the regular royalties based on income and

o    the minimum royalties.

 

The minimum royalties will be paid to the Licensors regardless of the fact that the Company succeeded to generate sales from the products arising from the usage of the patent.

 

The license agreement is for an unlimited term, unless terminated earlier by either of the parties. Each party is entitled to terminate the agreement as a result of a material breach or a failure to comply with a material term by the other party, as a result of liquidation or insolvency of the other party. In addition, the Company is entitled to terminate the agreement if at any time, during the period of 7 years following the effective date of the transaction, the Company, at its sole discretion, determines that commercialization of the leukemia licensed products is not commercially viable. As of December 31, 2014 the Company had not yet reached a determination regarding the probability of the commercialization of the licensed products.

 

As this 7 year period had not yet passed and the Company may terminate the agreement at any time, the Company did not recognize a liability with respect to the commitment to pay minimum royalties to the Licensors.

 

C. Crow Technologies 1977 Ltd., a company engaged in the manufacturing of plastics and electronic components, has an exclusive right to manufacture products for the Company (and any component of the products) for a price that is higher by 50% to that of the market prices of manufacturing such products or components in Israel. As of the date hereof, Crow Technologies has not exercised its exclusive right. The products of the Company do not have any electronic parts. While the Company’s products do have plastic parts, these parts cost approximately $0.10 per unit. The Company believes that the exclusive right held by Crow Technologies is immaterial to the ultimate price for which the Company will sell its products or even the overall estimated cost of production of its products.

 

  F- 14  
 

  

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 8        – SHAREHOLDERS' EQUITY

 

Convertible Preferred Shares:

 

According to the Articles of Association, which were revised on August 9, 2015, each preferred share shall entitle its holder to the following rights, until such preferred share is converted into an ordinary share: (a) the right to receive notices and participate in general meetings, vote there at, receive dividends and the assets of the Company upon liquidation; (b) anti-dilution right that is not transferrable; (c) the right to appoint one (1) director, provided that the holder holds 5% or more of the issued share capital of the Company.

 

Each preferred share shall be automatically converted to one ordinary share and shall be entitled to all rights afforded to the ordinary shares on the occurrence of the earlier of the following: (a) initial public offering of the securities of the Company or registration of the securities of the Company for trade in Israel or abroad (b) the sale of all or substantially all the assets of the Company; (c) merger, in case of a merger in which the Company is the surviving entity; (d) sale of preferred shares by the holder to any third party.   

 

Ordinary Shares

 

A. Upon inception the Company issued 3,000,000 Ordinary Shares of NIS 0.01 par value.

 

On January 29, 2012 the Company issued to an investor 27,000,000 Ordinary Shares of NIS 0.01 par value, for the conversion of a $160,987 (NIS 600,000) loan.

 

As of that date it was agreed between the investors who gained control over the Company and the then existing shareholders of the Company ("the former controlling shareholders") that the respective shares of the former controlling shareholders would be converted into preferred shares. For the preferred share rights and privileges refer to the beginning of Note 8 above.

 

B. Effective as at March 31, 2014, an investor was to be issued 123,900 shares in exchange for $57,356 (200,000 NIS) received by the Company in February, 2014. Although these shares had not yet formally been issued by the balance sheet date, they have been included in the shareholders’ deficit and loss per ordinary share.

 

C. On October 7, 2014, the Company signed a share purchase agreement with certain investors for $350,593 in exchange for 9,000,000 ordinary shares of NIS 0.01 par value.

 

As the investment was to be executed in installments the 9,000,000 shares were issued to a trustee that would hold the shares in trust until fully paid by the investors. The trustee released the shares to the investors following the completion of each significant transfer. As of December 31, 2014 the investor was entitled to 5,746,200 ordinary shares corresponding to an investment of $223,840. Subsequently all these shares were released to the investors and the remaining purchase amount was paid.

 

D. On December 30, 2014 the Company signed a share purchase agreement with an investor for $50,000 in exchange for 606,000 ordinary shares of NIS 0.01 per value.

 

  F- 15  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 9         – RESEARCH AND DEVELOPMENT EXPENSES, NET

 

    US dollars  
    Year ended December 31,  
    2014     2013     2012  
Salaries and related expenses     215,315       205,228       164,754  
Professional fees     75,566       99,952       73,313  
Materials     18,828       19,535       6,901  
Depreciation     434       275       275  
Travel expenses     2,039       2,099       5,037  
Insurance     -       14,929       7,701  
Patents     24,292       35,289       54,188  
      336,474       377,307       312,169  
Less:   Grants from the OCS     -       (72,286 )     (89,731 )
      336,474       305,021       222,438  

 

NOTE 10     – GENERAL AND ADMINISTRATIVE EXPENSES

 

    US dollars  
    Year ended December 31,  
    2014     2013     2012  
                   
Rent and Maintenance     26,715       6,430       5,830  
Office     3,697       4,101       1,131  
Communication     1,126       835       562  
Professional fees     22,522       20,377       10,548  
Other     10,312       2,769       3,985  
      64,372       34,512       22,056  

 

NOTE 11     – FINANCING (INCOME) EXPENSES, NET

 

    US dollars  
    Year ended December 31,  
    2014     2013     2012  
                   
Exchange rate difference and other finance costs     (78,779 )     42,285       11,626  

 

  F- 16  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 12     – INCOME TAX

 

A. Israeli corporate tax rates

 

On December 6, 2011, the Law for the Change in the Tax Burden (Legislative Amendments) – 2011 was published.  As part of this law, among other things, commencing from 2012 the corporate tax rate was increased to 25%.  In addition, commencing in 2012, the tax rate on capital gains in real terms was increased to 25%.

 

On July 30, 2013, the Israeli parliament approved the Law for the Change in National Priorities (Legislative Amendments to Achieve Budgetary Goals for 2013 and 2014) – 2013 (hereinafter – the “Law for the Change in National Priorities”), which, among other things increased the standard Israeli corporate income tax rate from 25% to 26.5% effective as of January 1, 2014.

 

B. Tax assessments

 

The Company has not received final tax assessments since its inception.

 

C. Carry forward tax losses

 

As of December 31, 2014, the Company has carry forward losses for Israeli income tax purposes of approximately $1.1 million which can be offset against future taxable income for an indefinite period of time.

 

D. Deferred Taxes

 

Deferred taxes result primarily from temporary differences in the recognition of certain revenue and expense items for financial and income tax reporting purposes. Significant components of the Company's future tax assets are as follows:

 

    US dollars  
    Year ended December 31,  
    2014     2013     2012  
                   
Composition of deferred tax assets:                        
Provision for vacation     2,675       -       -  
Non capital loss carry forwards     292,000       203,000       102,000  
Valuation adjustments     (294,675 )     (203,000 )     (102,000 )
      -       -       -  

 

  F- 17  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 13     – LOSS PER SHARE

 

The loss and the weighted average number of shares used in computing basic and diluted loss per ordinary share for the years ended December 31, 2014, 2013 and 2012, are as follows:

 

    US dollars  
    Year ended December 31,  
    2014     2013     2012  
                   
Loss for the year     322,067       381,818       256,120  
Less: Loss attributed to preferred shares     30,721       38,182       25,369  
Loss for the year attributable to ordinary shareholders     291,346       343,636       230,751  

 

    Number of shares  
    Year ended December 31,  
    2014     2013     2012  
                   
Weighted average number of shares used in the computation of basic and diluted earnings per ordinary share     28,450,908       27,000,000       24,901,639  

  

During the reported periods there were no potential instruments (except for the convertible preferred shares).

 

NOTE 14     – RELATED PARTIES

 

Effective as of May 1, 2015, we entered into an employment agreement with Mr. Rami Zigdon, our chief executive officer, who owns all the Company’s preferred shares. From the Company’s inception to the effective date of the agreement, Mr. Zigdon provided us with management services as an independent contractor. As of the effective date of the agreement, Mr. Zigdon is employed as our chief executive officer on a full time basis. The agreement may be terminated by either party by ninety days written notice or by the Company under exceptional circumstances as detailed in the agreement. Pursuant to the agreement, Mr. Zigdon is entitled to a gross monthly salary of NIS 15,000 (approximately $3,900) linked to the Israeli CPI known at the effective date of the agreement as well as reimbursement of vehicle expenses up to an annual amount of NIS 16,000 (approximately $4,200). The gross monthly salary shall be increased to NIS 25,000 (approximately $ 6,600) from the date on which the Company shall have cash in its bank account of least NIS 3,500,000 (approximately $ 920,000) (the "Triggering Date") that is sourced from capital injections/non-repayable amounts only, as confirmed by the Company’s CFO. In the event that during the term of the agreement, on a certain date the Company shall have at least NIS 4,000,000 (approximately $1,050,000) cash in its bank account that is sourced from capital injection/non-repayable amounts only, as confirmed by the Company’s CFO, Mr. Zigdon shall be entitled to a payment in the sum of NIS 12,333 (approximately $ 3,200) multiplied by the number of calendar months that had passed from the effective date of the agreement and until the month ending prior to the Triggering Date. In addition, Mr. Zigdon is entitled to participate in our incentive program that will be adopted by the Company. Furthermore, Mr. Zigdon will be entitled to options to purchase Company shares all subject to an option plan to be adopted by the appropriate organs of the Company. The number of options, vesting and such other terms of grant of the options have not been specified as of the date hereof. Mr. Zigdon is entitled to customary fringe benefits under Israeli laws. If the agreement is terminated by the Company, other than for "cause" as defined in the agreement, Mr. Zigdon shall be entitled to an adjustment bonus equal to 3 times the last gross monthly salary or in the event that the Company will have more than $ 3 Million cash in hand, the adjustment bonus shall be equal to 6 times his last gross monthly salary. The agreement contains provisions regarding non-competition, confidentiality of information and assignment of inventions.

 

  F- 18  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 15     – SUBSEQUENT EVENTS

 

A. In January 2015, the Company signed a lease agreement for the lease of 108 sq.m. of office space in Rehovot, Israel for a monthly consideration of NIS 6,780 (approximately $ 1,750). The lease is for a term of one year renewable by the Company for an additional term of two years. During the option period, the monthly lease payments will increase to NIS 7,000 (approximately $ 1,800). Lease payments are linked to the Israeli CPI based on the CPI published on February 15, 2015.

 

B. In March 2015, the general meeting of the shareholders resolved to increase the registered share capital and performed a share split so after the increase and share split, the registered share capital of the Company was increased from NIS 100,000 to NIS 10,000,000 divided into 990,000,000 ordinary shares par value NIS 0.01 each and 10,000,000 preferred shares par value NIS 0.01 each of the Company. On this date the amended and restated articles of association were adopted. In March 2015, the board of directors approved the grant of 29 bonus shares for each 1 share of the Company held by every shareholder. Unless otherwise noted, all shares and per share amount for all periods presented have been retroactively restated to reflect the split and the issuance of bonus shares.

 

C. In March 2015, the Company approved a private placement memorandum for a funding round of up to $ 2,000,000 and issuance of units for a price of $0.20 for each unit consisting of: (A) 1 ordinary share par value NIS 0.01 and (B) 1 three year warrant to purchase 1 ordinary share par value NIS 0.01 of the Company at a price of $ 0.50. Until the date of this report, the Company has raised the sum of $500,000 and issued 2,500,000 ordinary shares par value NIS 0.01 each and warrants to purchase an equal number of ordinary shares par value NIS 0.01 each.

 

D. In June 2015 the Company approved the issuance of 1,000,000 fully vested ordinary shares to Maxim Partners LLC (“Maxim”) pursuant to an agreement entered with Maxim in April 2015 engaging Maxim to provide financial advisory and investment banking services to the Company. Estimated fair value of the issued shares is approximately $200,000 based on recent share price- see C above. Maxim is entitled to unlimited piggyback registration rights. Under the agreement, in addition to the issuance of shares as mentioned above, the Company undertook to pay to Maxim for such services a non-refundable fee of $30,000 for the term of the agreement (three monthly fee of $10,000) accruing and payable only upon consummation of a financing transaction between the Company and a third party introduced by Maxim in addition to a fee for a transaction consummated with such third party as detailed in the agreement and reimbursement of expenses in connection with such services provided. In addition, Maxim shall have a right of first offer for acting as lead book runner in the event that the Company shall seek to raise additional capital by way of an offering – private or public. The agreement is terminable by either party by a 30 days prior written notice.  

 

E. The Company issued 18,120,000 ordinary shares to a trustee for a group of investors pursuant to a Share Purchase Agreement dated October 2014, as amended in August 2015, for an aggregate consideration of $150,000. As of December 31, 2014, the investors were not entitled to any of these shares. As of August 2015, the majority of the $150,000 consideration had been paid to the Company and once the full amount has been paid, the trustee will release the shares to the group of investors.

 

 

  

  F- 19  
 

   

TODOS MEDICAL LIMITED

 

Unaudited Financial Statements

As of June 30, 2015

 

Table of Contents

 

    Page
Balance Sheets   F-21
Statements of Comprehensive Loss   F-22
Statements of Changes in Shareholders’ Deficit   F- 23
Statements of Cash Flows   F-24
Notes to Financial Statements   F-25 – F-29

 

 

  F- 20  
 

 

TODOS MEDICAL LIMITED

BALANCE SHEETS

 

    US dollars  
    June 30,     December 31,  
    2015     2014  
    (Unaudited)        
ASSETS                
Current Assets                
Cash and cash equivalents     343,552       60,600  
Other current assets     20,634       64,391  
Total current assets     364,186       124,991  
                 
Property and Equipment, Net     113,734       3,695  
                 
Total assets     477,920       128,686  
                 
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
Current Liabilities                
Accounts payable     17,639       15,378  
Liability for Minimum Royalties – current maturity     22,500       -  
Other current liabilities     61,141       84,365  
Total current liabilities     101,280       99,743  
                 
Long-Term Liabilities                
Long-Term Loans from shareholders     636,269       616,636  
Liability for Minimum Royalties     12,500       -  
Total long-term liabilities     648,769       616,636  
                 
Total liabilities     750,049       716,379  
                 
Shareholders' Deficit                
                 
Preferred Shares of NIS 0.01 par value:                
10,000,000 shares authorized and 3,000,000 issued at June 30, 2015 and December 31, 2014     8,562       8,562  
                 
Ordinary Shares of NIS 0.01 par value:                
990,000,000 shares authorized at June 30, 2015 and December 31, 2014; and 53,446,233  issued shares at June 30, 2015 and 33,352,200 at December 31, 2014.     140,668       89,492  
                 
Additional paid in capital     1,215,920       345,335  
Receipts on account of ordinary shares     -       57,356  
Accumulated Deficit     (1,637,279 )     (1,088,438 )
Total shareholders' deficit     (272,129 )     (587,693 )
                 
Total liabilities and shareholders’ deficit     477,920       128,686  

 

The accompanying notes are an integral part of the financial statements.

 

  F- 21  
 

 

TODOS MEDICAL LIMITED

STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

    US dollars  
    For the 6 months ended June 30,  
    2015     2014  
             
Research and development expenses, net     206,247       178,086  
General and administrative expenses     330,291       17,013  
                 
Operating loss     536,538       195,099  
                 
Financing expenses, net     12,303       8,445  
                 
Comprehensive loss for the period     548,841       203,544  
                 
Loss per share (Basic and Diluted)     0.012       0.007  
                 
Basic and diluted weighted average number of ordinary shares outstanding     43,683,930       27,062,977  

 

The accompanying notes are an integral part of the financial statements.

 

  F- 22  
 

 

TODOS MEDICAL LIMITED

STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

For the six months ended June 30, 2015

(Unaudited)

 

    Amounts in US dollars  
    Preferred shares     Ordinary shares              
                            Receipts     Additional           Total  
    Number           Number           on account     paid in     Accumulated     shareholders'  
    of shares     Amount     of shares     Amount     of shares     capital     deficit     deficit  
                                                 
Balance as of December 31, 2014     3,000,000       8,562       33,352,200       89,492       57,356       345,335       (1,088,438 )     (587,693 )
                                                                 
Issuance of ordinary shares, net                     19,094,033       48,637       (57,356 )     673,124       -       664,405  
Stock based compensation                     1,000,000       2,539               197,461               200,000  
Loss for the period                                                     (548,841 )     (548,841 )
                                                                 
Balance as of June 30, 2015     3,000,000       8,562       53,446,233       140,668       -       1,215,920       (1,637,279 )     (272,129 )

 

The accompanying notes are an integral part of the financial statements.

 

  F- 23  
 

 

TODOS MEDICAL LIMITED

STATEMENTS OF CASH FLOWS

(Unaudited)

 

    US dollars  
    For the 6 months ended June 30,  
    2015     2014  
Cash flows from operating activities:                
Loss for the period     (548,841 )     (203,544 )
Adjustments to reconcile loss for the period to net cash used in operating activities:                
Depreciation     2,248       230  
Liability for minimum royalties     35,000       -  
Stock based compensation     200,000       -  
Financing expenses of long term loans & other Shekel denominated balances     19,633       4,475  
                 
Changes in operating assets and liabilities:                
Decrease in other current assets     43,757       35,542  
Increase in accounts payable     2,261       13,857  
Increase (decrease)  in other current liabilities     (23,224 )     67,836  
Net cash used in operating activities     (269,166 )     (81,603 )
                 
Cash flows from investing activities                
Purchase of property and equipment     (112,287 )     -  
Net cash used in investing activities     (112,287 )     -  
                 
                 
Cash flows from financing activities                
Proceeds from issuance of ordinary shares, net     664,405       -  
Proceeds on receipts on account of ordinary shares     -       57,356  
Proceeds from shareholders loans     -       13,272  
Net cash provided by financing activities     664,405       70,628  
                 
Increase (decrease) in cash and cash equivalents     282,952       (10,975 )
                 
Cash and cash equivalents at beginning of the period     60,600       18,541  
Cash and cash equivalents at end of the period     343,552       7,566  

 

The accompanying notes are an integral part of the financial statements.

 

  F- 24  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS

June 30, 2015

(Unaudited)

 

NOTE 1 - GENERAL

 

A. Operations

 

Todos Medical Limited (the "Company") was incorporated under the laws of Israel and commenced its operations on April 22, 2010. The Company engages in the development of a series of patient-friendly blood tests for the purpose of early detection of a variety of cancers. The method incorporates biochemistry, physics and signal processing and is based on the cancer’s influence on the immune system which triggers biochemical changes in peripheral blood mononuclear cells. These changes are measured by spectroscopy and examined through a processing algorithm.

 

The Company’s products currently consist of individual kits developed for blood test detection of breast cancer (TB), and colorectal cancer (TC). Since inception, the Company’s operations have been limited to developing the products and raising capital to fund this research and development. The Company has not generated any revenues to date.

 

B. Share split and bonus shares

 

In March 2015, the board of directors approved a split of shares so that each (ordinary and preferred) 1 share of par value NIS 0.1 was split to 10 shares of par value NIS 0.01. In addition during March 2015, the board of directors approved the grant of 29 bonus shares for each 1 share of the Company held by every shareholder. Unless otherwise noted, all shares and per share amount for all periods presented have been retroactively restated to reflect the split and bonus shares issuance.

 

C. Going concern uncertainty

 

The Company devoted substantially all of its efforts to research and development and raising capital, and has not yet generated any revenues. The development and commercialization of the Company's products are expected to require substantial further expenditures. The Company has not yet generated any revenues from operations, and therefore it is dependent upon external sources for financing its operations. Since inception, the Company has incurred accumulated losses of $1,602,279, shareholders’ deficit of $237,129 and cumulative negative operating cash flow. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company plans to finance its operations through the sale of equity and, to the extent available, short term and long term loans. There can be no assurance that the Company will succeed in obtaining the necessary financing to continue its operations. During the first six months of 2015, the Company raised a net amount of $636,269 from the issuance of ordinary shares. Subsequent to June 30, 2015, the Company raised $90,000 of net new capital - see Note 5 for further details.

 

D. Risk factors

 

The Company has a limited operating history and faces a number of risks, including uncertainties regarding finalization of the development process, demand and market acceptance of the Company's products, the effects of technological changes, competition and the development of products by competitors. Additionally, other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Company's future results. In addition, the Company expects to continue incurring significant operating costs and losses in connection with the development of its products and marketing efforts. The Company has not yet generated any revenues from its operations to fund its activities and therefore the Company is dependent on the receipt of additional funding from its shareholders and investors in order to continue as a going concern (See Note 1 C).

 

  F- 25  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP).

 

Basis of Presentation :

 

Accounting Principles

 

The accompanying condensed financial statements and related notes should be read in conjunction with our financial statements and related notes contained in our Annual Report for the fiscal year ended December 31, 2014 (“fiscal 2014”). The unaudited condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“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 US 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 accompanying condensed balance sheet as of December 31, 2014 has been derived from our audited financial statements contained in our Annual Report for fiscal 2014.

 

The results for the six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or for any future period.

 

Recently Issued Accounting Standards

 

In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). ASU 2014-15 provides guidance on management's responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 also provides guidance related to the required disclosures as a result of management’s evaluation. The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

 

In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, that eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance which is prospectively effective for fiscal years beginning after December 15, 2015, requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The Company believes that this will not have a material impact on its consolidated financial statements.

 

For public business entities, the amendments ASU 2015-16 are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of ASU 2015-16 with earlier application permitted for financial statements that have not been issued.

 

NOTE 3 - PROPERTY AND EQUIPMENT, NET

 

    US dollars  
    June 30,     December 31,  
    2015     2014  
             
Laboratory equipment     107,098       -  
Furniture and equipment     8,258       4,770  
Computers     1,701       -  
Less - accumulated depreciation     (3,323 )     (1,075 )
Total property and equipment, net     113,734       3,695  

 

Depreciation expense was $2,248 and $230 for the six month periods ended June 30, 2015, and June 30, 2014 respectively.

 

  F- 26  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 4 - COMMITMENT AND CONTINGENT LIABILITIES

 

A. At inception of the Company, the Company entered into a license agreement with B.G. Negev Technologies and Applications Ltd (a wholly owned subsidiary of Ben Gurion University – Israel) & Mor Research Applications Ltd. (a wholly owned subsidiary of Clalit Medical Services – Israel) [the “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 license agreement the royalty rates are based on income from sales.

 

Without any connection to the Company’s income, the Company is required to pay minimum royalties to the Licensors according to the following schedule (subject to the termination clause described below):

 

1. Year 2015 - $10,000

2. Year 2016 - $25,000

3. Year 2017 and on - $50,000 per year.

 

In any specific year, the total royalties payable to the Licensors shall be the higher of:

o the regular royalties based on income and

o the minimum royalties.

 

The minimum royalties will be paid to the Licensors regardless of the fact that the Company succeeded to generate sales from the products arising from the usage of the patent.

 

The license agreement is for an unlimited term, unless terminated earlier by either of the parties. Each party is entitled to terminate the agreement as a result of a material breach or a failure to comply with a material term by the other party, as a result of liquidation or insolvency of the other party. In addition, the Company is entitled to terminate the agreement if at any time, during the period of 7 years following the effective date of the transaction, the Company, at its sole discretion, determines that commercialization of the leukemia licensed products is not commercially viable. As of June 30, 2015 the Company had not yet reached a determination regarding the probability of the commercialization of the licensed products and as a result recognized a liability only for the amount of minimum royalties to be paid in 2015 and 2016 for an amount of $35,000, which was recorded under research and development expenses during the six months ended June 30, 2015.

 

B. In January 2015, the Company signed a one year lease agreement for the lease of 108 sq.m. of office space in Rehovot, Israel for a monthly consideration of NIS 6,780 (approximately $ 1,750). In November 2015, the lease has been renewed by the Company for an additional term of two years for monthly payments of NIS 7,000 (approximately $ 1,800). Lease payments are linked to the Israeli CPI based on the CPI published on February 15, 2015.

 

C. As further described in Note 5. E., in April 2015 the Company concluded an agreement with Maxim Partners LLC (“Maxim”) engaging Maxim to provide financial advisory and investment banking services to the Company. The Company undertook to pay to Maxim for such services $10,000 a month accruing from April 2015 but only payable upon the consummation of a financing transaction between the Company and a third party introduced by Maxim. Maxim has not yet raised finance for the Company, so no liability has been recorded.

 

NOTE 5 - SHAREHOLDERS' EQUITY

 

Ordinary Shares:

 

A. In March 2015, the general meeting of the shareholders resolved to increase the registered share capital and performed a share split so after the increase and share split, the registered share capital of the Company was increased from NIS 100,000 to NIS 10,000,000 divided into 990,000,000 ordinary shares par value NIS 0.01 each and 10,000,000 preferred shares par value NIS 0.01 each of the Company. On this date the amended and restated articles of association were adopted. In March 2015, the board of directors approved the grant of 29 bonus shares for each 1 share of the Company held by every shareholder. Unless otherwise noted, all shares and per share amount for all periods presented have been retroactively restated to reflect the split and the issuance of bonus shares.

 

B. Effective as at March 31, 2014, an investor was to be issued 123,900 shares in exchange for $57,356 (200,000 NIS) received by the Company in February, 2014. As these shares had not yet formally been issued by December 31, 2014, they were included in the shareholders’ deficit as "Receipts on account of shares" and were taken into account for the calculation of loss per ordinary share. The shares were issued on June 24, 2015. Accordingly the amount presented as "Receipts on account of shares" was allocated to "Shares" and "Additional paid in capital" as applicable.

 

  F- 27  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

C. On October 7, 2014, the Company signed a share purchase agreement with certain investors for $350,593 (1,300,000 NIS) in exchange for 9,000,000 ordinary shares of NIS 0.01 par value.

 

As the investment was to be executed in installments the 9,000,000 shares were issued to a trustee that would hold the shares in trust until fully paid by the investors. The trustee released the shares to the investors following the completion of each significant transfer. As of December 31, 2014 the investors were entitled to 5,746,200 ordinary shares. During the six months ended June 30, 2015 the investors paid the remaining purchase amount of $118,975.

 

D. In March 2015, the Company approved a private placement memorandum for a funding round of up to $ 2,000,000 and issuance of units for a price of $0.20 for each unit consisting of: (A) 1 ordinary share par value NIS 0.01 and (B) 1 three year warrant to purchase 1 ordinary share par value NIS 0.01 of the Company at an exercise price of $0.50. Until June 30, 2015, the Company raised the net sum of $436,023 and issued 2,500,000 ordinary shares par value NIS 0.01 each and warrants to purchase an equal number of ordinary shares par value NIS 0.01 each. For the net amounts raised subsequent to June 30, 2015, see Note 8 below.

 

E. In April 2015 the Company entered an agreement with Maxim Partners LLC (“Maxim”) to issue them 1,000,000 ordinary shares engaging Maxim to provide financial advisory and investment banking services to the Company. Estimated fair value of the issued shares is approximately $200,000 based on recent share price - see Note D. above. Maxim is entitled to unlimited piggyback registration rights. Under the agreement, in addition to the issuance of shares as mentioned above, the Company undertook to pay to Maxim for such services $10,000 a month accruing from April 2015 but only payable upon the consummation of a financing transaction between the Company and a third party introduced by Maxim in addition to a fee for a transaction consummated with such third party as detailed in the agreement and reimbursement of expenses in connection with such services provided. In addition, Maxim shall have a right of first offer for acting as lead book runner in the event that the Company shall seek to raise additional capital by way of an offering – private or public. The agreement is terminable by either party by a 30 days prior written notice.

 

F. The Company issued 18,120,000 ordinary shares to a trustee for a group of investors pursuant to a Share Purchase Agreement dated October 2014, as amended in August 2015, for an aggregate consideration to be received, of $150,000. As of June 30, 2015, approximately $110,000 had been paid to the Company. Subsequently the remaining amount has been paid to the Company and the trustee has released the shares to the group of investors.

 

NOTE 6 - GENERAL AND ADMINISTRATIVE EXPENSES

 

    US dollars  
    For the 6 months ended June 30,  
    2015     2014  
             
Stock based compensation     200,000       -  
Professional fees     111,016       7,011  
Other     19,275       10,002  
      330,291       17,013  

 

NOTE 7 - LOSS PER SHARE

 

The loss and the weighted average number of shares used in computing basic and diluted loss per ordinary share for the periods ended June 30, 2015 and 2014, are as follows:

 

    US dollars  
    For the 6 months ended June 30,  
    2015     2014  
             
Loss for the period     548,841       203,544  
Less: Loss attributed to preferred shares     35,270       20,312  
Loss for the period attributable to ordinary shareholders     513,571       183,232  

 

    Number of shares  
    For the 6 months ended June 30,  
    2015     2014  
                 
Weighted average number of shares used in the computation of basic and diluted earnings per ordinary share     43,683,930       27,062,977  

 

Outstanding shares that will be issued upon conversion or exercise, as applicable, of all convertible Preferred Stock, stock options and warrants, have been excluded from the calculation of the diluted net loss per share for all the reported periods for which net loss was reported because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was anti-dilutive.

 

  F- 28  
 

 

TODOS MEDICAL LIMITED

 

NOTES TO FINANCIAL STATEMENTS (cont.)

 

NOTE 8 - SUBSEQUENT EVENTS

 

A.

As described in Note 5.D. above, in March 2015, the Company approved a private placement memorandum for a funding round of up to $ 2,000,000 and issuance of units for a price of $0.20 for each unit consisting of: (A) 1 ordinary share par value NIS 0.01 and (B) 1 three year warrant to purchase 1 ordinary share par value NIS 0.01 of the Company at an exercise price of $0.50. Subsequent to June 30, 2015, the Company raised the net sum of $430,093 and issued 2,389,406 ordinary shares par value NIS 0.01 each and warrants to purchase an equal number of ordinary shares par value NIS 0.01 each.

 

B.

On September 29, 2015 the Company made a 60 day loan of $ 45,731 (180,000 NIS) to a related party of a large shareholder of the Company. The related party had agreed not to offset this loan against the long-term loans that it has provided to the Company. As collateral for this loan, the related party transferred 6,162,600 ordinary shares in the Company held by the large shareholder to a trustee, who upon default was to return these shares to the Company or sell them to a third party, the proceeds of which would repay to the Company this short-term loan. The loan was later extended to mature on December 24, 2015. On the maturity date, the related party repaid NIS 123,000 (approximately $31,250) and the trustee returned 4,211,110 ordinary shares to the large shareholder. Pursuant to a separate agreement between a third party and the related party, on the maturity date, the third party repaid, on behalf of the related party, NIS 57,000 (approximately $14,481) to the Company and the trustee transferred 1,951,490 ordinary shares to the third party.

 

 

 

 

 

  F- 29  
 

  

Todos Medical Limited

 

53,349,490 Ordinary Shares

 

 

 

Prospectus

 

 

 

The Date of This Prospectus is [  ] [  ], 2016

 

Through and including [  ] [  ], 2016 (the 25th day after the commencement of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

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PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 6.    Indemnification of Directors and Officers

 

Under the Israeli Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care, but only if a provision authorizing such exculpation is included in its articles of association.  Our amended articles of association to be effective upon the Trading Date include such a provision to the fullest extent permitted by law.  The company may not exculpate in advance a director from liability arising out of a prohibited dividend or other distribution to shareholders.

 

Under the Israeli Companies Law and the Israeli Securities Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of any such event or following an event, provided its articles of association include a provision authorizing such indemnification:

 

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  · a financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court.  However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;
     
  · reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction;
     
  · reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent; and
     
  · expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law.

 

Under the Israeli Companies Law and the Israeli Securities Law, a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:

 

  · a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
     
  · a breach of the duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder;
     
  · a financial liability imposed on the office holder in favor of a third party; and
     
  · expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder or certain compensation payments to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Securities Law.

 

Under the Israeli Companies Law, a company may not indemnify, exculpate or enter into an insurance contract which would provide coverage for any monetary liability incurred as a result of any of the following:

 

  · a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
     
  · a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;
     
  · an act or omission committed with intent to derive illegal personal benefit; or

 

 

  93  
 

 

  · a fine, monetary sanction or forfeit levied against the office holder.

 

Under the Israeli Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to the chief executive officer or a director or under certain circumstances, also by the shareholders.  See “Management — Approval of Related Party Transactions under Israeli Law.”

 

Our amended articles of association, which will be effective upon the Trading Date, permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted under the Israeli Companies Law and Israeli Securities Law. We intend to enter into indemnification and exculpation agreements with each of our directors and executive officers prior to the closing of this offering.  We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay all premiums thereunder to the fullest extent permitted by the Israeli Companies Law.

 

Item 7.    Recent Sales of Unregistered Securities

 

Set forth below are the sales of all securities by us since January 1, 2012.

 

No underwriters were employed in connection with any of the transactions set forth in this Item 7.

 

On January 29, 2012 the Company issued to an investor 27,000,000 ordinary shares, in exchange for the conversion of a $160,987 (NIS 600,000) loan.

 

Effective as at March 31, 2014, an investor was to be issued 123,900 shares in exchange for $57,356 (200,000 NIS) received by the Company in February, 2014. Although these shares had not yet formally been issued by the balance sheet date, they have been included in the share counts above.

 

In October 2014, the company signed the Share Purchase Agreement with an investor for $350,000 in exchange for 8,280,000 ordinary shares. The investor will be issued another 720,000 ordinary shares of the Company if the Effectiveness Date is after June 7, 2016. These shares have already been issued by the Company to a trustee pending the conclusion of the registration process. If the Effectiveness Date is prior to June 7, 2016, the trustee will transfer 295,776 shares to Adeline, 295,776 shares to Mr. Melman, 72,000 shares to Mr. Zigdon, 34,848 shares to Yehezkel Machlev, and 21,600 shares to Dr. Zelig. The registration statement of which this prospectus forms a part assumes the Effectiveness Date will be prior to June 7, 2016. The investor has registration rights and such shares are being registered in this registration statement.

 

Mr. Wasserman was a member of the Board from October 7, 2014 through July 16, 2015.

 

The Company issued 18,120,000 ordinary shares to a trustee for a group of investors (including Mr. Wasserman and Mr. Ben Zion Hasid, a member of the Board from April 28, 2015 through July 15, 2015) pursuant to the Share Purchase Agreement dated October 7, 2014, as amended in August 2015, for an aggregate consideration of $150,000. As of December 31, 2014, the investors were not entitled to any of these shares. As of June 30, 2015, approximately $110,000 had been paid to the Company. Subsequently the remaining amount has been paid to the Company and the trustee has released the shares to the group of investors.

 

On December 30, 2014 the Company signed a share purchase agreement with an investor for $50,000 in exchange for 606,000 ordinary shares.

 

From March 2015 through May 2015, the Company raised the gross amount of $500,000 through its private placement memorandum, issuing 2,500,000 units to six investors – three of whom were in the United States. The overall offering (which remains open as of January 20, 2016), is $2,000,000. In August 2015, the Company raised the gross amount of $100,000 through its private placement memorandum, issuing 500,000 units to one investor (one of the earlier United States investors). In December 2015 and January 2016, the Company raised the gross amount of $377,881.20 through its private placement memorandum, issuing 1,889,406 units to twelve investors. Each unit consists of one ordinary share in addition to a warrant for one ordinary share exercisable for three years at a $0.50 price. All of the ordinary shares underlying these warrants have registration rights and are currently scheduled to be registered in this registration statement. If any of the ordinary shares underlying these warrants are not registered, persons holding a combined 51% of the warrant shares can demand registration of their warrant shares.

 

In June 2015 the Company approved the issuance of 1,000,000 ordinary shares to Maxim Partners, LLC pursuant to an agreement entered with Maxim in April 2015 engaging Maxim to provide financial advisory and investment banking services to the Company. Maxim is entitled to unlimited piggyback registration rights.

 

In December 2015 and January 2016, due to the Company’s 2015 and 2016 sales of its ordinary shares pursuant to its private placement memorandum, Mr. Zigdon was issued 189,852 preferred shares in accordance with his anti-dilution rights as a holder of preferred shares.

 

The sales of all of the above securities were deemed to be exempt from registration under the Securities Act because they were made outside of the United States to certain non-U.S. individuals or entities pursuant to Regulation S or, in reliance upon the exemption from registration provided under Section 4(a)(2) of the Securities Act and the regulations promulgated thereunder. The sales to U.S. persons were not “public offerings” as defined in Section 4(a)(2) due to the insubstantial number of U.S. persons involved in the deal.

 

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Item 8.    Exhibits and Financial Statement Schedules

 

(a)           Exhibits

 

The exhibits listed in the accompanying Exhibit Index are incorporated herein by reference.

 

(b)           Financial Statement Schedules

 

All schedules have been omitted since they are not required or are not applicable or the required information is shown in the financial statements or related notes.

 

Item 9.    Undertakings

 

The registrant hereby undertakes:

 

(1)           for purposes of any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

(2)           for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3)           to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i)           to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

(4)           that, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(5)           to remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.

 

(6)           to file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3.

 

  95  
 

 

(7)           for the purposes of determining liability to any purchaser:

 

(i)         If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(8)           for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(i)           any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

(ii)           any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

(iii)          the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

(iv)          any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

The registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

  96  
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in Rehovot, Israel, on February 26, 2016.

 

    TODOS MEDICAL LIMITED
     
  By:

/ s/ Rami Zigdon

 
  Name: Rami Zigdon
  Title: Chief Executive Officer

 

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POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Rami Zigdon or Uri Sher, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by the registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

 

Dated: February 26, 2016

By: /s/ Rami Zigdon  
  Name: Rami Zigdon  
  Title: Chief Executive Officer
(Principal Executive Officer)
 

 

Dated: February 26, 2016

By: /s/ Uri Sher  
  Name: Uri Sher  
  Title: Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
 

 

Dated: February 26, 2016

By: /s/ Eliezer Marmarosh  
  Name: Eliezer Marmarosh  
  Title: Director  

 

Dated: February 26, 2016

By: /s/ Alon Ostrovitzky    
  Name: Alon Ostrovitzky  
  Title: Director  

 

Dated: February 26, 2016

By: /s/ Judith Weingut    
  Name: Judith Weingut  
  Title: Director  

 

  98  
 

 

Exhibit Index

 

Exhibit
No.
  Description
3.1   English Translation of Certificate of Incorporation of Todos Medical Limited, dated April 22, 2010.
3.2   English Translation of Amended and Restated Articles of Association of Todos Medical Ltd.
3.3   English Translation of Form of Amended and Restated Articles of Association of Todos Medical Ltd. to be adopted by our general meeting prior to our ordinary shares being approved to trade on the OTCQB marketplace of OTC Link.
4.1   Form of Warrant.
5.1   Opinion of Dana Livneh-Zemer, Law Office, Israeli counsel to the Registrant, as to the validity of the ordinary shares (including consent).
10.1   Research and License Agreement with B.G. Negev Technologies and Applications Ltd. and Mor Research Applications Ltd., dated April 26, 2010, as amended June 25, 2012.
10.2   Employment Agreement, dated January 1, 2012, between Todos Medical Limited and Udi Zelig.
10.3   Employment Agreement, dated August 18, 2015, between Todos Medical Limited and Rami Zigdon.
10.4   Summary English Translation of Lease Agreement for Corporate Offices in Rehovot, Israel.
10.5   Share Purchase Agreement with D.P.H. Investments Ltd. and Group of Investors, dated October 7, 2014, as amended August 2015.
10.6   Loan Agreement with Yitzhak Ostrovitzky, dated September 29, 2015, as amended November 12, 2015.
10.7   Todos Medical Ltd. 2015 Israeli Share Option Plan.
10.8   Consulting Agreement with Iberica Investments LLC.
23.1   Consent of Fahn Kanne & Co. Grant Thornton Israel.
23.2   Consent of Dana Livneh-Zemer, Law Office (included in Exhibit 5.1).
24.1   Power of Attorney (included on the signature page of this registration statement).
99.1   Registrant’s Waiver Request and Representations under Item 8.A.4.

 

  99  

 

Exhibit 3.1

 

Ministry of Justice Register of Companies

 

State of Israel

The Companies Law, 1999

 

Certificate of Incorporation of a
Company

 

This is to certify that:

 

TODOS MEDICAL LTD .
Todos Medical Ltd .

 

has been incorporated and registered in accordance with the Companies Law as a limited liability company

 

22/04/2010

Chet Eiyar Ta'sha

 

Company Number 514437128

 

  [ Seal ]
  Aviva Rayer, Adv.
  in the name of Register of Companies

 

 

 

Exhibit 3.2

 

[Convenience Translation from Hebrew]

 

ARTICLES OF ASSOCIATION

 

OF

 

TODOS MEDICAL LTD.

 

Preamble

1. (a) In these Articles of Association, the following terms shall have the meaning appearing opposite them, unless another interpretation is expressly stated herein:

 

"Company"

Todos Medical Ltd.

 

The "Investor" D.P.H. Investments Ltd.
   

Office

 

The registered office of the Company at the relevant time.
Companies Law The Companies Law, 5759 – 1999, as the same shall be amended from time to time and the regulations promulgated thereunder from time to time.
   

Register of Shareholders

 

The Register of Shareholders that is to be kept pursuant to s ection 127 of the Companies Law.

 

"Members" or "Shareholder" or "Holders of Shares"

Shareholders of the Company as registered in the Register of Shareholders as holdings shares of the Company.

 

"Writing" In writing, typed, photographed, facsimiled, e-mailed or in any other way legible.
   
The "Articles" or "These Articles"

This Articles of Association, as shall be amended from time to time and in effect from time to time.

 

Person

Including corporation or other entity.

 

"Year" or "Month" Calendar Gregorian month.

 

(b) Subject to the this provision, in these Articles, and unless the context expressly requires some other interpretation, terms defined in the Companies Law, shall bear the meaning ascribed to them there and words in the singular shall include the plural and, vice versa; masculine terms shall include the feminine gender, and words indicating individuals shall include corporations.

 

(c) The titles of the Articles are for convenience only and are not binding and shall not affect the interpretation or any other purpose.

 

(d) any provision in these Articles that provides for a different arrangement, in whole or in part, than as prescribed under the Companies Law or the Companies Ordinance, as applicable, which can be conditioned, changed or added, whether in whole or in respect to particular matters or particular restrictions, by law, shall be regarded as conditioned the provision of the Companies Law or the Companies Ordinance, as applicable, even if the mere conditioning is not mentioned in the provision and even if it is stated in such provision (in this form or other) that its effect is subject to the applicable law.

 

     

 

 

(e) In the event of any inconsistency between a provision by law that cannot be conditioned, changed or amended, such provision shall prevail, without effecting the validity of these Articles or any provision thereof.

 

In interpreting any provision or examining its effectiveness, the interpretation shall be given to that provision which is most likely to achieve its purpose as appearing therefrom or as appearing from the other provisions included within these Articles.

 

(f) For the avoidance of doubt, these Articles replace and revoke any prior articles of association of the Company.

 

2. The vesting of the authorities of the organs of the Company shall be as detailed in the Companies Law and these Articles. Each organ shall have the ancillary authorities required for it to carry out its authorities.

 

Authority which was not given in these Articles or under the Companies Law, the board of directors is permitted to carry out.

 

Any act made without authorization or ultra vires, the relevant organ may ratify such act at a later time.

 

The Objects of the Company and Management of its Business .

 

3. The Company can engage in any lawful activity.

 

The Company may donate reasonable amounts to a worthy cause, even if such donations are not within the framework of business considerations. The board of directors is authorized to determine the donation amounts and the causes or type of causes to whom such donations will be made and the identity of the recipient of the donation.

 

Private Company and Limitations on Company

 

4. The Company is a private company, as defined in the Companies Law. The Company shall be restricted as follows:

 

4.1           the number of the Shareholders of the Company shall be limited to fifty (50). For the purposes of this provision, where two or more persons hold one or more shares in the Company jointly they shall be treated as a single Shareholder.

 

4.2           no invitation shall be issued to the public to subscribe for any shares or debentures or debenture stocks of the Company.

 

4.3 the right to transfer the shares of the Company shall be restricted as stated hereinafter;

 

     

 

 

Share Capital

 

5. The authorized share capital of the Company is NIS 10,000,000 divided into 990,000,000 Ordinary Shares of nominal value NIS 0.01 each (" Ordinary Shares ") and 10,000,000 Preferred Shares of nominal value NIS 0.01 each (" Preferred Shares ").

 

5.1 each Ordinary Share entitles its holder to the rights to receive notices of the general meetings, to participate and vote thereat, to receive dividends and to receive the surplus of assets upon liquidation.

 

5.2 each Preferred Share shall entitle its holder to receive the following rights:

 

5.2.1      the right to receive notices of the general meetings, to participate and vote thereat, to receive dividends and to receive the surplus of assets upon liquidation.

 

5.2.2      anti dilution right. Such right cannot be assigned upon sale of shares, whether for consideration or otherwise.

 

5.2.3      the right to appoint a director as details in section 74(b) below. This right cannot be assigned upon sale of the Preferred Share, whether for consideration or without.

 

It is clarified that each Preferred Share shall be automatically converted into ordinary share and shall be entitled to all the rights of the ordinary shares upon the occurrence of any of the following, the earlier of: (a) initial public offering of the securities of the Company or registration for trade of the Company's securities in Israel or abroad; (b) sale of all or substantially all of the assets of the Company; (c) merger, except for a merger in which the Company is the surviving entity; (d) sale of Preferred Share by its holder to any third party.

 

6. The liability of the Shareholders to the Company's debts is limited only to the par value of the shares unpaid for by them, unless it is determined that the issuance of the shares shall be for an amount higher than the par value and then the liability shall be restricted up to the sum as aforesaid and which has not been paid by the Shareholder, all in accordance with these Articles.

 

7. The Company may divide the share capital into types of shares. Consolidation or division of the share capital shall not be regarded as changed the rights of the shares so consolidated or divided.

 

8. The unissued share capital of the Company as well as shares repurchased by the Company shall be under the direction of the board of directors who may be able to issue them or grant them in any way that the board of directors deems fit. The board of directors can offer or issue shares to any third party subject to Section 41.5 below.

 

9. If in accordance with the conditions for the issuance of a share, the payment for such share, shall be in whole or in part, in installments, such payment shall be made when due to the Company by the person who is the registered holder of such shares at the time, or his successors by law.

 

10. Upon issuance of shares, the board of directors may differ in requirement from shareholders in respect of payment time and amounts.

 

11. Unless specified otherwise in these Articles or in the Companies Law, the Company shall be entitled to treat the registered shareholder of a shares as its absolute owner and accordingly, shall not be required to recognize any claim on an equitable basis or any other basis in regards to such share or any benefit of any third party, unless required by the court to do so.

 

     

 

 

Share Certificates

12. A share certificate shall carry the stamp or seal of the Company together with the signature of two directors or the signing of one director together with the chief executive officer, unless determined otherwise by the board of directors.

 

13. A Shareholder shall be entitled to receive from the Company, one certificate(s) that shall state the number of shares owned by him, their class and serial numbers and the amount paid on account of their par value.

 

14. Share certificate in the name of two or more holders shall be delivered to the shareholder named first at the Register of Shareholders in respect of joint ownership.

 

15. If a share certificate is defaced, lost or destroyed, it may be renewed on payment of such fee, if any, and on such terms, if any, as to evidence and indemnity as the board of directors think fit.

 

Calls on Shares .

 

16. The Board of Directors may, from time to time, as it in its discretion deems fit, make calls for payment upon Shareholders in respect of any sum that has not been paid up in respect of shares held by such Shareholders and which is not, pursuant to the terms of allotment or issuance of such shares or otherwise, payable at a fixed time. Each Shareholder shall pay the amount of every call so made upon him (and of each installment thereof if the same is payable in installments), to the person(s) and at the time(s) and place(s) designated by the Board of Directors, as any such time(s) may subsequently be extended or such person(s) or place(s) changed. Unless otherwise stipulated in the resolution of the Board of Directors (and in the notice referred to below), each payment in response to a call shall be deemed to constitute a pro rata payment on account of all the shares of the Shareholder making payment in respect of which such call was made.

 

17. Notice of any call for payment by a Shareholder shall be given in writing to such Shareholder not less than ten (10) business days prior to the time of payment fixed in such notice, and shall specify the time and place of payment, and the person to whom such payment is to be made. Prior to the time for any such payment fixed in a notice of a call given to a shareholder, the board of directors may, by notice in writing to such shareholder, revoke such call in whole or in part, extend the time fixed for payment of such call or designate a different place of payment or person to whom payment is to be made. Without derogating from the aforesaid, in the event of variance exceeding 10% of the monthly funding on the basis of the annual budget, prior notice of 20 business days shall be given.

 

18. Joint holders of a share shall be jointly and severally liable to pay all calls for payment in respect of such share and all interest payable thereon.

 

19. If pursuant to the terms of allotment or issuance of a share, or otherwise, an amount is made payable at a fixed time (whether on account of such share or by way of premium), such amount shall be payable at such time as if it were payable by virtue of a call made by the board of directors and for which notice was given, and the provisions of these Articles with regard to calls (and the nonpayment thereof) shall be applicable to such amount (and the non-payment thereof).

 

     

 

 

20. Any amount called for payment that is not paid when due shall bear interest from the date fixed for payment until actual payment, at such rate (not exceeding the then prevailing debitory rate charged by leading commercial banks in Israel) and payable at such time(s) as the board of directors may prescribe. However, the board of directors is entitled to waive payment of interest, in whole or in part.

 

21. With the consent of the Board of Directors any Shareholder may pay to the Company any amount not yet payable in respect of his shares, and the board of directors may approve the payment by the Company of interest on any such amount until the same would be payable if it had not been paid in advance, at such rate and time(s) as may be approved by the board of directors. The board of directors may at any time cause the Company to repay all or any part of the money so advanced, without premium or penalty.

 

Forfeiture and Surrender .

 

22. If any Shareholder fails to pay an amount payable by virtue of a call, or interest thereon as provided for in accordance with these Articles, on or before the day fixed for payment of the same, the board of directors may at any time after the day fixed for such payment, so long as such amount or any portion thereof remains unpaid, to notify such Shareholder and demand their payment including interest accrued thereon and all expenses of Company for such lack of payment.

 

23. The notice shall determine a day (which shall be at least 20 business days following the notice date) and place or places where such demand for payment requires to be settled. The Notice shall also specify that in the event of non payment in such date and place as mentioned in the notice, the relevant Shares shall be forfeited.

 

24. In the event that the requirements contained in the notice have not been fulfilled then, at any time thereafter, the board of directors may forfeit the shares subject matter of the notice. Such forfeiture shall include all dividends declared in respect of the shares so forfeited and not paid for prior to the forfeiture.

 

25. Any share forfeited or surrendered as provided herein shall become the property of the Company, and the same, subject to the provisions of these Articles, may be sold, re-allotted or otherwise disposed of, as the board of directors deems fit.

 

26. Shares forfeited and unissued shall be redeemed sharers and shall not have any rights for as long as they remain with the Company.

 

27. The board of directors may, at any time prior to reissuance or sale of forfeited share to annul its forfeiture under the conditions determined by the board of directors, subject to the Companies Law.

 

28. Any Shareholder whose shares have been forfeited shall cease to be a Shareholder in respect of the forfeited or surrendered shares, but shall nonetheless be liable to pay and shall promptly pay, to the Company all calls, interest and expenses owing upon or in respect of such shares at the time of forfeiture or surrender, together with interest thereon from the time of forfeiture or surrender until actual payment, unless the forfeited shares were sold and the Company received their full consideration owed by such shareholder including costs related to such sale. The board of directors shall be permitted (but not obliged) to undertake actions for payment of such amounts if determined necessary.

 

     

 

 

29. The provisions of these Articles in regards to forfeiture of shares shall apply to cases of non payment of a known sum that according to the conditions of execution of the share deed or the issuance of shares was due for payment on a known date, whether on account of the share or premium as though such amount was due and payable under a demand of payment lawfully notified.

 

30. The Company shall have a right of first lien and pledge first in rank on all registered shares in the name of a shareholder and on the income from their sale for the removal of all liabilities and obligations of the shareholder whether by himself or together with anyone else, to the Company, whether the time of payment of such debts or time of fulfillment of such obligations arrived or yet to arrive, from sources of debts and no right under law or equity shall be created over any share, except as stipulated in section 12 above. The lien and pledge shall apply on all dividends declared from time to time over those shares unless otherwise resolved by the Board.

 

31. For the purpose of exercise of the pledge, the Board may sell, as it deems required, the shares that the Company has a lien and/or pledge rights over, provided that any amount was due in respect of which such right exists. However, no share may be sold unless a period of 10 days shall expire from the date that the shareholder or the executor of his will was notified in writing of the Company's intention to sell the share and such shareholder or executor of the will did not pay such debts or fulfilled the obligation within the 10 days period.

 

32. The net income of such sale, after payment of expenses related to the sale, shall be used to pay such shareholder's debts and obligations (including the debts, obligations, commitment and engagement that their due date has not arrived) an the remainder (if applicable) shall be paid to him or to the executor of his will or to whom he shall pass the right to.

 

33. In case of a sale after forfeiture or the execution of a lien and/or pledge using the powers granted above, the Board may nominate a person to sign a transfer deed of the share so sold and to allow so that the buyer will be recorded at the shareholders registry as the owner of the shares sold and once his name is so recorded in the registry in respect of these shares, the validity of the sale shall not be undermined by anyone and sole remedy of any person claiming to be damaged by the sale shall be only for damages against the company alone.

 

Transfer of Shares

34. (a) Transfer of shares shall not be registered at the Registry of Shareholders unless the Company is delivered a share transfer deed signed by the transferee and transferor, in person or by proxy. Transferor shall be regarded as the owner of the shares until the transferee is registered as a shareholder in the Registry of Shareholders in respect of the transferred share.

 

(b) Share transfer deed shall be made as follows or in an similar way or an ordinary or as otherwise accepted by the board of directors: I, __________ of ______[the transferor] for consideration of ______ NIS paid by ____ of __________ ("Transferee"), hereby transfers to the Transferee ___ shares ____ of ______ NIS each marked ___ until ______ of Company _________ Ltd. to be held by transferee, its administrators, executors, and assigns, under the same terms that we held the same on the date of this Transfer Deed and I transferee agree to receive the shares under the aforementioned conditions.

 

In witness whereof, we signed on this __ day of ____, year _____

 

____________   ____________
Transferee   Transferor

 

     

 

  

35. (a) All transfer of shares that have not been fully paid up, shall be subject to the approval of the board of directors who shall be entitled in its sole discretion and without giving reason to refuse to permit the transfer of shares not paid up.

 

In the event that the board of directors refused the transfer of shares, notice shall be given to the Transferor within 30 days of receipt of the share transfer deed.

 

(b) fully paid up shares shall be transferable subject to fulfillment of Section 34 above and 36 below and subject to the board of directors which shall not refuse such transfer of fully paid up shares for unreasonable reason.

 

(c) the board of directors can delay registration of transfer for the last 14 days prior to every annual meeting and additional periods as determined by the board of directors provided that the accumulated periods of delay will not exceed 45 days per annum.

 

(d) The Company shall advise the shareholders on the closure of the Registry of Shareholders in accordance with these Articles regarding notification of shareholders.

 

(e) The Company shall be entitled to demand reasonable pay for expenses associated with recording transfers, in an amount determined by the board of directors.

 

36. Each transfer deed shall be delivered to the Office or any other place determined by the board of directors for registration together with the transferred share certificates, and any other proof of the transferor's title that the board of directors may require. The deed of transfer that shall have been registered or a photostat copy thereof, as shall be decided by the board of directors, shall remain with the Company.

 

37. Upon the death of a Shareholder, the remaining partners (in the event that the deceased was a partner in a share) or the administrators or executors or heirs of the deceased (in the event the deceased was the sole holder of the share or was the only one of the joint holders of the share to remain alive) shall be recognized by the Company as the sole holders of any title to the shares of the deceased. However, nothing aforesaid shall release the estate of a joint holder of a share from any obligation to the Company with respect to the share that he held in partnership.

38.

(a) Any person becoming entitled to a share as a consequence of the death or bankruptcy or liquidation of a Shareholder shall, upon such evidence being produced as may from time to time be required by the board of directors, have the right either to be registered as a Shareholder in respect of the share upon the consent of the board of directors, not to be unreasonably withheld, or, instead of being registered himself, to transfer such share to another person, subject to the provisions contained in these Articles with respect to transfers.

 

     

 

 

(b) a receiver, liquidator or similar official appointed to wind up, dissolve or otherwise liquidate a corporate shareholder, and such trustee, manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceeding with respect to a Shareholder or its properties, upon producing such evidence as the board of directors may deem sufficient as to his authority to act in such capacity or under this section, shall with the consent of the board of directors (which the board of directors may grant or refuse in its absolute discretion), be registered as a Shareholder in respect of such shares, or may, subject to the regulations as to transfer contained in these Articles, transfer such shares.

 

39. A person becoming entitled to a share because of the death of a Shareholder shall be entitled to receive, and to give receipts for, dividends or other payments paid with respect to the share.

 

40. Company will be entitled to destroy share transfer deeds following the expiration of 6 years from the date of registration and share certificates cancelled after 3 years from their date of cancellation and a presumption shall be that all such share transfer deeds and shares destroyed were in full force and effect and that the transfer, annulment and registration were validly made.

 

41.

 

41.1 Deleted.

 

41.2 Deleted.

 

41.3 Forced Sale .

 

At any time prior to the date of approval of registration of the Company's shares for trade in Israel or abroad, if the holders of at least seventy five percent (75%) of the issued share capital of the Company (on a fully diluted basis) (the " Offerees ") accept a an offer from a third party that is not related to such Offerees or the Company to purchase all of the Company’s issued and outstanding share capital under the terms detailed in the offer and accepted such offer, then all remaining Shareholders undertake to sell their shares to the purchaser under the terms detailed in the offer and to sign all document required in order to sale their shares to the purchaser and give the board of directors power of attorney, irrevocable and unconditional, to sign in their place and name all document required in connection with the transfer of shares pursuant to this Section.

 

41.4 Preemptive Right

 

41.4.1        At any time prior to the date of approval of registration of the Company's shares for trade in Israel or abroad or offering of the securities of the Company to the public in Israel or abroad, as applicable, any issuance of securities of the Company, including any shares of any kind, options, bonds, convertible bonds and/or any other security of the Company convertible to shares of the Company or the grant of any right to purchase shares of the Company or convertible securities (" Securities ") shall entitle each shareholder (" Offerees ") a right to purchase such Securities under the same terms as offered, pro rata to the shares held by such shareholder to the outstanding issued share capital prior to the issuance.

 

41.4.2        In the event that any of the Offerees wishes to accept the offer in full, such Offeree shall advise the Company in writing of his acceptance (" Acceptance Notice ") within 7 days from the date such offer was given to him.

 

     

 

 

41.4.3        No Acceptance Notice were received for all Securities offered, the Company will reoffer the Securities for which no Acceptance Notice was received only to those Offerees that returned Acceptance Notice for all Securities offered to them in the prior offer pro-rata to all Offerees (that returned Acceptance Notices), and so on, until no further Acceptance Notices are received for any offer or until such time as Acceptance Notices are received for all Securities offered. The provisions of this section 41.5 shall apply to further offers made under this section.

 

41.4.4        Acceptance Notices were received for all offered Securities, the Company shall transfer to the shareholders delivered the Acceptance Notices, against payment of the consideration as detailed in the Acceptance Notice, within seven (7) days from the date of last Acceptance Notice and payment therefor, the offered Securities, on the basis of final quantities per the Acceptance Notices, free and clear of all pledges, encumbrances, lien or third party rights and they shall be registered in the name of the transferee at the books of the Company.

 

41.4.5        No Acceptance Notices received for all the offered Securities as aforesaid, the Company shall be entitled to, within 15 days from the last date of receipt of Acceptance Notice after the last offer is made as aforesaid to act as follows:

 

41.4.4.1        to transfer to the Offerees that gave the Acceptance Notices the number of Securities for which such Acceptance Notice were given, free and clear of all pledges, encumbrances, lien or third party rights and the remaining Securities to the third party.

 

41.4.4.2        to transfer all Securities offered to the third party, as if no Acceptance Notices were received from any Offerees.

 

All subject that the offered Securities so transferred to such third party shall be transferred within 15 days mentioned in section 41.5.5 and that the third party transfer shall be made on the terms detailed in the offeres to the Offerees as aforesaid.

 

  41.4.6 In the event that the 15 days period mentioned in section 41.5. expired, the Securities offered shall be reoffered in accordance with Section 41.5.

 

  41.4.7 Shareholders' rights pursuant to this Section shall not apply in respect of issuance of shares or securities convertible to shares to employees, consultants and office holders or an investor which the Board of Directors determined to be deemed a strategic investor.

 

Bearer Shares

 

42. The Company shall not issue bearer shares.

 

Redeemable shares

 

43. The Company may, subject to the law, issue redeemable shares and may redeem them.

 

Capital Changes

 

44. The Company may, from time to time, by resolution of its Shareholders, whether or not all the shares then authorized have been issued, and whether or not all the shares issued have been called up for payment, increase its authorized share capital. Any such increase shall be in such amount and shall be divided into shares of such nominal amounts, with such rights and preferences but subject to such restrictions, as such resolution shall provide.

 

     

 

 

45. Except to the extent otherwise provided in such resolution, any new shares included in the authorized share capital increased as aforesaid shall be subject to all the provisions of these Articles which are applicable to shares included in the existing share capital, without regard to class (and, if such new shares are of the same class as a class of shares included in the existing share capital, to all of the provisions that are applicable to shares of such class included in the existing share capital).

 

46. Without derogating from any other right by law or these Articles, and without derogating from sections 44-45 above, the Company may, from time to time, by a resolution of its Shareholders –

 

(a) consolidate and divide all or any part of its issued or unissued authorized share capital into shares of a per share nominal value that is greater than the per share nominal value of its existing shares;
(b) subdivide its shares (issued or unissued) or any of them into shares of lesser nominal value than is fixed by these Articles;
(c) cancel any shares that, at the date of the adoption of such resolution, have not been purchased or subscribed for; or
(d) reduce its share capital in any manner, and with and subject to any incident authorized, and consent required, by law.

 

47. For the purpose of executing any resolution according to Section 46 above, the board of directors may settle any dispute that may arise with regard thereto as it deems fit and with respect to any consolidation of issued shares into shares that may result in fractional shares, the board of directors shall be permitted:

 

(a) To sell all the fractions and for such purpose to appoint a trustee in the name of which the share certificates that include the fractions sold and the consideration received less any fees and expense shall be distributed to the entitled; or
(b) To allot, in contemplation of or subsequent to such consolidation or other action, shares or fractional shares sufficient to preclude or remove fractional share holdings and in connection with any such consolidation or other action that may result in fractional shares; or
(c) To determine that shareholders shall not be entitled to receive a consolidated share for a consolidated fractional share, resulted from the consolidation of half or less than the number of shares that the consolidation thereof creates one consolidated share and entitled to receive consolidated share for a fraction of consolidated share resulting from the consolidation of more than half of the shares that their consolidation creates one consolidated share.

 

If an act in accordance with (b) or (c) above shall require allotment of additional shares then their payment shall be made by way of payment of bonus shares. Consolidation and split as aforesaid shall not be regarded as changing the rights of the shares.

 

     

 

 

Allotment of Shares and other Securities .

48. Subject to Section 8 above, the authorized but unissued shares shall be under the control of the board of directors, who shall have the power to allot, issue or otherwise dispose such shares to such persons, at such times, on such terms and conditions, and either at par, at a premium or, subject to the provisions of the Companies Law, at a discount or with payment of commission, all as the board of directors deems fit; and, the board of directors shall also have the power to give any person the option to acquire from the Company any shares, either at nominal value, at a premium or, subject to the provisions of the Companies Law, at a discount or with payment of commission, for such period and for such consideration as the board of directors deems fit.

 

49. Without derogating from the aforesaid, subject to the provisions of the companies law and these Articles, the Board may determine, that the consideration for the shares shall be paid in cash or otherwise including in securities or in any other way, at its sole discretion, whether in units, series all subject to the terms and dates as determined by the Board in its sole discretion.

 

General Meetings

50. A general meeting shall be held once in every year at such place and time, not being more than fifteen (15) months after the holding of the last preceding general meeting, as may be prescribed by the board of directors. The above-mentioned general meetings shall be called an Ordinary Meeting. All other general meetings shall be called Extraordinary General Meetings.

 

51. Pursuant to Section 50 of the Companies Law, the general meeting is entitled to receive the authorities vested in another organ and to determine that the authorities of the general manager of the Company shall vest in the board of directors, for a particular matter or for a particular time.

 

In the event that the general meeting retained authorities vested pursuant to the Companies Law or these Articles in the board of directors, the shareholders shall bear all the duties, rights and responsibilities applicable to the directors for the operation of such authorities as per section 50(B) of the Companies Law.

 

52. The Board of Directors may at their discretion, and upon a demand in writing as provided for in Sections 63 of the Companies Law shall, convene an Extraordinary General Meeting.

 

53. The Company shall furnish notices of general meetings to its shareholders according to law. Subject to the aforesaid or the regulation under section 69(a) of the Companies Law, notices shall be delivered to every shareholder registered at the Registry of Shareholders.

 

54. Any flaw in good faith in convening the general meeting or managing thereof, including without derogating the aforesaid, none delivery of notice of a meeting to those entitled to or none receipt by them or any such flaw arising out of non fulfilment of any provision or condition as detailed by law or these Articles, including means of convening general meetings or management thereof shall disqualify the decisions made by the general meeting and will not affect the discussion conducted therein, subject to the law.

 

Proceedings at the General Meetings .

 

55. No deliberation shall be commenced with respect to any matter at a General Meeting unless a quorum is present at the time when the General Meeting proceeds to deliberate. In the General Meeting, at least one or more Shareholders who hold or represent together at least sixty percent (60%) of the voting rights of the issued share capital of the Company present personally or by proxy, shall be deemed to be a quorum. Shareholder acting as proxy of any other shareholder shall be regarded as two shareholders or more, i.e himself in addition to the number of shareholder he represents.

 

     

 

 

56. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of the Shareholders, shall be dissolved; in any other case, it shall stand adjourned to the same day in the next week at the same place and time, or any other day, hour and place as may be determined. If a quorum is not present at the second meeting within half an hour from the time appointed for the meeting, any number of Shareholders present personally or by proxy shall be a quorum, and shall be entitled to deliberate and to resolve in respect of the matters for which the meeting was convened.

 

57. The Chairman of the board shall chair the General Meeting. If the Chairman is not present within 15 minutes from the time determined for the commencement of the meeting, or shall be reluctant to chair the meeting, the other shareholders present at the meeting shall elect one of them to preside over the meeting. The chairman of the General Meeting shall not have a casting or additional vote.

 

58. All resolution shall be made by a count of votes.

 

59. Resolution of the general meeting for a change of these Articles as well as merger approval as defined by the Companies Law, shall be adopted by a majority of shareholders present, in person or by proxy participating at the vote (abstaining votes disregarded).

 

 

60. The chairman's declaration of a resolution was adopted unanimously or in a particular majority or rejected shall be final, and an entry to that effect in the minute book of the Company shall be prima facie evidence of the fact.

 

61. The chairman may postpone the meeting, or any resolution to be adopted therein as detailed in the agenda from time to time and he is obliged to do so under the request of the general meeting, however the adjourned meeting shall not discuss any other matter other than the matter in respect of which a resolution was not adopted in the former meeting. No notice is required to be given on the adjourned meeting and the matters on the agenda at such adjourned meeting unless otherwise required by the Companies Law.

 

62. Resolution agreed upon in writing by all shareholders of the Company shall have the same effect as though adopted by a general meeting convened.

 

Shareholders Votes

63. Every shareholder, whether present in person or by an authorized representative shall have one vote for each share he owns.

 

64. A shareholder may vote in person or through legal representatives also fall under only part of his shares and to vote differently under each part of the shares.

 

 

65. A corporation which is a shareholder entitled to authorize by decision of its authorized body, any person that it shall deem fit to represent it at the general meeting of the Company. The representative appointed as aforesaid shall be entitled to perform on behalf of the corporation he represents all the powers that the corporation itself might perform as if it were a person.

 

66. A shareholder that is a minor or that a competent court declared to be legally incompetent may only vote through his legal guardian and such guardian may vote by proxy.

 

     

 

 

67. In the case of joint holders of a share in the vote of the head of the partners, given in person or by proxy, and for this purpose shall question of who is the head of the partners shall be determined based on the order in which names are registered in the Register of Shareholders.

 

68. Members can vote in person or by proxy or in the case of a corporation - by a representative pursuant to Section 65 above.

 

69. Each letter of appointment to nominee or power of attorney shall be signed by the appointor or by his authorized representatives that are authorized in writing or if the appointor is a corporation, such appointment shall be signed in his signature or in the signature of his power of attorney and shall be deposited at the Office not less than 48 hours prior to the date of the meeting. The board of directors shall be entitled to demand that any letter of appointment be authenticated by a notary, lawyer or accountant. Chairman of the meeting may waive this requirement for all participants for the meeting and receive letters of appointment or power of attorney by until the time of commencement of the meeting.

 

70. No member shall not be entitled to vote at a general meeting unless he paid the payment requests and all monies due in respect of his shares.

 

71. Each letter of appointment to a nominee or proxy, whether for a specific meeting or otherwise shall made as follows: I _______ of ________, a shareholder in _________, hereby appoint Mr. ________ of -_________ or in his absence, Mr. ________ of _________ or in his absence, Mr. _______ of ________, to vote for me and on my behalf in respect of ____ shares class ______ held by , at the general meeting (annual / special /class meeting) of the Company to be held on ___ of ____month of ____ year and at any adjourned meeting thereof .

 

IN WITNESS WHEREOF I have signed on this _ __ of month of _____ of _______

 

72. Voting in accordance with the provisions of a document appointing a proxy shall be in effect notwithstanding the death of the appointor, or cancellation of the power of attorney or transfer of shares for which such vote was cast, unless a written notice of death, cancellation or transfer, shall have been received by the Company or by the chairman of the meeting before the vote. It is clarified that the provisions of these Articles shall apply, mutatis mutandis, to the convening and proceedings of any class meetings.

 

The Board of Directors

 

73. The number of directors in the Company shall not be less than one director and not more than five. Corporation shall be eligible to act as a director in the Company subject to the provisions of the Companies Law.

74.

74.1               Board members shall be appointed or removed from office or replaced as follows:

 

(a) Holders of ordinary shares (excluding the Investor) will be entitled to appoint and dismiss 2 (two) directors.
(b) Holders of Preferred Shares, as long as they hold at least 5% of the issued share capital of the Company, shall be entitled to appoint and dismiss one director.
(c) As long as the Investor holds shares in the Company, the Investor will be entitled to appoint and dismiss one director (" Investor's Director "), and following such time as the Investor will hold at least 10% of the issued share capital of the Company, the Investor will be entitled to appoint and dismiss 2 (two) directors.

 

     

 

 

74.2    Appointment and dismissal (or replacement) of a director, will be made by written notice of the appointing shareholder, which shall be sent to the secretary of the Company or to the chairman of the board of directors, to the Company's registered address or at a meeting of the board of directors, and will enter into force, subject to the intent otherwise specified in the notice, upon its transmittal.

 

75. The office of a director shall be vacated, ipso facto, upon the occurrence of any of the following, subject to the Companies Law:

 

(a)         such Director's death and in the event that a director is a corporation – upon its liquidation;

 

(b)         such Director becomes legally incompetent and/or of unsound mind and/or demented.

 

(c)         if such Director is an individual, such Director is declared bankrupt or settled with his creditors;

 

(d)         if resigned by written notice to the Company;

 

(e)         if removed by the resolution of the general meeting

 

(f)         if convicted of a crime as described in Section 232 of the Companies Law;

 

(g)         if removed by a court of law in accordance with Section 233 or the Companies Law;

 

76. Director who has ceased to hold office may be re-appointed.

 

77.

(a) Every director may, subject to the provisions of the Companies Law, appoint any person as an alternate director. The appointment or termination of appointment of an alternate director shall be made in writing by the appointing director.

 

(b) Alternate director shall have, subject to the provisions of the letter of appointment, all of the powers vested in the director that such alternate director is replacing, except the power to appoint an alternate director to himself.

 

(c) An alternate director shall become vacant position automatically if dismissed by the director who appointed him or if the office of the director who appointed him become vacant for any reason, or if the alternate director is subject to one of the circumstances described in (a), (b), (c), (d), (f) or (g) of Section 75 above.

 

78. Deleted.

 

79. If no director is appointed or if the position become vacant, the remaining board members will be allowed to operate in any matter, so long as their number is not less than the minimum number of members of the board of directors in accordance with Section 73 above.

 

     

 

 

80. A director will not be required to hold shares.

 

81. No director will not be disqualified for office as director due to serving another role in the Company or being entitled to profits in the Company or from or in any other corporation that the Company has interest in, or has its other benefits or from entering into the contract or in any other way, whether as seller or buyer, service provider, independent contractor, employee or any other status, however, it is hereby declared such director is subject to disclosure obligation pursuant to the Companies Law.

 

Subject to the provisions of the Companies Law, a general notice of a controlling shareholder or officer of the Company that he is an interested party in any other corporation and the appointment of a controlling shareholder or officer of the Company to serve for the Company as a director or officer of any other corporation will be considered an advance notice of the personal interest of the controlling shareholder in every future engagement with the other corporation.

 

82. Terms of office of directors, including terms of employment as officers or in any other position, including salary and reimbursement for reasonable expenses related to the fulfillment of their duties, shall be determined in accordance with the Companies Law.

 

Actions of the Board

 

83. The Board can convene and adjourn its meetings and organize its proceedings and discussions. Until otherwise decided by the board of directors, the majority of board members serving at the time and present at the board meeting in person or by their alternates, shall constitute a quorum at board meetings.

 

If within half an hour from the time set for the board meeting there will be no quorum, the meeting shall be postponed to the next business day, same time and place, without any obligation to notify the directors, or any other day and/or time and/or place, as the Chairman of the board of directors shall advise and if at the adjourned meeting no quorum is present within half an hour after the scheduled time of commencement of that meeting, the meeting will take place with any number of present participants who will be allowed to discuss the matters on the agenda for which such meeting was convened.

 

84. The board of directors will convene a meeting as required by the Company from time to time and at least once a year. Chairman of the board or any two other directors may at any time call a meeting of the board of directors.

 

85. (a)   Any notice of a meeting of the Board shall be given to the directors by fax or e-mail provided that the notice shall be given at least seven (7) days before the time set for a meeting , unless at least a majority of the directors agreed to that are the same as in Israel on shorter notice.

(b) Director absent from Israel, during such days of absence shall not be entitled to receive notice of convening such a meeting, but the message will be given to his alternative (if exists).

 

(c) If inadvertently a notice was not delivered to a member of the Board or an alternative director concerning the meeting, such omission shall not affect the validity of any decision taken at that meeting.

(d) The Board may convene meeting without notice subject to the consent of all the directors or their substitutes.

 

     

 

 

86. Each Director shall have one vote. Matters raised at meetings of the Board will be decided by a majority vote.

 

87. Chairman of the Board shall be elected by the board and will chair all Board meetings. If there no chairman exist or if not present following 15 minutes after the time scheduled a meeting or does not want to preside, the present directors will elect one of them to serve as Chairman.

 

88. Chairman of the Board of Directors will have an additional or casting vote.

 

89. Any meeting of the Board of Directors which a quorum is present shall have the authority to hold all the powers, powers of attorney and discretion at the same time by the Board of Directors or operated by it.

 

90. The Board of Directors may hold meetings using any means of communication, provided that all the directors participants can hear each other simultaneously.

 

91. The Board is authorized to make decisions even without actually convening, provided that all the directors entitled to participate in the discussion and vote on the matter put to the vote have agreed not to convene the same matter. The resolutions shall be adopted by an ordinary majority of votes. In such case minutes shall be taken, including the decision not to convene in person and shall be signed by Chairman of the Board. Such minutes shall be deemed minutes of a meeting convened.

 

92. Subject to the provisions of the Companies Law, the board could deliver, transmit and/or delegate its authority to committees consisting of a member or members of the Board as it sees fit and may from time to time to revoke such decision.

 

Each committee so formed when exercising its powers must follow all decisions and conditions to be determined by the Board. Meetings and proceedings of any such committee, consisting of two or more members, will be conducted according to these Articles similarly to the Board, mutatis mutandis, and subject to the instructions given by the Board under these Articles.

 

Notwithstanding the foregoing, the Board is not entitled to delegate to a committee of the Board matters specified in section 112 of the Companies Law.

 

In addition, the Board may decide to set up committees which will be composed of members that are not members of the Board, provided that their role will only be to advise or recommend. The Board may not delegate its authorities to any committee composed of members that are not members of the Board.

 

93. All actions taken by the Board or by a committee of the Board by any person serving as a director, shall be valid even if it is later discovered that there was some defect in the appointment of directors or members of the Committee, or all or any of them were disqualified, have been appointed each of them law, and if he had the necessary qualifications to be a director or member of the said committee.

 

Powers of the Board

94. The Board of Directors shall have all the powers and the powers to him under these regulations, in accordance with the Companies Law and in accordance with any law.

 

     

 

 

95. Without derogating from the provisions of these Articles, the Board shall outline the Company's policy and supervise the performance of the functions and operations general manager, including all the powers vested in him as provided in section 92 of the Companies Law.

 

96. The Board may decide, that the powers granted to the general manager will be transferred to its authority, whether for a specific matter or for a period of time. Without limiting the foregoing, the Board may instruct the general manager on how to act on a certain matter. If the general manager did not carry out the instruction, the Board may exercise its power to carry out such instruction. If the general manager is unable to exercise his powers, the Board may exercise them in his stead.

 

Powers to borrow

  97.  

(a) The board of directors may from time to time, at its sole discretion, accept, borrow or guarantee receipt of any sum or sums of money or other benefits, including the provision of guarantees and/or guarantees received by the Company or by other entities.

 

(b) The board of directors may secure the repayment of any sum or such amounts in the same manner and on the same dates and conditions as it deems fit, and particularly by the issuance of letters of guarantee, bond, pledge, lien (fixed or otherwise), mortgage and/or any other security on the property the Company, in whole or in part, present or future including unpaid share capital required for payment and share capital called but not yet paid.

 

General Manager

 

98. The Board may appoint from time to time one or more persons (whether a director or not), as general manager or managers (hereinafter - " the General Manager "), whether for a fixed period or indefinitely and from time to time (considering the terms of engagement with him or them and the Company) to relieve him or them from their duties and appoint another in his or their place.

 

99. The remuneration of the General Manager shall be determined from time to time (considering the terms of engagement between him and the Company) by the board of directors and can be either by way of a fixed salary and benefits and/or commission on profits and/or revenues of the Company or of any company other company in which the Company is interested and/or by participation in such profits and/or by granting securities or right to acquire same and/or in any other way.

 

100. The General Manager is responsible for managing the Company's ongoing operations within the framework of the policy established by the board of directions and subject to its guidelines.

 

The General Manager shall have all powers of management and execution that were not granted by the Companies Law or these Articles to any other organ of the Company, and he will be subject to supervision by the board of directors.

 

101. General Manager may, with the approval of the board of directors, delegate to his inferior any of his powers, which approval may be general and in advance.

 

     

 

 

102. Subject to the provisions of the Companies Law, the board of directors may from time to time to give and/or delegated to the General Manager, the powers granted to it under these regulations.

 

103. Appointment and dismissal of officers, who are members of the board of directors or the General Manager and the terms of their tenure shall be determined by the General Manager as long as the board of directors does not otherwise determine.

 

Local administrations

104. The board of directors may make arrangement from time to time for the management of the Company's affairs in any particular place, whether in Israel or abroad, as it sees fit.

 

105. The board of directors may at any time and from time to time establish all the local management or local agency, to manage the Company's business in some certain places, in Israel or abroad and will be able to appoint any person to be a member of the local management or any officer or agent and will be able to determine their fees. The board of directors will be able to from time to time and at any time to disclose to any person appointed that all power, authority and judgment and it may empower any person is used at the same time as a member of local management to continue in his post despite what job became available there, and any such appointment or power of attorney that could be done under the same conditions the board will and the board could fit at any time dismiss any person appointed to and cancel any such power of attorney or change.

 

Register of shareholders and register of other securities of the Company

106. The Company shall keep a register of shareholders and substantial shareholders, in accordance with the Companies Law.

 

The register of shareholders shall be prima facie evidence as to the correctness of its content. In case of any discrepancy between the contents of the register of shareholders and the share certificate, the evidentiary value of the registry shall prevail over the evidentiary value of the share certificate.

 

The Company may close the register of shareholders as well as any prescription or another note managed or maintained by the Company (whether by virtue of any law or by virtue of an agreement or the choice of the Company) in connection with the Company's securities, as applicable, for a period or periods that shall not exceed 30 days per year.

 

Additional Registry

107. The Company will hold a register of shareholders everywhere outside of Israel as well as the Board deems appropriate, subject to the requirements of the law, Board of Directors may from time to time make regulations and change them, as it deems appropriate, for holding any register of shareholders.

 

Minutes

108. The Company shall keep a register of minutes of board meetings and general meetings, which are recorded correctly in the books. Minutes of general meetings, signed by chairman of the meeting shall serve as prima facie evidence to its content. Minutes of board meeting signed by the director who presided over the meeting shall serve as prima facie evidence as to its content.

 

     

 

 

Signatory rights

109. The Board of Directors may designate any person or persons (even if they are not directors) to act and to sign in the name of the Company, and the acts and signature of such person shall bind the Company, insofar as such person has acted and signed within the limits of his authority.

 

Power of Attorney

110. Subject to the provisions of the Companies Law, the Board may at any time, empower each person to be the representative of the Company for the same purposes and with the same powers and discretion, for the same period and subject to the same conditions, and all as the Board may deem appropriate. The Board of Directors may grant that person, among other things, the authority to delegate to another, wholly or partially, the powers, privileges and discretions vested in him.

 

Dividends, foundations and capitalization of funds and earnings

 

111. The Board may, prior to deciding on the distribution of dividends, as stated in the articles below, set aside any amounts from earnings, as it sees fit, to a general fund or reserve fund for dividend distribution, distribution of bonus shares, the purchase of securities of the Company or any other purpose, as determined by the board of directors at its discretion.

 

112. Until such time as the aforementioned funds are used, the Board may invest the amounts set aside as aforesaid and monetary funds, in any investment as it sees fit, handle these investments, change them or to use them and it may divide the reserve fund into special funds, and use any fund or part thereof for the purpose of the Company's business, without having to keep separate from the rest of the Company's assets, all at the discretion of the Board of Directors and under terms to be set.

 

113. Subject to the provisions of the Companies Law, the Board may decide on the distribution of the as defined in the Companies Law, including dividend distribution, the purchase of securities of the Company and distribution that does not meet the profit test. The Board of Directors decides on the distribution of dividends may decide that the dividend will be paid, in whole or in part, in cash or by way of distribution of assets in kind, including in securities or otherwise, in its discretion.

 

Unless the Board decided otherwise, the Company will pay no interest or linkage differentials on dividends, including dividends paid after the date set for such payment for any reason.

 

114. (a) Subject to the provisions of the Companies Law, the Board may decide on the distribution of bonus shares and capitalized against which the share capital amounts from sources permitted under the Companies Law.

 

(b) bonus shares allotted under this Regulation shall be deemed fully paid up shares.

 

115. The Board of Directors when deciding on the allocation of bonus shares, may decide that the Company will move to a special fund intended for the distribution of bonus shares in the future, such amount sufficient to turning it into share capital in order to issue to whom at that time would be any reason has the right to acquire shares in the Company (including rights exercisable only upon later), bonus shares which were afforded to him, if he had exercised the right to purchase shares prior to the effective date for the right to receive bonus shares (in this regulation - "Effective Date"). If after the Effective Date such holder of a right will exercise his right to acquire the shares or part thereof, the Company will issue him the bonus shares, which were due to him if he had exercised prior to the Effective Date for the right to acquire the shares acquired by practice, by converting the appropriate share capital. Bonus shares will entitle their owners to participate in the distribution of additional bonus shares will be distributed after the Effective Date. For the purpose of determining the amount to be transferred to a special fund in question, any amount transferred to this fund in respect of earlier distributions of bonus shares, shall be capitalized and allocated from shares entitling the holders the right to purchase shares, to bonus shares.

 

     

 

 

116. Subject to the rights attached to the shares issued in the Company and the provisions of these Articles, dividends or bonus shares, will be distributed to holders of ordinary shares in proportion to the nominal value of each share, regardless of any premium paid thereon.

 

117. For the purpose of executing a resolution for dividend distribution or allotment of bonus shares, the Board of Directors may:

 

117.1.                at its discretion settle any difficulty arising in connection therewith and to take any steps it sees fit to overcome this difficulty.

 

117.2.                to issue certificates for fractional shares or decide fragments or fractions less than a certain amount to be determined by the Board of Directors, will not be taken into account to adjust the rights of the shareholders or sell fractional shares and pay the proceeds (net) those entitled to them.

 

117.3.                to authorize any person to sign on behalf of shareholders in any contract or other document is necessary in order to give effect to the allocation and/or distribution, including as provided in section 291 of the Companies Law.

 

117.4.                to determine the value of certain assets to be distributed and decide that payments to shareholders will be paid in cash based on the value set.

 

117.5.                to provide cash or certain assets to trustees for the benefit of those who are entitled to them, as the Board deems useful. Every action made ​​by the trustees and any agreement between the Company and the trustees will apply and bind the above.

 

117.6.                to make some other arrangement is necessary in the opinion of the Board to optimize the allocation, or distribution, as applicable.

 

118. The Board of Directors may withhold any dividend or bonus shares or rights to other benefits in respect of the share consideration set for it, in whole or in part, is not paid to the Company, and to charge all such sum or proceeds received from the sale of any bonus shares or rights other benefit, at the expense of the debts or liabilities for the stock in question, however, whether the said share exclusively owned by the shareholder debtor and whether jointly with other shareholders.

 

119. The Board of Directors may withhold any dividend or bonus shares or other benefits in respect of a share for which a person is entitled to be registered as the register or entitled to transfer, to be recorded the same person as its owner of the stock or has transferred illegally , as applicable.

 

120. The Board of Directors may determine, from time to time, the methods of payment of dividends or the allocation of bonus shares or transfer them to those entitled thereto as well as instructions, procedures and arrangements in this regard, both the registered shareholders and for shareholders who are not registered. Without limiting the generality of the foregoing, the Board may determine, as follows:

 

     

 

 

120.1.   (a) Subject to sub-paragraph (b) below, dividends or funds to be distributed to registered shareholders will be paid by sending a check by mail to the address, as registered in the register of shareholders, or in the case of joint registered owners share those whose name appears first in the register of shareholders in respect of the share. Any transmission of such check will be at the risk of the registered shareholder; Without limiting the foregoing, the Board may determine that the amount of dividends lower than an amount determined by the Board of Directors, will not be sent by check, as mentioned above, and respect the provisions of sub-regulation (b) below.

 

             (b) The Board of Directors may determine that the payment of dividends or funds to be distributed to shareholders registered, will be made at the office or any other place determined by the Board.

 

120.2.                Dividends distributed to shareholders who are not registered, will be transferred to such shareholders through nominee company or otherwise determined by the Board.

 

121. If two or more registered co-owners of a share, any one of them may give a valid receipt for any dividend, share or other securities, or other monies or benefits due for the share.

 

Company documents

122. Shareholders shall have the right to review company documents specified in section 184 of the Companies Law, under the conditions applicable to it. The Board of Directors may refuse a shareholder's request to review the Company's documents filed application if he believes in bad faith or that the required documents or trade secret or patent disclosure could harm in any way the benefit of the Company.

 

123. Subject to the law, any book, notepad or prescription that the Company had managed, by law or under these regulations, will be managed by technical or mechanical means as resolved by the Board of Directors.

 

Audit

124. At least once a year the annual financial statements of the Company shall be audited by the auditor of the Company.

 

125. The auditor shall be appointed each annual meeting and will serve in office until the end of the following annual general meeting; however, the general meeting may appoint an auditor may serve as such for a longer period not extending beyond the third annual general meeting following the one in which he was appointed. Auditor whose term has expired as aforesaid, may be reappointed by the Company.

 

The remuneration of the auditor for audit activities and for other services which are not auditing, will be determined by the Board or a person authorized by it.

 

Any action taken by the auditor of the Company shall be valid for any person dealing in good faith with the Company, even if there was a defect in the appointment or competency of the auditor.

 

     

 

 

Notices

126. Subject to the provisions of the law regarding the manner of giving notice to shareholders, the Company may give notice to the shareholders by hand delivery or by sending registered mail or by sending a telegram to him to the registered address in Israel (if exists) given by him to the Company for the purpose of transmittal of notices or by fax or e-mail according to the number or address, as appropriate, provided and by the shareholder to the Company for sending messages, and subject to approval of the recipient by fax or electronic mail. A notice published in two newspapers will be considered as delivered on the date of publication; if the notice was sent by mail, notification shall be deemed to have been delivered correctly, if proof to the contrary, be considered a delivery was a time when the letter had been delivered in the usual way by mail.

 

127. Co-holders of shares can be sent by the Company to the partner who is named first in the registry of members in respect of such share.

 

Liquidation

128. In the case of liquidation of the Company, whether voluntary or otherwise, the liquidator will use the assets to repay its debts. Subject to the special rights attached to the shares, if any, the liquidator will divide the remaining assets among the holders of ordinary shares in proportion to their par value of the shares. Subject to the approval of the general meeting the liquidator is entitled to divide the assets among holders of ordinary shares in kind and to transfer any asset of the remaining assets to a trustee in prior to the shareholders, as the liquidator deems appropriate.

 

Insurance , indemnification and exemption of Officers

129. Officers' Insurance

 

129.1.                Subject to the provisions of the Companies Law, the Company may enter into a contract to insure the liability of the officer of the Company for any liability imposed on him for an act done by virtue of being an officer of the Company, in any of the following:

 

129.1.1.            Breach of duty of care to the Company or to any other person;

 

129.1.2.           Breach of fiduciary duty to the Company, provided that the officer acted in good faith and had reasonable grounds to believe that the act will not affect the benefit of the Company;

 

129.1.3.            Financial liability imposed on him in favor of another person;

 

129.1.4.            in any other event that is permitted or that will be permitted to insure responsibility of an officer.

 

If the insurance contract shall also covers the Company's liability, precedence shall be given to the officer over the Company, in obtaining insurance compensation.

 

129.2.             The Company will not enter into a contract to insure the liability of officers in respect of any of the following:

 

129.2.1.           Breach of fiduciary duty towards the Company, excluding in respect of the insurance and indemnification if the officer who had acted in good faith and had reasonable grounds to believe that the act will not affect the benefit of the Company;

 

     

 

 

129.2.2.             Breach of duty of care committed intentionally or recklessly, unless made in negligence only;

 

129.2.3.             Act intending to derive unlawful personal gain;

 

129.2.4.             Fine , civil penalty, a financial sanction or penalty imposed.

 

130. Indemnification of Officers

 

130.1.                The Company may indemnify an officer for any liability or expense incurred or imposed on him due to an act made ​​by him in his capacity as an officer of the Company, as described below:

 

130.1.1.            Financial liability imposed on him in favor of another person pursuant to a judgment , including a judgment given settlement or award approved by a court.

 

130.1.2.           Reasonable litigation expenses, including attorney's fees, incurred by an officer following an investigation or proceeding conducted against him by the competent authority to conduct an investigation or proceeding, which ended without any charges against him and which ended without imposed financial liability lieu of criminal proceedings, or ended without an indictment against him but with respect to a financial liability in lieu of a criminal offense which does not require proof of criminal intent or in connection with a monetary sanction.

 

In this Section 130.1.2 - completion of the procedure without an indictment regarding a criminal investigation - means closing the case under Section 62 of the Criminal Procedure [Consolidated Version] Law-1982 (" Criminal Procedure Act "), or a stay of proceedings by the Attorney General According to Article 231 of the Criminal Procedure;

 

" Monetary liability as an alternative to criminal proceedings "- a financial liability imposed by law as an alternative to criminal proceedings, including managerial fines under the regulations managers Law 1985, a fine for an offense defined as a fine offense under the provisions of the Criminal Procedure Law, financial sanction or a fine;

 

130.1.3.             Reasonable litigation expenses, including attorney's fees, incurred by an officer or imposed by a court, in a proceeding brought against him by the Company or on its behalf or by another person, or a criminal charge which he was acquitted, or convicted of a criminal charge where the offense does not require proof of criminal intent.

 

130.1.4.             Any liability or other expense which it is permitted or will be permitted for an officer to be indemnified.

 

130.1.5.             Notwithstanding Section 130.1.5, the Company will not be permitted to indemnify, directly or indirectly, an officer in respect of a financial sanction imposed on him, except for indemnification for compensation for the victim of a violation charge of up to 20 percent of the monetary sanction imposed on an officer as aforesaid or for expenses incurred by the officer in connection with a proceeding conducted in his case, including reasonable including attorney's fees, including by way of indemnity in advance.

 

     

 

 

130.2.                Subject to the provisions of the Companies Law, the Company may undertake in advance to indemnify an officer for any liability or expense as specified in Section 130.1 above, assigned to him or to be incurred, due to an act done by virtue of being an officer of the Company (" an undertaking to indemnify "), provided that the liability for indemnification for liabilities set forth in Section 130.1 above shall be limited to events in the opinion of the Board anticipated in view of the operations of the Company at the time the liability to indemnify and amount or benchmark for the board determined to be reasonable under the circumstances purposes and liability to indemnify shall state the events in the opinion of the Board anticipated in view of the operations of the Company at the time the liability and the amount or criterion that the Board of Directors determined to be reasonable in the circumstances of the case may be.

 

130.3.                Subject to the provisions of the Companies Law and without derogating from the provisions of Section 130.2 above, the Company may indemnify an officer retroactively, for any liability or expense as specified in Section 130.1 above, imposed on him or issued due to an act done by virtue of being an officer of the Company.

 

131. Exculpation of officers

 

Subject to the provisions of the Companies Law, the Company may exculpate officer's liability, in whole or in part, for damage due to breach of duty of care towards it.

Notwithstanding the foregoing, the Company may not exculpate in advance director from his responsibilities due to violation of the duty of care in distribution. In addition, the Company shall not exculpate officer's liability, for any of the events specified in Section 130.1 above.

 

132. Subject to the provisions of the Companies Law, the abovementioned regarding insurance, indemnification and exculpation do limit the Company in any way regarding the engagement contract of liability insurance and/or regarding indemnification and/or exculpation of liability:

 

132.1.              in respect of those who are not officers of the Company, including employees, contractors or consultants of the Company, who are not office holders;

 

132.2.              in connection with the officers of the Company - If the insurance and/or exemption and/or exculpation are not expressly prohibited under the law.

 

133. Special Resolutions

 

Notwithstanding these regulations, until the registration for trade of the Company's securities in Israel or abroad, decisions on the following issues shall be taken by the general meeting or meetings of the Board of Directors, as applicable, only if the Investor or the Investor's director, as applicable , voted in their favor:

 

133.1.             modification and/or amendment of the Company's articles of association, which would create a substantial change in the rights attached to shares of the Company.

 

133.2.            Voluntary liquidation of the Company, split of the Company or reorganization of the Company's capital, and any arrangement under section 350 of the Companies Law.

 

133.3.            Entering into various operations materially different from the Company's operations or substantial reduction of the scope of operations or exiting any existing business areas of the Company.

 

     

 

 

133.4.                A transaction with an interested party and/or deal with any entity affiliated with an interested party.

 

133.5.                Any deviation of more than 5% of the Company's budget.

 

133.6.                Change signatory rights of the Company.

 

     

 

Exhibit 3.3

 

Amendments to the Company's Articles of Association

 

THE ISRAELI COMPANIES LAW

 

A COMPANY LIMITED BY SHARES

 

AMENDED AND RESTATED

ARTICLES OF ASSOCIATION

OF

 

TODOS MEDICAL LTD.

 

GENERAL PROVISIONS

 

1. Definitions

 

a) In these Articles the following terms shall bear the meaning ascribed to them below:

 

"Alternate Director" is defined in Article 41.
   
"Annual General Meeting" shall have the meaning assigned to such term in the Companies Law
   
Articles shall mean these Articles of Association of the Company, as amended from time to time.
   
Audit Committee shall mean the Audit Committee of the Board of Directors.
   
Board of Directors shall mean Board of Directors of the Company.
   
Company" shall mean Todos Medical Ltd.
   
" Companies Law " shall mean the Israeli Companies Law, 1999, as amended from time to time.
   
 “ Director shall mean a member of the Board of Directors.
   
External Director shall have the meaning assigned to such term in the Companies Law.
   
Extraordinary General Meeting shall mean any General Meeting other than the Annual General Meeting.
   
General Manager(s) is defined in Article 46.
   
General Meeting shall mean a general meeting of the shareholders of the Company, which may be an Annual General Meeting or an Extraordinary General Meeting.

 

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NIS shall mean New Israeli Shekel.
   
Office means the registered office of the Company.
   
Ordinary Majority shall mean a simple majority of the votes cast by shareholders at a General Meeting in person or by means of a proxy.
   
Ordinary Shares shall mean the ordinary shares of the Company, par value NIS 0.01 each.
   
" Person shall mean any individual or firm, corporation, partnership, association, trust or other entity.
   
Register of Shareholders shall mean a register of the shareholders of the Company.
   
Secretary shall mean the corporate secretary of the Company.
   
Shareholders Resolution shall mean a resolution adopted by votes of shareholders of the Company at a General Meeting.

 

b) The captions in these Articles are for convenience only and shall not be deemed a part hereof or affect the construction of any provision hereof.

 

c) Unless the subject or the context otherwise requires, words and expressions not defined herein shall have the respective meanings set forth in the Companies Law in force on the date when these Articles or any amendment thereto, as the case may be, first became effective; words and expressions importing the singular shall include the plural and vice versa; and words and expressions importing the masculine gender shall include the feminine gender.

 

2. Object and Purpose of the Company

 

(a) The object and purpose of the Company is to undertake any lawful activity.

 

(b) In accordance with Section 11(a) of the Companies Law, the Company may donate reasonable amounts to any cause it deems worthy. The Board of Directors or an authorized committee of the Board of Directors may from time to time determine the policy and amounts within which such donations may be made by the Company, and the Person or Persons authorized to approve any such specific donation.

 

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3. Limitation of Liability

 

The liability of the shareholders is limited to the payment of the nominal value, if any, of the shares in the Company issued to them and which remains unpaid, and only to that amount.

 

SHARE CAPITAL

 

4. Authorized Share Capital

 

The authorized share capital of the Company is NIS 10,000,000 consisting of 1,000,000,000 ordinary shares par value NIS 0.01 each.

 

5. Increase of Authorized Share Capital

 

(a) The Company may, from time to time, by Shareholders Resolution, whether or not all the shares then authorized have been issued, and whether or not all the shares theretofore issued have been called up for payment, increase its authorized share capital by the creation of new shares through amending these Articles. Any such increase shall be in such amount and shall be divided into shares of such nominal amounts (or no nominal amounts), and such shares shall confer such rights and preferences, and shall be subject to such restrictions, as such resolution shall provide.

 

(b) Except to the extent otherwise provided in such resolution, such new shares shall be subject to all the provisions applicable to the shares prior to such resolution.

 

6. Rights of the Ordinary Shares

 

The Ordinary Shares confer upon the holders thereof all rights accruing to a shareholder of the Company, as provided in these Articles, 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.

 

7. Special Rights; Modifications of Rights

 

(a) The Company may, from time to time, by Shareholders Resolution, provide for shares with such preferred or deferred rights or rights of redemption or other special rights and/or such restrictions, whether in regard to dividends, voting, repayment of share capital or otherwise, as may be stipulated in such resolution.

 

(b)

(i) If at any time the share capital is divided into different classes of shares, the rights attached to any class, unless otherwise provided by these Articles and subject to applicable law, may be modified or abrogated by the Company, by Shareholders Resolution, subject to an approval by a resolution passed by the holders of a simple majority of the shares of such class voting at a separate General Meeting of the holders of the shares of such class.

 

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(ii) The provisions of these Articles relating to General Meetings shall, mutatis mutandis , apply to any separate General Meeting of the holders of the shares of a particular class.

 

(iii) Unless otherwise provided by these Articles, the enlargement of an existing class of shares, or the issuance of additional shares thereof, shall not be deemed, for purposes of this Article 7(b), to modify or abrogate the rights attached to the previously issued shares of such class or of any other class.

 

8. Consolidation, Subdivision, Cancellation and Reduction of Share Capital

 

(a) The Company may, from time to time, by Shareholders Resolution (subject, however, to the provisions of Article 7(b) hereof and to applicable law):

 

(i) consolidate and divide all or any of its issued or unissued share capital into shares of larger nominal value than its existing shares;

 

(ii) subdivide its shares (issued or unissued) or any of them, into shares of smaller nominal value than is fixed by these Articles (subject, however, to the provisions of the Companies Law), and the Shareholders Resolution whereby any share is subdivided may determine that, as among the holders of the shares resulting from such subdivision, one or more of the shares may, as compared with the others, have any such preferred or deferred rights or rights of redemption or other special rights, or be subject to any such restrictions, as the Company has power to attach to unissued or new shares;

 

(iii) cancel any shares which, at the date of the adoption of such resolution, have not been taken or agreed to be taken by any Person, and diminish the amount of its share capital by the amount of the shares so cancelled; or

 

(iv) reduce its share capital in any manner, and with and subject to any consent required by law.

 

(b) With respect to any consolidation of issued shares into shares of larger nominal value, and with respect to any other action which may result in fractional shares, the Board of Directors may settle any difficulty which may arise with regard thereto, as it deems fit, including, inter alia , resort to one or more of the following actions:

 

(i) determine, as to the holder of shares so consolidated, which issued shares shall be consolidated into each share of larger nominal value;

 

(ii) issue, in contemplation of or subsequent to such consolidation or other action, such shares or fractional shares sufficient to preclude or remove fractional share holdings;

 

(iii) redeem, in the case of redeemable preference shares, and subject to applicable law, such shares or fractional shares sufficient to preclude or remove fractional share holdings;

 

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(iv) subject to applicable law, cause the transfer of fractional shares by certain shareholders of the Company to other shareholders thereof so as to most expediently preclude or remove any fractional shareholdings, and cause the transferees to pay the transferors the fair value of fractional shares so transferred, and the Board of Directors is hereby authorized to act as agent for the transferors and transferees with power of substitution for purposes of implementing the provisions of this sub-Article 8(b)(iv); or

 

(v) cause the aggregation of fractional shares and the sale thereof so as to most expediently preclude or remove any fractional shareholding and cause the proceeds thereof, less expenses, to be paid to the former holders of the fractional shares.

 

(c) Notwithstanding the foregoing, if a class of shares has no nominal value, then any of the foregoing actions may be taken with respect to such class without regard to nominal value.

 

SHARES

 

9. Issuance of Share Certificates; Replacement of Lost Certificates

 

(a) Share certificates shall be issued under the seal or stamp of the Company and shall bear the signature of any two (2) Directors or any two (2) of the following: the General Manager, the Chief Financial Officer, the Secretary, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, or of any other Person or Persons authorized thereto by the Board of Directors. For the avoidance of doubt, any transfer agent designated by the Company may issue share certificates on behalf of the Company even if the signatories on the share certificate no longer serve in the relevant capacities at the time of such issuance.

 

(b) The Company may issue un-certificated shares, provided, however, that each holder of shares shall be entitled to one numbered certificate for all the shares of any class registered in his name, and if reasonably requested by such holder, to several certificates, each for one or more of such shares.

 

(c) A share certificate registered in the names of two or more Persons shall be delivered to the Person first named in the Register of Shareholders in respect of such coownership.

 

(d) If a share certificate is defaced, lost or destroyed, it may be replaced, upon payment of such fee, and upon the furnishing of such evidence of ownership and such affidavit and indemnity or security, as the Company’s Secretary may deem fit.

 

10. Issuance of Shares; Registered Holders of Shares

 

(a) The unissued shares from time to time shall be under the control of the Board of Directors, who shall have the power to issue shares or otherwise dispose of them to such Persons, on such terms and conditions (including inter alia terms relating to calls as set forth in Article 11(f) hereof), and either at par or at a premium, or, subject to the provisions of the Companies Law, at a discount, and at such times, as the Board of Directors may deem fit, and the power to give to any Person the option to acquire from the Company any shares, either at par or at a premium, or, subject to the provisions of the Companies Law, at a discount, during such time and for such consideration as the Board of Directors may deem fit.

 

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(b) Except as otherwise provided in these Articles, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof, and, accordingly, shall not, except as ordered by a court of competent jurisdiction, or as required by statute, be bound to recognize any trust or equitable or other claim to, or interest in such share on the part of any other Person.

 

(c) Subject to and in accordance with the provisions of the Companies Law and to all orders and regulations issued thereunder, the Board of Directors may elect to maintain one or more Registers of Shareholders outside of Israel in addition to its principal Register of Shareholders, and each such register shall be deemed a Register of Shareholders for purposes of these Articles, and, subject to all applicable requirements of law, the Board of Directors may from time to time adopt such rules and procedures as it may think fit in connection with the keeping of such branch registers.

 

11. Calls on Shares

 

(a) The Company may, from time to time, make such calls as the Board of Directors may determine upon holders of shares in respect of any sum unpaid for shares held by such holders which is not, by the terms of issuance thereof or otherwise, payable at a fixed time, and each such holder shall pay the amount of every call so made upon him (and of each installment thereof if the same is payable in installments), to the Person(s) and at the time(s) and place(s) designated by the Board of Directors, as any such time(s) may be thereafter extended and/or such Person(s) or place(s) changed. Unless otherwise stipulated in the resolution of the Board of Directors (and in the notice hereafter referred to), each payment in response to a call shall be deemed to constitute a pro rata payment on account of all shares in respect of which such call was made.

 

(b) Notice of any call shall be given in writing to the holder(s) in question not less than fourteen (14) days prior to the time of payment, specifying the time and place of payment, and designating the Person to whom such payment shall be made, provided, however, that before the time for any such payment, the Company upon approval of the Board of Directors may, by notice in writing to such holder(s), revoke such call in whole or in part, extend such time, or alter such Person and/or place. In the event of a call payable in installments, only one notice thereof need be given.

 

(c) If, by the terms of issuance of any share or otherwise, any amount is made payable at any fixed time, every such amount shall be payable at such time as if it were a call duly made by the Company and of which due notice had been given, and all the provisions herein contained with respect to such calls shall apply to each such amount.

 

(d) The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof and all interest payable thereon.

 

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(e) Any amount unpaid in respect of a call shall bear interest from the date on which it is payable until actual payment thereof, at such rate (not exceeding the then prevailing debitory rate charged by leading commercial banks in Israel), and at such time(s) as the Board of Directors may prescribe.

 

(f) Upon the issuance of shares, the Board of Directors may provide for differences among the holders of such shares as to the amount of calls and/or the times of payment thereof.

 

(g) With the approval of the Board of Directors, any holder of shares may pay to the Company any amount not yet payable in respect of his shares. The Board of Directors may at any time cause the Company to repay all or any part of the money so advanced, without premium or penalty.

 

12. Forfeiture and Surrender

 

(a) If any holder fails to pay any amount payable in respect of a call, or interest thereon as provided for herein, on or before the day fixed for payment of the same, the Company, by resolution of the Board of Directors, may at any time thereafter, so long as the said amount or interest remains unpaid, forfeit all or any of the shares in respect of which said call had been made. Any expense incurred by the Company in attempting to collect any such amount or interest, including, inter alia , attorneys' fees and costs of suit, shall be added to, and shall, for all purposes (including the accrual of interest thereon), constitute a part of the amount payable to the Company in respect of such call.

 

(b) Upon the adoption of a resolution of forfeiture, the Board of Directors shall cause notice thereof to be given to such holder, which notice shall state that, in the event of the failure to pay the entire amount so payable within a period stipulated in the notice (which period shall not be less than fourteen (14) days and which may be extended by the Company with the approval of the Board of Directors), such shares shall be ipso facto forfeited, provided, however, that, prior to the expiration of such period, the Board of Directors may nullify such resolution of forfeiture, but no such nullification shall estop the Board of Directors from adopting a further resolution of forfeiture in respect of the non-payment of the same amount.

 

(c) Whenever shares are forfeited as herein provided, all dividends theretofore declared in respect thereof and not actually paid shall be deemed to have been forfeited at the same time.

 

(d) The Company, by resolution of the Board of Directors, may accept the voluntary surrender of any share.

 

(e) Any shares forfeited or surrendered as provided herein shall become Dormant Shares and the property of the Company, and the same, subject to the provisions of these Articles, may be sold, re-issued or otherwise disposed of as the Board of Directors deems fit.

 

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(f) Any holder whose shares have been forfeited or surrendered shall cease to be a holder in respect of the forfeited or surrendered shares, but shall, notwithstanding, be liable to pay, and shall forthwith pay, to the Company, all calls, interest and expenses owing upon or in respect of such shares at the time of forfeiture or surrender, together with interest thereon from the time of forfeiture or surrender until actual payment, at the rate prescribed in Article 11(e) above, and the Company, in its discretion, may enforce the payment of such moneys, or any part thereof, but shall not be under any obligation to do so. In the event of such forfeiture or surrender, the Company, by resolution of the Board of Directors, may accelerate the date(s) of payment of any or all amounts then owing by the holder in question (but not yet due) in respect of all shares owned by such holder, solely or jointly with another.

 

(g) The Board of Directors may at any time, before any share so forfeited or surrendered shall have been sold, re-issued or otherwise disposed of, nullify the forfeiture or surrender on such conditions as it deems fit, but no such nullification shall estop the Board of Directors from re-exercising its powers of forfeiture pursuant to this Article 12.

 

13. Lien

 

(a) Except to the extent the same may be waived or subordinated in writing, to the extent permitted by applicable law, the Company shall have a first and paramount lien upon all the shares (other than shares which are fully paid up) registered in the name of each holder (without regard to any equitable or other claim or interest in such shares on the part of any other Person), and upon the proceeds of the sale thereof, for his debts and liabilities, solely or jointly with another, to the Company in respect of such shares, whether the period for the payment, fulfillment or discharge thereof shall have actually arrived or not. Such lien shall extend to all dividends from time to time declared in respect of such share. Unless otherwise provided, the registration by the Company of a transfer of shares shall be deemed to be a waiver on the part of the Company of the lien (if any) existing on such shares immediately prior to such transfer.

 

(b) The Board of Directors may cause the Company to sell any shares subject to such lien when any such debt or liability has matured, in such manner as the Board of Directors may deem fit, but no such sale shall be made unless such debt or liability or has not been satisfied within fourteen (14) days after written notice of the intention to sell shall have been served on such holder, his executors or administrators.

 

(c) The net proceeds of any such sale, after payment of the costs thereof, shall be applied in or toward satisfaction of such debts or liabilities of such holder (whether or not the same have matured), or any specific part of the same (as the Company may determine), and the residue (if any) shall be paid to the holder, his executors, administrators or assigns.

 

14. Sale after Forfeiture or Surrender or in Enforcement of Lien

 

Upon any sale of shares after forfeiture or surrender or for enforcing a lien, the Board of Directors may appoint some Person to execute an instrument of transfer of the shares so sold and cause the purchaser's name to be entered in the Register of Shareholders in respect of such shares, and the purchaser shall not be bound to see to the propriety of the proceedings, or to the application of the purchase money, and after his name has been entered in the Register of Shareholders in respect of such shares, the validity of the sale shall not be impeached by any Person, and the remedy of any Person aggrieved by the sale shall be in damages only and against the Company exclusively.

 

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15. Redeemable Shares

 

The Company may, subject to applicable law, issue redeemable shares and redeem the same upon the conditions and terms determined by the Board of Directors.

 

TRANSFER OF SHARES

 

16. Effectiveness and Registration

 

(a) No transfer of shares shall be registered in the Register of Shareholders unless a proper instrument of transfer (in form and substance satisfactory to the Secretary) has been submitted to the Company or its agent, together with any share certificate(s) and such other evidence of title as the Secretary may reasonably require, and unless such transfer complies with applicable law and these Articles. Until the transferee has been registered in the Register of Shareholders in respect of the shares so transferred, the Company may continue to treat the transferor as the owner thereof. The Board of Directors may, from time to time, prescribe a fee for the registration of a transfer.

 

(b) The Company shall be entitled to refuse to recognize a transfer deed until the certificate of the transferred share is attached to it together with any other evidence which the Board of Directors or the Secretary shall require as proof of the transferor’s right to transfer the share and payment of any transfer fee determined by the Board of Directors. Registered transfer deeds shall remain with the Company, but any transfer deed which the Company refused to register shall be returned to the transferor upon demand.

 

(c) The Board of Directors may close the Register of Shareholders for a period of up to thirty (30) days in each year.

 

TRANSMISSION OF SHARES

 

17. Decedents' Shares

 

(a) In case of a share registered in the names of two or more holders, the Company may recognize the survivor(s) as the sole owner(s) thereof unless and until the provisions of Article 17(b) have been effectively invoked.

 

(b) Any Person becoming entitled to a share in consequence of the death of any individual, upon producing evidence of the grant of probate or letters of administration or declaration of succession (or such other evidence as the Board of Directors or the Secretary may reasonably deem sufficient of the capacity in which he proposes to act under this Article), shall be registered as a holder in respect of such share, or may, subject to the regulations as to transfer herein contained, transfer such share.

 

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18. Receivers and Liquidators

 

(a) The Company may recognize the receiver or liquidator or similar official of any corporate shareholder in winding-up or dissolution, or the receiver or trustee or similar official in bankruptcy or in connection with the reorganization of any shareholder, as being entitled to the shares registered in the name of such shareholder.

 

(b) The receiver or liquidator or similar official of a corporate shareholder in winding-up or dissolution, or the receiver or trustee or similar official in bankruptcy or in connection with the reorganization of any shareholder, upon producing such evidence as the Board of Directors or the Secretary may deem sufficient of the capacity in which he proposes to act under this Article, shall with the consent of the Secretary, be registered as a shareholder in respect of such shares, or may, subject to the provisions as to transfer herein contained, transfer such shares.

 

RECORD DATE WITH RESPECT TO OWNERSHIP OF SHARES

 

19. Record Dates

 

(a) Notwithstanding any provision to the contrary in these Articles, for the determination of the holders entitled to receive notice of and to participate in and vote at a General Meeting or to express consent to or dissent from any corporate action in writing, the Board of Directors may fix, in advance, a record date which shall neither be earlier nor later than is permitted under applicable law. No Persons other than holders of record of Ordinary Shares as of such record date shall be entitled to notice of and to participate in and vote at such General Meeting, or to exercise such other right, as the case may be. A determination of holders of record with respect to a General Meeting shall apply to any adjournment of such meeting, provided that the Board of Directors may fix a new record date for an adjourned meeting.

 

(b) Subject to the applicable law, the holders entitled to receive payment of any dividend or other distribution or issuance of any rights, shall be the shareholders on the date upon which it was resolved to distribute the dividend or at such later date as shall be determined by, or pursuant to a resolution of, the Board of Directors.

 

GENERAL MEETINGS

 

20. Annual General Meeting

 

An Annual General Meeting shall be held once in every calendar year at such time (within a period of not more than fifteen (15) months after the last preceding Annual General Meeting) and at such place either in the State of Israel or abroad as may be determined by the Board of Directors.

 

21. Extraordinary General Meetings

 

The Board of Directors may, whenever it deems fit, convene an Extraordinary General Meeting at such time and place, in the State of Israel or abroad, as may be determined by the Board of Directors, and shall be obliged to do so upon a demand in writing in accordance with Section 63(b) of the Companies Law, if the proposed resolution is suitable for determination by shareholders.

 

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22. Notice of General Meetings

 

(a) The Company is required to give such prior notice of a General Meeting as required by applicable law, but in any event not less than fourteen (14) days. The Company is not required to deliver personal notice to every shareholder except to the extent required by applicable law. In any event, the accidental omission to give notice of a meeting to any shareholder or the non-receipt of notice by any of the shareholders shall not invalidate the proceedings at any meeting.

 

(b) The notice of the meeting shall set forth the agenda of the meeting.

 

(c) A shareholder desiring to request that the Board of Directors include a certain item on the agenda of the meeting pursuant to Section 66(b) of the Companies Law, shall, as a condition to such proposal being considered by the Board of Directors, make such request to the Company in writing at least eight (8) weeks prior to the date of the meeting (or such shorter period as may be determined by the Board of Directors).

 

(d) Notwithstanding anything to the contrary in these Articles, unless otherwise provided by applicable law, notice by the Company of a General Meeting which is published in one (1) daily newspaper in the State of Israel, if at all, shall be deemed to have been duly given on the date of such publication to any shareholder whose address as registered in the Register of Shareholders or as designated in writing for the receipt of notices and other documents) is located in the State of Israel or whose shares of the Company are registered with a transfer agent, or listed for trade on a stock exchange, that is located in the State of Israel.

 

(e) Notwithstanding anything to the contrary in these Articles, unless otherwise provided by applicable law, notice by the Company of a General Meeting or any other matter which is published via one international wire service shall be deemed to have been duly given on the date of such publication to any shareholder whose address as registered in the Register of Shareholders (or as designated in writing for the receipt of notices and other documents) is located outside the State of Israel or whose shares of the Company are registered with a transfer agent, or listed for trade on a stock exchange that is located outside the State of Israel.

 

PROCEEDINGS AT GENERAL MEETINGS

 

23. Quorum

 

(a) Two or more holders of Ordinary Shares (not in default in payment of any sum referred to in Article 12(a) hereof), present in person or by proxy and holding shares conferring in the aggregate at least 25% of the voting power of the Company shall constitute a quorum at General Meetings. Except as set forth in this Article 23, no business shall be transacted at a General Meeting, or at any adjournment thereof, unless the requisite quorum is present when the meeting proceeds to business.

 

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(b) If within an hour from the time set for the meeting a quorum is not present, in person or by proxy, the meeting shall stand adjourned to the same day in the next week, at the same time and place, or, if not set forth in the notice of the meeting, to such day and at such time and place as the Chairman may determine with the consent of the holders of a majority of the voting power represented at the meeting in person or by proxy and voting on the question of adjournment. No business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called. At such adjourned meeting, if a quorum is not present, in person or by proxy, within a half hour from the time set, any two (2) holders of Ordinary Shares (not in default as aforesaid) present in person or by proxy, shall constitute a quorum. Notwithstanding anything in this Article 23 to the contrary, if the meeting was convened upon requisition pursuant to Section 63 or 64 of the Companies Law, the quorum requirement at any adjournment thereof shall be governed by the provisions of the Companies Law.

 

24. Chairman of Meetings

 

The Chairman, if any, of the Board of Directors shall preside as Chairman at every General Meeting of the Company. If there is no such Chairman, or if at any meeting he is not present within fifteen (15) minutes after the time fixed for the meeting or is unwilling to act as Chairman or has notified the Company that he will not attend such meeting, the holders of Ordinary Shares present (or their proxies) shall choose someone else to be Chairman. The office of Chairman shall not, by itself, entitle the holder thereof to vote at any General Meeting (without derogating, however, from the rights of such Chairman to vote as a holder of Ordinary Shares or proxy of a shareholder if, in fact, he is also a shareholder or a proxy).

 

25. Adoption of Resolutions at General Meetings

 

(a) Unless otherwise indicated herein or required by applicable law, any Shareholders Resolution shall be deemed adopted if approved by an Ordinary Majority, including without limitation, a Merger of the Company or an amendment to these Articles, to the extent permitted by applicable law.

 

(b) Every question submitted to a General Meeting shall be decided by a show of hands, without derogating from voting by written ballot to the extent permitted, pursuant to applicable law.

 

(c) A declaration by the Chairman of the meeting that a resolution has been carried unanimously, or carried by a particular majority, or defeated, and an entry to that effect in the minutes book of the Company, shall be conclusive evidence of the fact without need of proof of the number or proportion of the votes recorded in favor of or against such resolution.

 

26. Power to Adjourn

 

The Chairman of a General Meeting at which a quorum is present may, with the consent of the holders of a majority of the voting power represented in person or by proxy and voting on the question of adjournment (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called.

 

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27. Voting Power

 

Subject to applicable law, and subject to any provision hereof conferring special rights as to voting, or restricting the right to vote, every holder of Ordinary Shares shall have one vote for each share registered in his name in the Register of Shareholders upon any resolution put to a vote of the holders of Ordinary Shares.

 

28. Voting Rights

 

(a) The shareholders entitled to vote at a General Meeting shall be the shareholders listed in the Company’s Register(s) of Shareholders on the record date, as specified in Article 19.

 

(b) A company or other entity which is not an individual being a holder of Ordinary Shares of the Company may be represented by an authorized individual at any meeting of the Company. Such authorized individual shall be entitled to exercise on behalf of such holder all the power, which the latter could have exercised if it were an individual shareholder. Upon the request of the Chairman of the meeting, written evidence of such authorization (in form acceptable to the Chairman in his sole discretion) shall be delivered to him.

 

(c) Any holder of Ordinary Shares entitled to vote at the General Meeting may vote thereat either personally or by proxy (who need not be a shareholder of the Company), or, if the shareholder is a company or other corporate body, by a representative authorized pursuant to Article 28(b).

 

(d) If two or more Persons are registered in the Register of Shareholders as joint holders of any Ordinary Share, the vote of the senior who tenders a vote, in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s); and for this purpose seniority shall be determined by the order in which the names stand in the Register of Shareholders, all subject to applicable law.

 

(e) No shareholders shall be entitled to vote at any General Meeting (or be counted as a part of the quorum thereat), unless all calls and other sums then payable by him in respect of his shares in the Company have been paid.

 

(f) The Board of Directors may determine, in its discretion, the matters, if any, that may be voted upon by written ballot delivered to the Company (without attendance in person or by proxy) at a General Meeting, in addition to the matters on which shareholders are entitled to do so pursuant to applicable law.

 

(g) Subject to the provisions of applicable law, the Secretary of the Company may, in his discretion, disqualify proxies, proxy cards, written ballots or any other similar instruments.

 

PROXIES

 

29. Instrument of Appointment

 

(a) The instrument appointing a proxy shall be substantially in the form provided below or any other usual or customary form or such other form as may be approved by the Board of Directors from time to time. It shall be duly signed by the appointer or his duly authorized attorney or, if such appointer is a company or other corporate body, under its common seal or stamp or the hand of its duly authorized agent(s) or attorney(s).

 

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“I, the undersigned, _________________________________, being a (name of shareholder) shareholder of Todos Medical Ltd. hereby appoint ________________________ of _____________________________ (name of proxy) (address of proxy) as my proxy to attend and vote on my behalf at [any General Meeting of the Company] [the General Meeting of the Company to be held on the _____ day of _______ , ____ ] and at any adjournment thereof. Signed this ______ day of ___________, 2___ . __________________.”

(signature of shareholder)

 

(b) The instrument appointing a proxy (and the power of attorney or other authority, if any, under which such instrument has been signed) shall be delivered to the Company (at its registered office, or at its principal place of business or at the offices of its registrar and/or transfer agent or at such place as the Board of Directors may specify) not less than forty-eight (48) hours before the time fixed for the meeting at which the Person named in the instrument proposes to vote, unless otherwise determined by the Chairman of the meeting.

 

(c) The rights of a shareholder who is legally incapacitated to attend and/or vote at a General Meeting may be exercised by his guardian.

 

30. Effect of Death of Appointer or Revocation of Appointment

 

A vote cast pursuant to an instrument appointing a proxy shall be valid notwithstanding the previous death of the appointing shareholder (or of his attorney-in-fact, if any, who signed such instrument) or the revocation of the appointment, provided that no written notice of such death or revocation shall have been received by the Company or by the Chairman of the meeting before such vote is cast and provided, further, that the appointing shareholder, if present in person at said meeting, may revoke the authority granted by the execution of a proxy by filing with the Company a duly executed instrument appointing another proxy, on or prior to the deadline for the delivery of proxies, or by voting in person at the General Meeting.

 

BOARD OF DIRECTORS

 

31. Powers of Board of Directors

 

(a) In General

 

The oversight of the management of the business of the Company shall be vested in the Board of Directors, which may exercise all such powers and do all such acts and things as the Company is authorized to exercise and do, and are not hereby or by law required to be exercised or done by the Company in a General Meeting. The authority conferred on the Board of Directors by this Article 31 shall be subject to the provisions of the Companies Law, of these Articles and any resolution consistent with the Companies Law and these Articles adopted from time to time by a General Meeting, provided, however, that no such resolution shall invalidate any prior act done by or pursuant to a decision of the Board of Directors which would have been valid if such resolution had not been adopted.

 

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(b) Borrowing Power

 

The Board of Directors may from time to time, in its discretion, cause the Company to borrow or secure the payment of any sum or sums of money for the purposes of the Company, and also may cause the Company to secure or provide for the repayment of such sum or sums in such manner, at such times and upon such terms and conditions in all respects as it deems fit, and, in particular, by the issuance of bonds, perpetual or redeemable debentures, debenture stock, or any mortgages, charges, or other securities on the undertaking or the whole or any part of the property of the Company, both present and future, including its uncalled or called but unpaid share capital for the time being.

 

(c) Reserves

 

The Board of Directors may, from time to time, set aside any amount(s) out of the profits of the Company as a reserve or reserves for any purpose(s) which the Board of Directors, in its absolute discretion, shall deem fit, and the Company may invest any sum so set aside in any manner and from time to time deal with and vary such investments, and dispose of all or any part thereof, and employ any such reserve or any part thereof in the business of the Company without being bound to keep the same separate from other assets of the Company, and may subdivide or redesignate any reserve or cancel the same or apply the funds therein for another purpose, all as the Board of Directors may from time to time deem fit.

 

32. Exercise of Powers of Directors

 

(a) A meeting of the Board of Directors at which a quorum is present (in person, by means of a conference call or any other device allowing each director participating in such meeting to hear all the other directors participating in such meeting) shall be competent to exercise all the authorities, powers and discretions vested in or exercisable by the Board of Directors.

 

(b) A resolution proposed at any meeting of the Board of Directors shall be deemed adopted if approved by a simple majority of the Directors present and lawfully entitled to vote thereon (as conclusively determined by the Secretary, and in the absence of such determination, by the Chairman of the Board of Directors) and voting thereon.

 

(c) A resolution may be adopted by the Board of Directors without convening a meeting if all Directors then in office and lawfully entitled to participate in the meeting and vote thereon (as conclusively determined by the Secretary, and in the absence of such determination, by the Chairman of the Board of Directors), have given their written consent (in any manner whatsoever) not to convene a meeting to discuss such matter. Such resolution shall be adopted if approved by a majority of the Directors lawfully entitled to vote thereon (as determined as aforesaid). The Chairman of the Board of Directors shall sign the instrument evidencing any resolutions so adopted, including the decision to adopt said resolutions without a meeting.

 

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33. Delegation of Powers

 

(a) The Board of Directors may, subject to the provisions of the Companies Law and these Articles, delegate any of its powers to committees, each consisting of two or more Persons (all of whose members must be Directors), and it may from time to time revoke such delegation or alter the composition of any such committee. Any Committee so formed (in these Articles referred to as a “ Committee of the Board of Directors ”), shall, in the exercise of the powers so delegated, conform to any regulations imposed on it by the Board of Directors. The meetings and proceedings of any such Committee of the Board of Directors shall, mutatis mutandis , be governed by the provisions herein contained for regulating the meetings of the Board of Directors, so far as not superseded by the Companies Law or any regulations adopted by the Board of Directors under this Article. Notwithstanding the foregoing, the Chairman of a Committee of the Board of Directors shall not have a casting vote. Unless otherwise expressly provided by the Board of Directors in delegating powers to a Committee of the Board of Directors, such Committee shall not be empowered to further delegate such powers.

 

(b) Without derogating from the provisions of Article 46, the Board of Directors may, subject to the provisions of the Companies Law, from time to time appoint a Secretary to the Company, as well as any officers of the Company, and may terminate the service of any such Person, and also may cause the Company to engage employees, agents and independent contractors and to terminate the service of any such Person, all as the Board of Directors may deem fit. Without derogating from the provisions of Article 46, the Board of Directors may, subject to the provisions of the Companies Law, determine the powers and duties, as well as the compensation terms of all such Persons, and may require security in such cases and in such amounts as it deems fit.

 

34. Number of Directors

 

(a) The Board of Directors shall include at least three (3) Directors and not more than seven (7) Directors in addition to two (2) External Directors (or such other number of External Directors as shall be required by applicable law).

 

(b) The requirements of the Companies Law applicable to an External Director shall prevail over the provisions of these Articles to the extent that these Articles are inconsistent with the Companies Law, and shall apply to the extent that these Articles are silent.

 

35. Election and Removal of Directors

 

(a) The Subject to Article 35(b) below, the Directors shall be elected at each Annual General Meeting and shall serve in office until the close of the next Annual General Meeting at which one or more Directors are elected, unless their office becomes vacant earlier in accordance with the provisions of these Articles. Each Director shall be elected by a Shareholders Resolution at the Annual General Meeting by the vote of the holders of a simple majority of the voting power represented at such meeting in person or by proxy and voting on such election; provided, however, that External Directors shall be elected in accordance with the Companies Law. The elected Directors shall commence their terms immediately upon election, unless a later effective date is stated in the resolution with respect to their election.

 

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(b) Notwithstanding the other provisions of these Articles, one or more Directors may be elected by a Shareholders Resolution at an Extraordinary General Meeting. Any Director appointed or elected in such manner (excluding an External Director) shall serve in office until the next Annual General Meeting at which one or more Directors are elected, unless his office becomes vacant earlier in accordance with the provisions of these Articles.

 

(c) An elected External Director shall commence his term from the date of, and shall serve for the period stated in, the resolution of the General Meeting at which he was elected, unless his office becomes vacant earlier in accordance with the provisions of the Companies Law.

 

(d) A Director may serve for multiple terms, provided, however, that the terms of an External Director shall be limited in accordance with applicable law.

 

(e) The General Meeting shall be entitled to remove any Director(s) from office by a Shareholder Resolution, all subject to applicable law. The Board of Directors shall be entitled to remove from office any Director(s) appointed by the Board of Directors.

 

36. Qualification of Directors

 

No Person shall be disqualified to serve as a Director by reason of his not holding shares in the Company.

 

37. Vacancies in the Board of Directors

 

(a) Notwithstanding anything to the contrary in these Articles, as long as the number of Directors

serving on the Board of Directors is less than the maximal number of Directors under Article 34(a), the Board of Directors may act to appoint Directors to the Board of Directors. A Director elected to fill a vacancy shall be elected to hold office until the next Annual General Meeting at which one or more Directors are elected, unless his office becomes vacant earlier in accordance with the provisions of these Articles.

 

(b) In the event of one or more vacancies in the Board of Directors, the continuing Directors may continue to act in every matter, provided, however, that if they number less than the minimum number set forth in Article 34(a) hereof, they may only act in an emergency (as determined in their absolute discretion), may appoint one or more Directors and call one or more General Meetings for any purpose.

 

38. Vacation of Office

 

(a) The office of a Director shall be vacated, ipso facto , upon his death, or if he be found mentally incapacitated, or upon the conviction of a crime enumerated in the Companies Law or as otherwise provided by applicable law.

 

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(b) The office of a Director shall be vacated by his written resignation. Such resignation shall become effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later.

 

39. Remuneration of Directors

 

No Director shall be paid any remuneration by the Company for his services as Director except as may be approved pursuant to the provisions of the Companies Law. Except as otherwise provided by applicable law, reimbursement of expenses incurred by a Director in carrying out his duties as such shall be made pursuant to the policy in this respect as determined by the Board of Directors and in effect from time to time.

 

40. Conflict of Interests

 

Subject to the provisions of the Companies Law, the Company may enter into any contract or otherwise transact any business with any Director in which contract or business such Director has a Personal Interest, directly or indirectly; and may enter into any contract of otherwise transact any business with any third party in which contract or business a Director has a Personal Interest, directly or indirectly.

 

41. Alternate Directors

 

(a) A Director may, by written notice to the Company, appoint an individual as an alternate for himself (“ Alternate Director ”), remove such Alternate Director and appoint another Alternate Director in place of any Alternate Director appointed by him whose office has been vacated for any reason whatsoever. The appointment of an Alternate Director by any Director other than the Chairman of the Board of Directors shall be subject to the consent of the Chairman of the Board of Directors, and the appointment of an Alternate Director by the Chairman of the Board of Directors shall be valid unless objected to by a majority of the other Directors.

 

(b) Any notice given to the Company pursuant to Article 41(a) shall become effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later.

 

(c) An Alternate Director shall have all the rights and obligations of the Director who appointed him, provided, however, that he may not in turn appoint an alternate for himself, and provided further that an Alternate Director shall have no standing at any meeting of the Board of Directors or any committee thereof while the Director who appointed him is present at such meeting.

 

(d) An Alternate Director shall alone be responsible for his own acts and omissions, and he shall not be deemed the agent of the Director who appointed him.

 

(e) The office of an Alternate Director shall be vacated under the circumstances, mutatis mutandis , set forth in Article 38, and such office shall ipso facto be vacated if the Director who appointed such Alternate Director ceases to be a Director.

 

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(f) Notwithstanding Article 41(a), (i) no Person shall be appointed as the Alternate Director for more than one Director and (ii) except as otherwise specifically permitted by the Companies Law, (A) no External Director may appoint an Alternate Director and (B) no Director may serve as an Alternate Director.

 

PROCEEDINGS OF THE BOARD OF DIRECTORS

 

42. Meetings

 

(a) The Board of Directors may meet and adjourn its meetings according to the Company’s needs but at least once in every three (3) months, and otherwise regulate such meetings and proceedings as the Directors think fit. Notice of the meetings of the Board of Directors shall be sent to each Director at the last address that the Director provided to the Company, or via telephone, facsimile or e-mail message, to the last telephone number, fax number or e-mail address, as applicable, that the Director provided to the Company.

 

(b) Any two (2) Directors may, at any time, convene a meeting of the Board of Directors, but not less than seventy-two (72) hours' notice shall be given of any meeting so convened, provided that the Chairman of the Board of Directors may convene a meeting of the Board of Directors upon not less than twenty four (24) hours written notice, and further provided, that the Board of Directors may convene a meeting without such prior notice with the consent of all of the Directors who are lawfully entitled to participate in and vote at such meeting (as conclusively determined by the Secretary, and in the absence of such determination, by the Chairman of the Board of Directors). The notice of a meeting of the Board of Directors shall describe the agenda for such meeting in reasonable detail, as determined by those convening such meeting. The failure to give notice to a Director in the manner required hereby may be waived by such Director. In urgent situations, a meeting of the Board of Directors can be convened without any prior notice with the consent of a majority of the Directors, including a majority of those who are lawfully entitled to participate in and vote at such meeting (as conclusively determined by the Secretary, and in the absence of such determination, by the Chairman of the Board of Directors).

 

43. Quorum

 

Unless otherwise unanimously decided by the Board of Directors, a quorum at a meeting of the Board of Directors shall be constituted by the presence in person or by any other means of communication by which the Directors may hear each other simultaneously, of at least a majority of the Directors then in office who are lawfully entitled to participate in the meeting and vote thereon (as conclusively determined by the Secretary, and in the absence of such determination, by the Chairman of the Board of Directors). No business shall be transacted at a meeting of the Board of Directors unless the requisite quorum is present as aforesaid.

 

44. Chairman of the Board of Directors

 

(a) The Board of Directors may from time to time elect one of its members to be the Chairman of the Board of Directors, remove such Chairman from office and appoint another in his place.

 

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(b) The Chairman, if any, of the Board of Directors shall preside at every meeting of the Board of Directors, but if there is no such Chairman, or if at any meeting he is not present within fifteen (15) minutes after the time fixed for the meeting, or is unwilling to act as Chairman or has notified the Company that he will not attend such meeting, the Directors present shall choose one of their number to be the Chairman of such meeting. The office of Chairman shall not, by itself, entitle the holder thereof to vote at any meeting of the Board of Directors nor shall it entitle such holder to a second or casting vote (without derogating, however, from the rights of such Chairman to vote as a Director of the Company).

 

45. Validity of Acts Despite Defects

 

Subject to the provisions of the Companies Law, all acts done bona fide at any meeting of the Board of Directors, or of a Committee of the Board of Directors, or by any Person(s) acting as Director(s), shall, notwithstanding that it may afterwards be discovered that there was some defect in the process or in the appointment of the participants in such meetings or any of them or any Person(s) acting as aforesaid, or that they or any of them were disqualified, be as valid as if there were no such defect or disqualification.

 

GENERAL MANAGER

 

46. General Manager

 

(a) The Board of Directors may from time to time appoint one or more Persons, whether or not Directors, as general managers (the “ General Manager(s) ”) of the Company and may confer upon such Person(s), and from time to time modify or revoke, such title(s) (including Managing Director, President, Chief Executive Officer, Director General or any similar or dissimilar title) and such duties and authorities of the Board of Directors as the Board of Directors may deem fit, subject to such limitations and restrictions as the Board of Directors may from time to time prescribe. Such appointment(s) may be either for a fixed term or without any limitation of time, and the Board of Directors may from time to time (subject to the provisions of the Companies Law and of any contract between any such Person and the Company) fix his or their compensation terms, remove or dismiss him or them from office, or assume his or their authorities with respect to a specific matter or period of time.

 

(b) The General Manager shall have the authority, in his discretion, to appoint any Person to become an Office Holder (other than a Director). Nothing in this Article 46(b) shall derogate from the authority of the Board of Directors.

 

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MINUTES

 

47. Minutes

 

(a) Minutes of each General Meeting and of each meeting of the Board of Directors and any Committees thereof shall be recorded and duly entered in books provided for that purpose. Such minutes shall, in all events, set forth the names of the persons present at the meeting and all resolutions adopted thereat.

 

(b) Any minutes as aforesaid, if purporting to be signed by the Chairman of the meeting, shall constitute prima facie evidence of the matters recorded therein.

 

DIVIDENDS

 

48. Declaration and Payment of Dividends

 

(a) Subject to the Companies Law, the Board of Directors may from time to time declare, and cause the Company to pay, such dividend as may appear to the Board of Directors to be appropriate. Subject to the Companies Law, the Board of Directors shall determine the time for payment of such dividends, and the record date for determining the shareholders entitled thereto.

 

(b) The Company’s obligation to pay dividends or any other amount in respect of shares, may be set-off by the Company against any indebtedness, however arising, liquidated or non-liquidated, of the Person entitled to receive the dividend. The provisions contained in this Article shall not prejudice any other right or remedy vested with the Company pursuant to these Articles or otherwise.

 

49. Amount Payable by Way of Dividends

 

Subject to the rights of the holders of shares with special rights as to dividends, any dividend paid by the Company shall be allocated among the shareholders entitled thereto in proportion to their respective holdings of the shares in respect of which such dividend is being paid.

 

50. Interest

 

No dividend shall carry interest as against the Company.

 

51. Form of Dividend

 

Upon the declaration of the Board of Directors, a dividend may be paid, wholly or partly, by the distribution of cash or specific assets of the Company or by distribution of securities of the Company or of any other companies, or in any one or more of such ways.

 

52. Retention of Dividends

 

The Board of Directors may retain any dividend or other moneys payable or property distributable in respect of a share in respect of which any Person is, under Articles 17 or 18, entitled to become a shareholder, or which any Person is, under said Articles, entitled to transfer, until such Person shall become a shareholder in respect of such share or shall transfer the same.

 

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53. Unclaimed Dividends

 

All unclaimed dividends or other moneys payable in respect of a share may be invested or otherwise made use of by and for the benefit of the Company until claimed. The payment by the Company of any unclaimed dividend or such other moneys into a separate account shall not constitute the Company a trustee in respect thereof, and any dividend unclaimed after a period of seven (7) years from the date of declaration of such dividend, and any such other moneys unclaimed after a like period from the date the same were payable, shall be forfeited and shall revert to the Company, provided, however, that the Board of Directors may, at its discretion, cause the Company to pay any such dividend or such other moneys, or any part thereof, to a Person who would have been entitled thereto had the same not reverted to the Company.

 

FINANCIAL STATEMENTS

 

54. Financial Statements

 

The Board of Directors shall cause accurate books of account to be kept in accordance with the provisions of applicable law. Such books of account shall be kept at the Registered Office of the Company, or at such other place or places as the Board of Directors may think fit, and they shall always be open to inspection by all Directors. No shareholder, not being a Director, shall have any right to inspect any account or book or other similar document of the Company, except as conferred by law or authorized by the Board of Directors or by a Shareholders Resolution. The Company shall not be required to send copies of its financial statements to the shareholders.

 

AUDITORS

 

55. Outside Auditor

 

The outside auditor of the Company shall be recommended by the Audit Committee and elected by Shareholder Resolution at each Annual General Meeting and shall serve until the next Annual General Meeting or its earlier removal or replacement by Shareholder Resolution. The Board of Directors shall have the authority to fix, in its discretion, the remuneration of the auditor for audit and any other services, or to delegate such authority to the Audit Committee.

 

56. Internal Auditor

 

The internal auditor of the Company shall be subject to the administrative supervision of the Chairman of the Board of Directors and shall present all its proposed work plans to the Audit Committee, which shall have the authority to approve them subject to any modifications in its discretion.

 

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EXEMPTION, INSURANCE AND INDEMNITY

 

57. Exemption, Insurance and Indemnity

 

(a) Insurance of Office Holders:

 

i. The Company may insure the liability of any Office Holder therein to the fullest extent permitted by law.

ii. Without derogating from the aforesaid the Company may enter into a contract to insure the liability of an Office Holder therein for an obligation imposed on him in consequence of an act done in his capacity as an Office Holder therein, in any of the following cases:

 

1. A breach of the duty of care vis-à-vis the Company or vis-à-vis another Person;

 

2. A breach of the duty of loyalty vis-à-vis the Company, provided that the Office Holder acted in good faith and had reasonable basis to believe that the act would not harm the

Company;

 

3. A monetary obligation imposed on him in favor of another Person;

 

4. Reasonable litigation expenses, including attorney fees, incurred by the Office Holder as a result of an administrative enforcement proceeding instituted against him. Without derogating from the generality of the foregoing, such expenses will include a payment imposed on the Office Holder in favor of an injured party as set forth in Section 52(54)(a)(1)(a) of the Israeli Securities Law, 1968, as amended (the "Securities Law") and expenses that the Office Holder incurred in connection with a proceeding under Chapters H'3, H'4 or I'1 of the Securities Law, including reasonable legal expenses, which term includes attorney fees; or

 

5. Any other matter in respect of which it is permitted or will be permitted under applicable law to insure the liability of an Office Holder in the Company.

 

(b) Indemnity of Office Holders:

 

i. The Company may indemnify an Office Holder therein, retroactively or pursuant to an advance undertaking, to the fullest extent permitted by law. Without derogating from the aforesaid the Company may indemnify an Office Holder in the Company for liability or expense incurred by him or imposed on him in consequence of an action made by him in the capacity of his position as an Office Holder in the Company, as follows:

 

1. Any financial liability imposed on him in favor of another Person in accordance with a judgment, including a judgment given in a settlement or a judgment of an arbitrator, approved by a court.

 

2. Reasonable litigation expenses, including legal fees, incurred by the Office Holder or which he was ordered to pay by a court, within the framework of proceedings filed against him by or on behalf of the Company, or by a third party, or in a criminal proceeding in which he was acquitted, or in a criminal proceeding in which he was convicted of a criminal offense which does not require proof of criminal intent.

 

3. Reasonable litigation expenses, including legal fees he incurs due to an investigation or proceeding conducted against him by an authority authorized to conduct such an investigation or proceeding, and which was ended without filing an indictment against him and without being subject to a financial obligation as a substitute for a criminal proceeding, or that was ended without filing an indictment against him, but with the imposition of a financial obligation, as a substitute for a criminal proceeding relating to an offence which does not require proof of criminal intent, within the meaning of the relevant terms in the Companies Law, or in connection with an administrative enforcement proceeding or a financial sanction. Without derogating from the generality of the foregoing, such expenses will include a payment imposed on the Office Holder in favor of an injured party as set forth in Section 52(54)(a)(1)(a) of the Securities Law, and expenses that the Office Holder incurred in connection with a proceeding under Chapters H'3, H'4 or I'1 of the Securities Law, including reasonable legal expenses, which term includes attorney fees.

 

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ii. Advance Indemnity The Company may indemnify an Office Holder therein, except as provided by applicable law. The Company may give an advance undertaking to indemnify an Office Holder therein in respect of the following matters:

 

1. Matters as detailed in Article 57(b)(i)(1), provided, however, that the undertaking is restricted to events, which in the opinion of the Board of Directors, are foreseeable in light of the

Company’s actual activity at the time of granting the obligation to indemnify and is limited to a sum or measurement determined by the Board of Directors as reasonable under the circumstances. The indemnification undertaking shall specify the events that, in the opinion of the Board of Directors are foreseeable in light of the Company’s actual activity at the time of grant of the indemnification and the sum or measurement, which the Board of Directors determined to be reasonable under the circumstances;

 

2. Matters as detailed in Article 57(b)(i)(2) and 57(b)(i)(3); and

 

3. Any matter permitted by applicable law.

 

(c) Exemption of Office Holders. The Company may exempt an Office Holder therein in advance and retroactively for all or any of his liability for damage in consequence of a breach of the duty of care vis-à-vis the Company, to the fullest extent permitted by law.

 

(d) Insurance, Exemption and Indemnity – General.

 

i. The provisions of this Article 57 with regard to insurance, exemption and indemnity are not and shall not limit the Company in any way with regard to its entering into an insurance contract and/or with regard to the grant of indemnity and/or exemption in connection with a person who is not an Office Holder of the Company, including employees, contractors or consultants of the Company, all subject to any applicable law.

 

ii. Articles 57(a) through 57(d) shall apply mutatis mutandis in respect of the grant of insurance, exemption and/or indemnification for Persons serving on behalf of the Company as Office Holders in companies controlled by the Company, or in which the Company has an interest.

 

iii. An undertaking to insure, exempt and indemnify an Office Holder in the Company as set forth above shall remain in full force and effect even following the termination of such Office Holder’s service with the Company.

 

iv. Any amendment to the Companies Law, the Securities Law or any other applicable law adversely affecting the right of any Office Holder to be indemnified or insured pursuant to this Article 57 shall be prospective in effect, and shall not affect the Company’s obligation or ability to indemnify or insure an Office Holder for any act or omission occurring prior to such amendment, unless otherwise provided by the Companies Law, the Securities Law or such other applicable law.

 

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NOTICES

58. Notices

 

(a) Any written notice or other document may be served by the Company upon any shareholder either personally, or by facsimile transmission, or by sending it by prepaid mail (airmail or overnight air courier, if being sent from any country to a destination outside such country) or electronic mail addressed to such shareholder at his address as set forth in the Register of Shareholders or such other address as he may have designated in writing for the receipt of notices and other documents. Any written notice or other document may be served by any shareholder upon the Company by tendering the same in person to the Secretary or the General Manager of the Company at the principal office of the Company, or by facsimile transmission, or by sending it by prepaid registered mail (airmail or overnight air courier if being sent from any country outside Israel) to the Company at its registered office. Any such notice or other document shall be deemed to have been served (i) in the case of mailing, three (3) days after it has been posted, or when actually received by the addressee if sooner than three (3) days, after it has been posted; (ii) in the case of overnight air courier, on the second business day following the day sent; (iii) in the case of personal delivery, on the date such notice was actually tendered in person to such shareholder (or to the Secretary or the General Manager); (iv) in the case of facsimile transmission, on the date on which the sender receives automatic electronic confirmation that such notice was successfully transmitted; or (v) in the case of electronic mail, on the date on which the sender receives telephonic or written confirmation that such notice was received. If a notice is, in fact, received by the addressee, it shall be deemed to have been duly served, when received, notwithstanding that it was defectively addressed or failed, in some respect, to comply with the provisions of this Article 58(a).

 

(b) All notices to be given to the shareholders shall, with respect to any share to which Persons are jointly entitled, be given to whichever of such Persons is named first in the Register of Shareholders, and any notice so given shall be sufficient notice to the holders of such share.

 

(c) Any shareholder whose address is not specified in the Register of Shareholders, and who shall not have designated in writing an address for the receipt of notices, shall not be entitled to receive any notice from the Company.

 

RIGHTS OF SIGNATURE

 

59. Rights of Signature

 

The Board of Directors shall be entitled to authorize any Person or Persons (who need not be officers or Directors) to act and sign on behalf of the Company, and the acts and signature of such Person(s) on behalf of the Company with the Company’s stamp or printed name shall bind the Company insofar as such Person(s) acted and signed within the scope of his or their authority.

 

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WINDING UP

 

60. Winding Up

 

(a) Notwithstanding anything to the contrary in these Articles, a Shareholders Resolution approved by 75% of the voting shares represented at such meeting in person or by proxy is required to approve the voluntary winding up of the Company.

 

(b) If the Company be wound up, liquidated or dissolved, then, subject to applicable law and to the rights of the holders of shares with special rights upon winding up, if any, the assets of the Company legally available for distribution among the shareholders, after payment of all debts and other liabilities of the Company, shall be distributed to the shareholders in proportion to the nominal value of their respective holdings of the shares in respect of which such distribution is being made, provided, however, that if a class of shares has no nominal value, then the assets of the Company legally available for distribution among the holders of such class shall be distributed to them in proportion of their respective holdings of the shares in respect of which such distribution is made.

 

SPECIAL APPROVAL FOR NEW FIELDS OF BUSINES S

 

61. Special Approval for New Fields of Business

 

Notwithstanding Article 32(b) above, a decision by the Company to engage in a new field of business which is material to the Company, in which neither the Company nor any of its subsidiaries is engaged and which new field of business is not complementary to the business of the Company or its subsidiaries, shall require the unanimous approval of all of the members of the Company's board of directors present and lawfully entitled to vote at the relevant meeting.

 

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Exhibit 4.1

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

ORDINARY SHARES PURCHASE WARRANT

 

TODOS MEDICAL LTD.

 

Warrant Shares: _______ Issue Date: ______ ___, 2015

 

THIS ORDINARY SHARES PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received, _____________ or its assigns (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date and on or prior to the close of business on ____ ___, 2018 (the “ Termination Date ”) but not thereafter, to subscribe for and purchase from Todos Medical Ltd., an Israel limited shares company (the “ Company ”), up to ______ Ordinary Shares (as subject to adjustment hereunder, the “ Warrant Shares ”). The purchase price of one Ordinary Share under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1 .         Definitions . Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Subscription Agreement (the “ Purchase Agreement ”), dated _____ __, 2015, among the Company and the purchasers signatory thereto.

 

Section 2 .          Exercise .

 

a)         Exercise of Warrant . Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or prior to the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise in the form annexed hereto and within three (3) trading days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) trading days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

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b)        Exercise Price . The exercise price per share of the Ordinary Shares under this Warrant shall be $0.50, subject to adjustment hereunder (the “ Exercise Price ”).

 

c)        Reserved.

 

d)         Mechanics of Exercise .

 

i.           Delivery of Warrant Shares Upon Exercise . Warrant Shares purchased hereunder shall be transmitted: (1) if the Company’s Ordinary Shares are not able to be publicly traded on a securities exchange or marketplace on the date the Notice of Exercise is delivered and the Company does not have a transfer agent, by the Company to the Holder by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is ten (10) business days after the delivery to the Company of the Notice of Exercise (such date, the “ Situation 1 Warrant Share Delivery Date ”); (2) if the Company’s Ordinary Shares are not able to be publicly traded on a securities exchange or marketplace on the date the Notice of Exercise is delivered and the Company has a transfer agent, by the transfer agent to the Holder by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is ten (10) business days after the delivery to the Company of the Notice of Exercise (such date, the “ Situation 2 Warrant Share Delivery Date ”); or (3) if the Company’s Ordinary Shares are able to be publicly traded on a securities exchange or marketplace on the date the Notice of Exercise is delivered, by the transfer agent crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“ DWAC ”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the shares are eligible for resale by the Holder pursuant to Rule 144, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is one (1) trading day after the delivery to the Company of the Notice of Exercise (such date, the “ Situation 3 Warrant Share Delivery Date ”, and collectively with the Situation 1 Warrant Share Delivery Date and the Situation 2 Warrant Share Delivery Date, the “ Warrant Share Delivery Date ”). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Situation 1 or Situation 2 Warrant Share Delivery Dates, as the case may be, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $1 in total per business day after such Situation 1 or Situation 2 Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Situation 3 Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the volume weighted average price of the Ordinary Shares on the date of the applicable Notice of Exercise), $10 per trading day (increasing to $20 per trading day on the fifth trading day after such liquidated damages begin to accrue) for each trading day after such Situation 3 Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise.

 

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ii.           Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii.           Rescission Rights . If the Company fails to cause the Company or the transfer agent, as the case may be, to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv.           Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise . In addition to any other rights available to the Holder, if the Company fails to cause the transfer agent to transmit to the Holder the Warrant Shares pursuant to an exercise on or before the Situation 3 Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Ordinary Shares to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “ Buy-In ”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Ordinary Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Ordinary Shares that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Ordinary Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Ordinary Shares with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Ordinary Shares upon exercise of the Warrant as required pursuant to the terms hereof.

 

v.           No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi.           Charges, Taxes and Expenses . Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided , however , that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all transfer agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

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vii.           Closing of Books . The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

e)                  Holder’s Exercise Limitations . The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Ordinary Shares beneficially owned by the Holder and its Affiliates shall include the number of shares of Ordinary Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Ordinary Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Ordinary Shares, a Holder may rely on the number of outstanding shares of Ordinary Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the transfer agent setting forth the number of shares of Ordinary Shares outstanding.  Upon the written or oral request of a Holder, the Company shall within two trading days confirm orally and in writing to the Holder the number of shares of Ordinary Shares then outstanding.  In any case, the number of outstanding shares of Ordinary Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Ordinary Shares was reported. The “ Beneficial Ownership Limitation ” shall be 9.99% of the number of shares of the Ordinary Shares outstanding immediately after giving effect to the issuance of shares of Ordinary Shares issuable upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Ordinary Shares outstanding immediately after giving effect to the issuance of shares of Ordinary Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any such increase or decrease will not be effective until the 61 st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

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Section 3 .            Certain Adjustments .

 

a)          Share Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a share dividend or otherwise makes a distribution or distributions on shares of its Ordinary Shares or any other equity or equity equivalent securities payable in shares of Ordinary Shares (which, for avoidance of doubt, shall not include any shares of Ordinary Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Ordinary Shares into a larger number of shares, (iii) combines (including by way of reverse share split) outstanding shares of Ordinary Shares into a smaller number of shares or (iv) issues by reclassification of the Ordinary Shares, any shares of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Ordinary Shares (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Ordinary Shares outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)         [RESERVED]

 

c)          Subsequent Rights Offerings . In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any or any rights to purchase shares, warrants, securities or other property pro rata to the record holders of any class of shares of Ordinary Shares (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Ordinary Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Ordinary Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d)          Pro Rata Distributions . During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Ordinary Shares, by way of return of capital or otherwise (including, without limitation, any distribution of cash, shares or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Ordinary Shares are to be determined for the participation in such Distribution ( provided , however , to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Ordinary Shares as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

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e)          Fundamental Transaction . If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Ordinary Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Ordinary Shares, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Ordinary Shares or any compulsory share exchange pursuant to which the Ordinary Shares is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Ordinary Shares (not including any shares of Ordinary Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such share purchase agreement or other business combination) (each a “ Fundamental Transaction ”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Ordinary Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Ordinary Shares for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Ordinary Shares in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Ordinary Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction. “ Black Scholes Value ” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“ Bloomberg ”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the trading day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “ Successor Entity ”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Ordinary Shares acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the Ordinary Shares pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

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f)          Calculations . All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Ordinary Shares deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Ordinary Shares (excluding treasury shares, if any) issued and outstanding.

 

g)         Notice to Holder .

 

i.           Adjustment to Exercise Price . Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii.           Notice to Allow Exercise by Holder . If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Ordinary Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Ordinary Shares, (C) the Company shall authorize the granting to all holders of the Ordinary Shares rights or warrants to subscribe for or purchase any shares of any class or of any rights, (D) the approval of any shareholders of the Company shall be required in connection with any reclassification of the Ordinary Shares, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Ordinary Shares is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Ordinary Shares of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Ordinary Shares of record shall be entitled to exchange their shares of the Ordinary Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company, the Company shall simultaneously file such notice with the Commission pursuant to a Report of Foreign Private Issuer on Form 6-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

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Section 4 .           Transfer of Warrant .

 

a)         Transferability . Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d), this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) trading days of the date the Holder delivers an assignment form to the Company assigning this Warrant full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b)         New Warrants . This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c)         Warrant Register . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

d)         Reserved .

 

e)         Representation by the Holder . The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

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Section 5 .           Registration Rights . On or prior to the Termination Date, the Holder shall have the right to request that the Company effect a registration of the Warrant Shares by having the Company prepare and file a Registration Statement in compliance with the 1933 Act. Thereupon the Company shall promptly use its best efforts to effect the registration of the Warrant Shares that the Company has been requested to register and the Company will pay all registration expenses in connection therewith; provided, however, that the Company shall not be obligated to effect any registration except in accordance with the following provisions:

 

a) The Company shall not be obligated to file any registration statement with regard to any Warrant Shares unless holders request, within a five (5) business day period, at least fifty one percent (51%) of all of the Company’s then outstanding Warrant Shares be registered.

 

b) The Company shall not be obligated to file and cause to become effective more than one (1) registration statement in which Warrant Shares are registered pursuant to this Section 5.

 

c) Notwithstanding the foregoing, the Company may include in each such registration requested pursuant to this Section 5 any authorized but unissued Ordinary Shares for sale by the Company or any issued and outstanding Ordinary Shares for sale by others, provided, however, that the inclusion of such previously authorized but unissued Ordinary Shares by the Company or issued and outstanding Ordinary Shares by others in such registration shall not prevent the holders of Warrant Shares requesting such registration from registering the entire number of Warrant Shares requested by them.

 

d) The registration rights granted pursuant to this section shall have no force or effect until the earlier of the Company having completed its initial public offering under the Securities Act or otherwise becoming obligated to file periodic or other reports pursuant to Section 13 of the Exchange Act.

 

Section 6 .           Miscellaneous .

 

a)         No Rights as Shareholder Until Exercise . This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.

 

b)         Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any share certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or share certificate, if mutilated, the Company will make and deliver a new Warrant or share certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or share certificate.

 

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c)          Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d)         Authorized Shares .

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Ordinary Shares a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Ordinary Shares may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

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Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e)         Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f)          Restrictions . The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

g)         Nonwaiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h)         Notices . Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i)          Limitation of Liability . No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Ordinary Shares or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j)          Remedies . The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

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k)          Successors and Assigns . Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l)          Amendment . This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m)          Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n)          Headings . The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

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(Signature Page Follows)

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

  TODOS MEDICAL LTD.
     
  By:  
    Name:
    Title:
     

 

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NOTICE OF EXERCISE

 

To:          TODOS MEDICAL LTD.

 

(1)       The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2)       Payment shall take the form of (check applicable box) in lawful money of the United States.

 

(3)       Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

     

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

     
     
     
     
     

 

If DWAC is not available, the Warrant Shares shall be physically delivered to the following address:

 

     
     
     
     
     

 

(4)       Accredited Investor . The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

   
   
[SIGNATURE OF HOLDER]  

 

Name of Investing Entity:  

Signature of Authorized Signatory of Investing Entity :  

Name of Authorized Signatory:  

Title of Authorized Signatory:  

Date:  

 

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name:  
  (Please Print)
   
Address:  
  (Please Print)

 

Dated: _______________ __, ______  

 

Holder’s Signature:    
     
Holder’s Address:    

 

 

 

Exhibit 5.1

Dana Livneh-Zemer, Law Offices

 

Tel-Aviv

February 26, 2016

 

Todos Medical Ltd.

1 Hamada Street

Rehovot

Israel

 

 

Ladies and Gentlemen:

 

We have acted as Israeli counsel to Todos Medical Ltd., a corporation organized under the laws of the State of Israel (the “ Company ”), in connection with the Registration Statement on Form F-1 (the “ Registration Statement ”), filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”) on the date hereof. The Registration Statement relates to the resale from time to time by the selling security holders identified therein of up to 53,349,490 ordinary shares of the Company, par value NIS 0.01 per share (the “ Ordinary Shares ”), including 4,889,406 Ordinary Shares issuable upon exercise of warrants (the “ Warrant ”) held by the selling security holders (the “ Warrant Shares ”) and up to 2,172,034 Ordinary Shares issuable upon exercise of options by certain employees of the Company (the " Option Shares ").

 

In so acting, we have examined such corporate documents and have made such investigation of matters of fact and law as we have deemed relevant and necessary as a basis for the opinion hereinafter set forth.

 

In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. As to all questions of fact material to this opinion, we have relied, without independent investigation, upon statements and certificates or comparable documents of officers and representatives of the Company and upon certificates of public officials. We have considered such questions of Israeli law as we have deemed necessary for the purpose of rendering this opinion.

 

Based upon the foregoing and subject to the assumptions, qualifications and limitations as set forth herein, we are of the opinion that:

 

(1) the Ordinary Shares, when issued, were duly authorized and validly issued, fully paid and non-assessable; and

 

(2) the Warrant Shares, when fully paid for and issued in accordance with the terms and conditions of the Warrants, will be duly authorized, validly issued, fully paid and non-assessable.

 

 

 

 

 

 

  

 

 

 

(3) the Option Shares, when fully paid for and issued upon exercise of the Options, in accordance with the terms of the 2015 Option Plan and respective grant letters to the employees, will be duly authorized, validly issued, fully paid and non-assessable.

 

We are members of the Bar of the State of Israel and, in rendering our opinion, we do not pass (expressly or by implication) on the laws of any jurisdiction other than the State of Israel. Our opinion relates only to Israeli laws. In addition, we render no opinion in relation to any representation made or given in the Registration Statement.

 

This opinion is furnished to you solely in connection with the Registration Statement and is not to be used, circulated, quoted or otherwise referred to for any other purpose without our express prior written permission.

 

This opinion is rendered as of the date hereof and we disclaim any obligation to advise you of facts, circumstances, events or developments that may be brought to our attention after the effective date of the Registration Statement that may alter, affect or modify the opinions expressed herein.

 

We hereby consent to the filing of this opinion with the Securities and Exchange Commission as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the caption “Enforceability of Civil Liability" and "Legal Matters” in the related prospectus. The issuance of such consent does not concede that we are an “expert” for the purposes of the Securities Act or the rules and regulations promulgated thereunder.

 

 

Very truly yours,

 

 

/s/ Dana Livneh-Zemer, law office

——————————————

Dana Livneh-Zemer, Law office

 

 

 

 

Exhibit 10.1

 

RESEARCH AND LICENSE AGREEMENT

 

This Agreement is entered into as of this 8 th day of April, 2010 (the “ Effective Date ”), by and between a company to be incorporated under the laws of the State of Israel (the “ Company ”) (until the Company is incorporated, Crow Technologies 1977 Ltd. Shall be in place of the Company); B.G. Negev Technologies and Applications Ltd. , number 510785207, a company formed under the laws of Israel, having a place of business at 1 Henrietta Szold St., Beer Sheva, 84105 (“ BG Negev ”); and Mor Research Applications Ltd. a company incorporated under the laws of the State of Israel having a place of business at 38 HaBarzel St, Tel Aviv 69710 (“ Mor ”). BG Negev and Mor shall be referred to hereinafter jointly and severally as “ Licensors ” and each as a “ Licensor ”.

 

Licensors the Company and Mor shall be hereinafter collectively referred to as the “ Parties ”; each one of which also be referred to as a “ Party ”.

 

WHEREAS , BG Negev, a company wholly-owned by Ben Gurion University (“ BGU ”), is exclusively in charge of the protection, management and commercial exploitation of the intellectual property and know how of BGU; and

 

WHEREAS , Mor, a company wholly-owned by Clalit Medical Services (the “ Institute ”), is exclusively in charge of the protection, management and commercial exploitation of the intellectual property and know how of the Institute; and

 

WHEREAS , the Company desires to receive from Licensors an exclusive, world wide, sublicensable right and license to utilize Licensors IP (as such term is defined below) for the commercial development, production, marketing, sublicensing, distributing and selling of the Leukemia Licensed Products and the Licensed Products (as such terms are defined below); and

 

WHEREAS , Licensors agree to grant such license to the Company, all in accordance with the terms and conditions contained herein; and

 

WHEREAS , the Parties wish to set forth herein the terms and conditions of their research and economic collaboration;

 

NOW, THEREFORE , the Parties hereto, intending to be legally bound, hereby agree as follows:

 

1. GENERAL

 

1.1 The preface and Appendices to this Agreement constitute an integral part hereof.

 

1.2 The headings of the sections and subsections of this Agreement are for convenience and reference purposes only, and shall not be used for the interpretation thereof.

 

1.3 This Agreement contains the entire understanding of the Parties with respect to the subject matter hereof, and cancels all prior or pre-existing negotiations, declarations, presentations, commitments and/or agreements, whether written or oral, whether explicit or implied, between the Parties, with respect to such subject matter.

 

 

 

 

1.4 In this Agreement, unless otherwise required or indicated by the context, the singular shall include the plural and vice-versa, the masculine gender shall include all other genders.

 

1.5 In this Agreement, the following expressions shall have the meanings appearing alongside them, unless the context otherwise requires:

 

1.5.1 Affiliate ” - shall mean with respect to any Person, any other Person that directly or indirectly, through one or more intermediary Persons, Controls or is Controlled by or is under common Control with such Person.

 

1.5.2 Agreement ”- shall mean this agreement together with all the appendices and annexes hereto.

 

1.5.3 Calendar Quarter ” - shall mean during any given calendar year the periods from January 1 – March 31, April 1 – June 30, July 1 – September 30, and October 1 – December 31.

 

1.5.4 Commercialize ” - shall mean to render research, develop, manufacture, market, distribute, sublicense, sell, lease and/or make any other disposition of, a product and/or service.

 

1.5.5 Company IP ” - shall mean Company Research Results, and/or the Company Improvements and all IP independently developed by the Company prior to and after execution of this Agreement in relation only to the Licensed Products and Leukemia Licensed Product, including based on the Licensed IP.

 

1.5.6 Company Improvements ” – shall mean Improvements made, discovered or reduced to practice by the Company regarding the Licensed Products and Leukemia Licensed Products, including based on the Licensed IP.

 

1.5.7 Control ” – shall mean the power to direct or manage the affairs of the relevant entity or the beneficial ownership of more than fifty percent (50%) of such entity by voting share, equity interest, partnership interests, contract or otherwise.

 

1.5.8 Existing IP ” – shall mean provisional patent application number 61/318,395 filed on March 29 th 2010.

 

1.5.9 First Commercial Sale ” – shall mean the first sale of a Leukemia Licensed Product or a Licensed Product by an Invoicing Entity to a non-Affiliated Third Party, for value and not for demonstration or other promotional purposes or testing or development purposes, after obta inin g all required approvals from any competent authority to Commercialize such product.

 

1.5.10 Improvements ” – shall mean improvements and/or modifications of the Licensed IP.

 

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1.5.11 Inventors ” – shall mean Prof. Ilana Natan, Prof. Shaul Mordechai, Prof. Joseph Kapelushnik and Udi Zelig.

 

1.5.12 Invoicing Entity ” – shall mean the Company and/or any Affiliate of the Company and/or any Sublicensee of the Company and/or any Sublicensee of any Affiliate of the Company. For the sake of clarity non Affiliated Third Parties such as resellers, agents etc. shall not be considered as an Invoicing Entity if and to the extent the contractual relations between such Third Parties and an Invoicing Entity are constructed of (only) the sale of Leukemia Licensed Product(s) and/or Licensed Product(s) to such Third Parties for the purpose of reselling same.

 

1.5.13 Intellectual Property ”, “ IP ” – shall mean any and all intellectual property, whether or not registered or protected by patent rights, including, but not limited to, trade secrets, procedures, protocols, inventions, moral rights, drawings, trademarks, databases, know-how, improvements, discoveries, conceptions, ideas, techniques, designs, products, developments, specifications, methods, drawings, diagrams, models, software programs, data, data analysis, data interpretation, written reports, compounds, compositions, substances, processes, information and other results of whatsoever nature and all rights therein including copyright, patent rights, database rights, rights in designs and all registrations and applications therefore, and all continuations, continuations in part, divisional applications, and renewals of any of the foregoing, in any part of the world.

 

1.5.14 License ” – shall mean the license granted under Section 2 below.

 

1.5.15 Licensed Patents ” or “ Licensed IP ” – shall mean: (i) the Existing IP; (ii) all patent applications that may hereafter be filed by or on behalf of the Licensor, in any jurisdiction, which either are based on or claim priority from any Existing IP (iii) any issued patent(s) and pending patent application(s) relating to leukemia identification and screening and filed pursuant to this Agreement to protect the Existing IP, whether filed as an original application, continuation, continuation-in-part or divisional application; (iv) all patents which may be granted pursuant to any of the foregoing patent applications; (v) all IP using the FTIR for cancer diagnosis and follow up, which has not been developed by the Company.

 

1.5.16 Leukemia Licensed Product(s) ” – shall mean any process, product and/or service utilizing or incorporating the Licensed IP and/or Company IP or any part thereof in the field of Leukemia.

 

1.5.17 Licensed Product ” – shall mean any process, product and/or service utilizing or incorporating the Licensed IP and/or Company IP or any part thereof in any other fields which are not Leukemia.

 

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1.5.18 Net Sales ” – shall mean all amounts actually collected by an Invoicing Entity in connection with the Commercialization of the Leukemia Licensed Products and/or the Licensed Products and/or the Licensed IP and practice methods in connection with the use of the Leukemia Licensed Products and the Licensed Products and/or Licensed IP, less indirect taxes and charges, including sales tax, custom charges, freight and insurance (if separately invoiced) and any allowances or trade and quantity discounts actually granted by the Company, less any returns and allowances of Licensed Products and/or Leukemia Licensed Products; provided, however, that; (i) in any transfers of Leukemia Licensed Products and Licensed Products between an Invoicing Entity and an Affiliate thereof, Net Sales shall be equal to the total amount actually received by such Affiliate on resale to an independent Third Party purchaser; and (ii) in the event that the Invoicing Entity or an Affiliate thereof, receives non-monetary consideration for any Leukemia Licensed Products and Licensed Products or in the case of transactions not at arm’s length with a non-affiliate of the Invoicing Entity, Net Sales shall be calculated based on the fair market value of such consideration or transaction, ass umin g an arm’s length transaction made in the ordinary course of business.

 

1.5.19 Person ” – shall mean an individual, partnership, corporation, limited liability company, association, joint stock company, trust, probate estate, joint venture, unincorporated organization, governmental authority or any other entity.

 

1.5.20 Research Team ” – shall mean the Inventors and/or those BGU’s and/or BG Negev’s and/or Mor and/or Soroka Medical Center’s (“ Soroka ”) medical doctors, researchers, scientists and technicians working at BGU’s and/or BG Negev’s and/or Soroka’s and/or Mor’s facilities under the direction of any of the Inventors.

 

1.5.21 Sublicense ” – shall mean any right granted by the Company under the License to Third Parties, including to Affiliates or sub-contractors, as well as any right granted by any Affiliate of the Company, with respect to or permitting any use of any of the Licensed IP or otherwise permitting the Commercialization of the Leukemia Licensed Products and the Licensed Products.

 

1.5.22 Sublicensee ” – shall mean a non-Affiliated Third Party to whom the Company or an Affiliate of the Company grants a Sublicense.

 

1.5.23 Sublicense Income ” – shall mean amounts actually received by the Company and/or any Affiliate of the Company from a Sublicensee attributable to the grant of a Sublicense under the License, excluding royalties from Sublicensees calculated based on sales of the Leukemia Licensed Products and the Licensed Products by such Sublicensees to Third Parties. In the event the Company and/or any Affiliate of the Company receives Sublicense Income in the form of non-cash consideration, the Company shall determine the equivalent cash value based on the fair market value of such non-cash consideration assuming an arms-length transaction made in the ordinary course of business.

 

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1.5.24 Third Party ” – shall mean any Person other than the Parties.

 

2. GRANT OF LICENSE

 

Subject to full compliance by the Company with all the terms and conditions of this Agreement. Licensors hereby grant to the Company, subject to the terms of this Agreement, an exclusive, worldwide, sub-licensable license under their rights in the Licensed IP to Commercialize the Leukemia Licensed Products and the Licensed Products. For purposes of this Section 2, the term “exclusive” means that each of Licensors and/or BGU shall not have any right to grant such licenses or rights to any Third Party or engage in any of the foregoing and in addition shall not be entitled to directly, by itself or through any affiliate or third party on its behalf, Commercialize the Leukemia Licensed Products and the Licensed Products; however, each of Licensors will retain the right to use or to have used the Licensed IP solely for internal non-commercial research purposes, provided that if and to the extent such research shall be conducted by the Research Team, the results of such research shall be provided to the Company and shall be included in the Licensed IP and the provisions of this Agreement shall apply thereto.

 

3. SUB-LICENSES

 

3.1 Subject to the terms and conditions of this Section 3 the Company shall be entitled to grant Sublicenses under the License.

 

3.2 Sublicenses shall only be granted pursuant to written agreements (“ Sublicense Agreement ”), which shall be in compliance and not inconsistent with the terms and conditions of this Agreement.

 

3.3 Each Sublicense Agreement shall contain undertakings by the Sublicensee to observe and perform provisions substantially similar to those contained in this Agreement with regard to, inter alia , confidentiality, non-assignability, liability, Licensors’ proprietary rights and termination.

 

3.4 Each Sublicense Agreement shall terminate automatically upon expiration or termination of this Agreement. Upon such termination, Licensors shall be entitled to enter into direct licensing agreements with any such Sublicensee excluding in the event that the termination of this Agreement results from a material breach of any of the Licensors, in which case said Licensor’s right (to enter into direct licensing agreements with Sublicensees) shall be subject to the Company’s approval). Notwithstanding the above-mentioned, Company shall be entitled to permit any Sublicensee to fulfill any outstanding undertaking such Sublicensee has on the date of termination of this Agreement to supply Leukemia Licensed Products and/or Licensed Products to any Third Party subject to the fulfillment of Company’s obligations hereunder with regard to such sales. The above exception shall not apply in case that this Agreement has been terminated as a result of Company’s failure to effect payments under Sections 4 and 5 below.

 

3.5 Each Sublicense Agreement shall include all terms necessary to enable performance by the Company of its obligations under this Agreement.

 

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3.6 A copy of each Sublicense Agreement shall be submitted to Licensors, provided that Licensors shall sign, if requested by Sublicensee, a confidentiality undertaking.

 

3.7 Concurrently with the signature of each Sublicense Agreement, the Company shall submit to Licensors: (i) a non-disclosure agreement signed by the Sublicensee in a form reasonably acceptable to Licensors; and (ii) an undertaking executed by the Sublicensee confirming its obligations to Licensors, in accordance with the terms of this Agreement, in a form reasonably acceptable to Licensors.

 

3.8 The Company hereby agrees and undertakes to make commercially reasonable efforts to ensure that Sublicensees do not materially breach their respective Sublicense Agreement. If the Company fails to make such commercially reasonable efforts (which for this purpose include also the termination by the Company of the respective Sublicense Agreement as provided below), it hereby agrees and undertakes that it shall remain solely responsible towards Licensors for all acts and omissions performed, or omitted, by any such Sublicensees (“ Acts ”). Any Acts by any Sublicensee which are not remedied by the Company or the Sublicensee within a period of thirty (30) days from the date of service of a notice [and for this purpose it is agreed that the termination of the respective Sublicense Agreement by Company shall be considered as an appropriate remedy], and which would have constituted a breach of this Agreement by the Company had it been the Act of the Company, shall constitute a breach of this Agreement by the Company.

 

4. CONSIDERATION AND PAYMENT TERMS

 

4.1 In consideration for the rights granted under this Agreement, the Company, shall pay Licensors the following fees and payments:

 

4.1.1 Running Royalties. The Company shall pay Licensors three percent (3.0%) of Net Sales of any Leukemia Licensed Products and two and a half percent (2.5%) of Net Sales of any Licensed Products (“ Running Royalties ”). Notwithstanding the aforesaid, in the event that no patent will be granted for the patent application/s filed by Licensors or by Company in any of the following major territories: USA, Canada, Europe and or Japan, the Running Royalties shall be decreased to 2% of Net Sales of Leukemia Licensed Products and Licensed Products in that certain territory. For the sake of clarity it is hereby recorded that Running Royalties in connection to sales of Leukemia Licensed Products or Licensed Products shall not be paid more than once (e.g. as a result of transfers from an Affiliate of the Company to the Company or from one Affiliate to another). Running Royalties shall be paid starting from the Initiation Date (as defined below) or the First Commercial Sale, the earlier of, and in an amount not less than the Annual Minimum Royalties defined below.

 

4.1.2 Payments on Sublicensing Receipts. In addition to the Running Royalties Company shall also pay Licensors an amount equal to ten percent (10%) of any and all Sublicense Income for any Leukemia Licensed Products, and seven and a half percent (7.5%) of any and all Sublicense Income for any Licensed Products (“ Sublicense Consideration ”).

 

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Notwithstanding the above, if Company’s or any of its Affiliate’s sole consideration from a Sublicensee Agreement is Sublicense Income (no Running Royalties), Company shall pay Licensors twenty percent (20%) of such Sublicense Income received from the Sublicensee for Sublicense of any Leukemia Licensed Products and fifteen percent (15%) of such Sublicense Income received from the Sublicensee for Sublicense of any Licensed Products.

 

4.1.3 Minimum Royalties. Starting in the fifth calendar year following the Effective Date (8/4/2014) (“ Initiation Date ”) the Company shall pay Licensors an annual minimum royalty (“ Annual Minimum Royalty ”), as follows: for the first calendar year from the Initiation Date (2015): US$ 10,000; for the second calendar year following the Initiation Date (2016): US$ 25,000; as of the third calendar year following the Initiation Date and as long as this Agreement is in full force (2017 and thereafter): US$ 50,000. The Minimum Annual Royalties paid for each year shall be creditable against Running Royalties and Sublicense Consideration paid to Licensors with respect to that specific calendar year. In the event that the First Commercial Sale shall be achieved before the Initiation Date, the above timetable for payment of Annual Minimum Royalty will be accelerated accordingly [e.g. in case the First Commercial Sale shall be achieved on the second calendar year following the Effective Date, the amount of US$ 10,000 will be due on the third calendar year (following the Effective Date); US$ 25,000 on the forth calendar year; and US$ 50,000 as of the fifth calendar year].

 

4.2 Payment . All payments due under this Agreement shall be payable in US$. Payment shall be made as follows:

 

4.2.1 Running Royalties shall be paid by the Company to Licensors no later than forty five (45) days after the end of each Calendar Quarter.

 

4.2.2 Sublicense Consideration shall be paid no later than forty five (45) days after the end of each Calendar Quarter.

 

4.2.3 The Company shall pay Licensors the Minimum Annual Royalty due hereunder on the last day of each calendar Quarter for which the Minimum Annual Royalty is due, in respective portions (i.e. - 25% of the Annual Minimum Royalty shall be paid on the last day of the first calendar Quarter, additional 25% shall be paid on the last day of the second calendar Quarter, etc). For the sake of clarity and for the avoidance of any doubt, expiration or termination of this Agreement prior to the termination of any calendar year for which Minimum Annual Royalties are due hereunder shall entitle Licensors, without prejudicing any additional rights or remedies available to Licensors pursuant to this Agreement and/or the applicable law, to a pro-rata portion of the Minimum Annual Royalty for said calendar year.

 

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4.2.4 For the avoidance of doubt, in the event that the amount of Running Royalties and/or Sublicense Consideration actually received by Licensors for any calendar year during which Minimum Annual Royalties are payable to Licensors hereunder, will be lower than the Minimum Annual Royalty payable for such year, then the Company shall pay Licensors an amount that is equal to the difference between said Running Royalties and/or Sublicense Consideration and the Minimum Annual Royalty, no later than forty five (45) days following the end of the relevant calendar year.

 

4.3 Overdue Payments . Without derogating from Licensors’ rights hereunder or by law to any other additional remedy or relief, if the payments due to Licensors under this Agreement have not been paid by its due date of payment, the overdue monies shall bear interest at the U.S. prime rate plus two percent (2%), or, if such rate is not permitted by law, at the maximum rate permitted by the law. at the actual time of payment, on the outstanding sums. Said interest and the payment and acceptance thereof shall not preclude Licensors from exercising any other rights it may have as a consequence of the lateness of any payment.

 

4.4 Payment Method . Each payment due to Licensors under this Agreement shall be made by wire transfer to Licensors’ accounts in accordance with written instructions as provided by Licensors, and shall be net and free of any set-offs, deductions or withholdings, except as set forth in Section 4.6 below. 50% of each payment shall be remitted to the bank account of BG Negev (the details of which shall be provided by BG Negev to the Company from time to time) and 50% shall be remitted to the bank account of Mor (the details of which shall be provided by Mor to the Company from time to time).

 

4.5 Currency Conversion . Wherever it is necessary to convert currencies for Net Sales or Sublicense Income received by the Company in a currency other than the USD, such conversion shall be made into USD using the exchange rate for converting the applicable currency to the USD as published by Bloomberg on the date the applicable Net Sales have been received by the applicable Invoicing Entity.

 

4.6 Withholding and Similar Taxes . If applicable laws requires that taxes be withheld from any amounts due to Licensors under this Agreement, the Company shall: (a) deduct these taxes from the remittable amount, (b) pay the taxes to the appropriate tax authority, and (c) promptly deliver to Licensors a statement including the amount of tax withheld and justification therefore, and such information as may be necessary for tax credit purposes. Each Party agrees to assist the other Party in claiming exemption from such deductions or withholdings under any double taxation or similar agreement or treaty which may be in force from time to time.

 

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5. COMPANY REPORTS AND RECORDS

 

5.1 Reports . Within forty five (45) days after the conclusion of each Calendar Quarter, commencing with the first Calendar Quarter in which an Invoicing Entity first receives consideration from Net Sales and/or Sublicense Income, the Company shall deliver to Licensors a report containing the following information:

 

5.1.1 the Leukemia Licensed Products and the Licensed Products and/or Licensed IP Commercialized by the Company and/or its Affiliates and/or any Sublicensees in each country for the applicable Calendar Quarter;

 

5.1.2 the gross amount billed for the Leukemia Licensed Products and the Licensed Products and/or Licensed IP Commercialized by the Company and/or its Affiliates and/or Sublicensees in each country during the applicable Calendar Quarter;

 

5.1.3 a calculation of Net Sales for the applicable Calendar Quarter in each county, including a list of any and all applicable deductions;

 

5.1.4 the amount of Sublicense Income received by the Company and/or its Affiliates for the applicable Calendar Quarter;

 

5.1.5 the total amount payable to Licensors in US$ for the applicable Calendar Quarter, together with exchange rates used for conversion, if such rates apply.

 

The reports shall state if no amounts are due to Licensors for any Calendar Quarter.

 

5.2 Records and Audit . The Company shall maintain, shall cause its Affiliates to maintain and shall make reasonable commercial effort to cause its Sublicensees to maintain (and for this purpose will incorporate the necessary provisions in each Sublicense Agreement), complete and accurate, records of the Leukemia Licensed Products and the Licensed Products and/or Licensed IP that are Commercialized under this Agreement, any amounts payable to the Company and/or its Affiliates and/or Sublicensees in relation to such Leukemia Licensed Products and the Licensed Products and/or Licensed IP, and all Sublicense Income received by the Company and/or its Affiliates, which records shall contain sufficient information to permit Licensors to confirm the accuracy of any reports or notifications delivered to Licensors under Section 5.1.

 

The relevant party shall retain such records relating to a given Calendar Quarter for at least five (5) years after the conclusion of the Calendar Quarter. During such five (5) year period, Licensors shall have the right, at Licensors’ sole expense, to be exercised once every calendar year, to cause an independent, certified public accountant (“ Auditor ”), who is mutually acceptable to the Company, bound by a suitable confidentiality arrangement, with the Company, in the form acceptable to the Company, to inspect the Company’s and the relevant Affiliates’ and Sublicensees’ relevant records during normal business hours and with prior coordination with the Company and relevant Affiliates and Sublicensees for the purpose of verifying any reports and payments delivered under this Agreement.

 

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The Parties shall reconcile any underpayment or overpayment within thirty (30) days after the Auditor delivers the results of the audit in writing to such Parties, including accurate calculations of such underpayment or overpayment, as applicable, as well as interest in accordance with Section 4.3.

 

The Company shall make reasonable commercial effort to cause its Affiliates and Sublicensees to fully comply with the terms of this Section 5.2.

 

Notwithstanding the aforementioned, in the event that such an inspection reveals an underpayment of monies to Licensors by more than ten percent (10%), the Company shall pay all direct costs of the Auditor plus liquidated damages of 10% of the outstanding sums.

 

6. DEVELOPMENT AND COMMERCIALIZATION

 

6.1 The Company undertakes, at its own expense and discretion, to carry out the development and manufacturing work necessary to Commercialize the Licensed Products.

 

6.2 Without derogating from the aforesaid, the Company shall use commercially reasonable efforts to develop and to introduce the Leukemia Licensed Products and the Licensed Products into the co mm ercial market as soon as practicable and thereafter, until the expiration or termination of this Agreement, to use reasonably commercial efforts and endeavors to keep the Leukemia Licensed Products and the Licensed Products reasonably available to the public, provided such Leukemia Licensed Products and Licensed Products have continuous certifications and approvals (and the company shall use commercially reasonable efforts to procure that such certifications and approvals are granted).

 

6.3 The Company shall provide Licensors for the first three years from the Effective Date with semi-annual written reports, which shall detail the development status and other related work performed by the Company or by any of its Sublicensees or Affiliates during the six months prior to the report. After the above-mentioned three years period. Company shall provide Licensors with such written reports on an annual basis. Such reports shall also set forth a general assessment regarding the development of the Leukemia Licensed Products and the Licensed Product and the marketing thereof. It is hereby agreed that such reports shall not contain (i) personal information (of patients) which its disclosure is restricted under applicable law; and (ii) any individual raw data which is according to the mutual agreement of the Parties not relevant.

 

6.4 The Company shall submit to Licensors a written notice with regard to the First Commercial Sale within thirty (30) days after such sale has been effected.

 

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BG Negev, to the extent informed by the applicable researcher of BGU, shall in turn inform Company of any new project based on the Licensed IP that has been initiated by said researcher of BGU, and shall outline the content of such research within 3 months from the date of initiation of such research.

 

7. TITLE TO LICENSED IP

 

7. 1. All rights, title and interest in and to the Licensed IP shall be owned by Licensors and/or BGU and the Company undertakes not to do, or cause to be done, any acts or things contesting or in any way impairing or tending to impair any portion of Licensors’ and/or BGU’s right, title and interest in and to any of the aforesaid. The Company further undertakes not to represent in any manner that it possesses any ownership interest in the Licensed IP nor shall any action taken by the Company or on the Company’s behalf create in the Company’s favor any right, title or interest in and to the aforesaid.

 

7.2 All rights, title and interest in and to the Company IP shall be owned by the Company and Licensors undertake not to do, or cause to be done, any acts or things contesting or in any way impairing or tending to impair any portion of the Company’s right, title and interest in and to any of the aforesaid.

 

8. PATENT FILING, PROSECUTION AND MAINTENANCE

 

8.1 The Company shall bear all patent expenses with respect to the filing, prosecution and maintenance of the Licensed Patents including the out-of-pocket expenses incurred by Licensors in respect to the filing of the Licensed Patents until the Effective Date in the amount of US$ 8,170. Patent applications shall be in full coordination and subject to advice of the Company’s patent attorney. Company shall be named at its own cost as an exclusive licensee and the terms of the License shall be detailed and registered as part of the applicable patent application. During the term of this Agreement Licensors shall not make any changes in the status of the registration of the Company as an exclusive licensee, for any reason whatsoever, except with the prior consent of the Company, not to be unreasonably withheld.

 

8.2 The Company shall be solely responsible for the ongoing filing, prosecution, maintenance of the Licensed Patents, using its own legal counsel, and will consult on a general basis with the Licensors in relation to the preparation of any relevant specifications and the filing of new patent applications included therein. All applications shall list the Company as an exclusive licensee of such Patents.

 

8.3 All Licensed Patents shall be filed and registered in the name of Licensors (or their designees) and shall include the Company as an exclusive licensee.

 

8.4 The Parties shall consult and make every reasonable effort to reach an agreement in all respects relating to the manner of making applications and registering the Licensed Patents, including the time of making the applications, the countries where applications will be made and all other particulars relating to patent registration as aforesaid.

 

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8.5 In respect of any patent application mutually approved by the Company and Licensors, any and all costs and expenses of the preparation, filing, maintenance and prosecution of the Licensed Patents shall be borne and paid by the Company until termination or expiration of this Agreement.

 

8.6 The Parties shall assist each other in all respects relating to the preparation of documents for the registration of Licensed Patents or the maintenance thereof forthwith upon the other Party’s request.

 

8.7 During the term of this Agreement and as long as there is a commercial justification, as shall be mutually agreed by the Parties, the Company and Licensors undertake to take all appropriate measures in order to extend the period of the duration of the patent registrations or any other extension, granted by the law, to enable extension of the time in which the Licensed Patents are protected. All the terms of this Agreement shall apply to the extended period of protection.

 

8.8 In the event that the Company shall not pay the costs and expenses related to the filing, maintenance, prosecution or defense of any Licensed Patents (the “ Abandoned Patent Rights ”) in a certain state or country (the “ Abandoned Country ”) and Licensors elect to continue to file, maintain, prosecute or defend any such Abandoned Patent Rights in such Abandoned Country at its own cost and expense, then, subject to Licensor’s obligation to inform the Company 3 months in advance of its intention to do so and allowing the Company a 7 working days period following such notice to pay the Abandoned Patent Rights, any right granted hereunder to the Company with respect to the Abandoned Patent Right will terminate with respect to such Abandoned Country, and the Company shall have no rights whatsoever to exploit such Abandoned Patent Rights in such Abandoned Country.

 

Licensors hereby warrant that to the best of their knowledge (but without making any special inquiries) the Existing IP does not infringe upon any Intellectual Property of others. Licensors make no additional representation and extend no additional warranties of any land, either express or implied, in connection to the validity of any of the Licensed Patents (including the Existing IP). Licensors disclaim all warranties whatsoever with respect to the merchantability or fitness for a particular purpose of any Licensed Patent.

 

8.9

If any Party shall become aware of any known or threatened infringements, imitations or counterfeits of the Licensed Patents and/or the Leukemia. Licensed Products and/or the Licensed Products by any Third Party, it shall notify the other Party and the Company may take legal action in its own name, at the Company’s cost and expense, and with counsel of the Company’s choosing. If required or asked by the Company, Licensors shall join the Company as a party to any proceeding relating to prosecuting or defending such infringement actions, at the cost and expense of the Company. In the event that the Company shall elect NOT to take any legal action in its own name, the Company shall so notify Licensors and Licensors shall be entitled to pursue such legal action against third parties at its own cost and expense. If there is any monetary recovery in any such action commenced by the Company, the Company shall have the right to deduct all of its counsel fees and costs after which any remaining proceeds will be divided thirty-five percent (35%) to Licensors and sixty-five percent (65%) to the Company. If there is any monetary recovery in an action commenced by Licensors in accordance with this Section, Licensors shall have the right to deduct all of its counsel fees and costs after which any remaining proceeds will be divided thirty-five percent (35%) to the Company and sixty-five percent (65%) to Licensors.

 

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9. CONFIDENTIAL INFORMATION AND PUBLICATIONS

 

9.1 Concurrently with the signature hereof, the Parties shall execute a non-disclosure agreement in the form attached hereto as Appendix “A” .

 

9.2 Licensors shall have the right to allow Licensor’s researchers to publish research results obtained from the use of the Licensed IP according to Section 2 above, in scientific publications or to present such results at scientific symposia, provided that the following procedure is followed:

 

9.2.1 Such publications and presentations shall comply with standard academic practice regarding authorship of scientific publications and recognition of contribution of other Parties .

 

9.2.2 No later than forty-five (45) days prior to submission for publication of any scientific articles, abstracts or papers concerning such research results and prior to the presentation of such results at any scientific symposia, the researchers shall send to the Company and Licensors a written copy of the material to be so submitted or presented, and shall allow them to review such submission in order to determine whether the publication or presentation contains subject matter for which patent protection should be sought prior to publication or presentation or whether the publication or presentation contains non-patentable know how or trade secrets that should remain confidential.

 

9.2.3 The Company and Licensors shall provide their written comments with respect to such publication or presentation within forty-five (45) days following their receipt of such written material.

 

9.2.4 If the Company and/or Licensors, in their written comments, identifies material for which patent protection should be sought, then they shall cause the publication or presentation of such submission to be delayed for up to an additional sixty (60) days to enable the Parties, through the Parties’ patent counsel to make the necessary patent filings in accordance with Section 8 above.

 

9.2.5 If the Company, in its written comments, identifies material which contains know how and trade secrets that, in the reasonable judgment of the Company, should not be patented but should be maintained in confidence as trade secret then such publication or presentation will not be published or presented or will be delayed for up to an additional sixty (60) days to enable the Parties, through the Parties’ patent counsel to make the necessary redactions in the publication or presentation to maintain such confidentiality. In this regard the Company and Licensors will exercise all good faith efforts to cooperate with the researchers, recognizing their interest in publishing and discussing their work.

 

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9.2.6 After compliance with the foregoing procedures with respect to an academic, scientific or medical publication and/or public presentation the researchers shall not have to resubmit any such information for reapproval should it be republished or publicly disclosed in another form.

 

10. LIABILITY AND INDEMNITY

 

10.1 The Company hereby declares towards the Licensors only that it alone assumes any and all liabilities and/or responsibilities for any Leukemia Licensed Products and any Licensed Products and/or Licensed IP Commercialized by or on behalf of the Company and/or any of its Affiliates and/or Sublicensees. Without derogating from the generality of the aforesaid, the Company shall be responsible to obtain, at its own risk and expense, any and all licenses and/or official authorizations, including, without limitation, with respect to standards and/or quality, required with respect to the Commercialization of the Leukemia Licensed Products and/or the Licensed IP in accordance with any relevant laws, rules and regulations but only with respect to jurisdictions in which the Company has a License under this Agreement and in which it will Commercializes the Leukemia Licensed Products and the Licensed Products. Notwithstanding the above, the Company shall not be liable or responsible for any Third Party claim the cause of action of which is infringement of IP rights by the Existing IP or any patent issued pursuant to any Existing IP.

 

10.2 All warranties in connection with the Leukemia Licensed Products and the Licensed Products and/or the Licensed IP shall be made by the Company or its Affili ates and/or Sublicensees as manufacturer and seller, and shall not directly or by implication obligate Licensors and/or their officers, directors, agents, employees, shareholders, successors and assignees, and each of them (hereinafter collectively: the “Indemnitees” ).

 

10.3 The Indemnitees shall not be liable for any claims, demands, liabilities, costs, losses, damages or expenses (including legal costs and attorneys’ fees) of whatever kind or nature (all of the foregoing, collectively, “Liabilities” ) caused to or suffered by any person or entity (including the Company, its Af fil iates or any Sublicensee) that directly or indirectly arise out of or result from or are encountered in connection with the exercise of the License by the Company its Affiliates or any Sublicensee, including directly or indirectly arising out of or resulting from or encountered in connection with: (i) the Commercialization of any of the Leukemia Licensed Products and the Licensed Products and/or Licensed IP by the Company and/or its Affiliates and/or any Sublicensee or any person acting in the name of or on behalf of any of the foregoing, or acquiring, directly or indirectly, any of the Leukemia Licensed Products and/or Licensed IP from any of the foregoing; or (ii) the exploitation or use by the Company, its Affiliates or any Sublicensee of the Licensed IP or any part thereof, including of any data or information given, if given, in accordance with this Agreement.

 

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10.4 In the event that any of the Indemnitees should incur or suffer any Liabilities, that arise out of or result from or are encountered in connection with the exercise of the License or as otherwise set forth in Section 10.3 above, or shall be requested or obliged to pay to any person or entity any amount whatsoever as compensation for any Liabilities as aforesaid in Section 10.3 above, then the Company shall defend, indemnify and hold harmless such Indemnitees from and against any and all such Liabilities. Without limiting the generality of the foregoing, the Company’s indemnification as aforesaid and the exclusion of liability in Section 10.3 above shall extend to product liability claims and to damages, claims, demands, liabilities, losses, costs and expenses attributable to death, personal injury or property damage or to penalties imposed on account of the violation of any law, regulation or governmental requirement. The aforesaid shall not apply to Liabilities which result from a Third Party claim the cause of action of which is infringement of IP rights by the Existing IP or any patent issued pursuant to any Existing IP. Any indemnification under this Agreement is subject to the following provisions: no indemnification shall be made unless final and non-appealable judgment is entered against the Indemnitees or any of them or the Company and provided that the Indemnitees were unable to receive indemnification from other third parties, including insurance companies. Any settlement proceedings initiated or agreed to by the Indemnitees with any third party shall require the Company’s prior written consent. Indemnitees will enable the Company, at its sole expense, to solely defend such claims, and will make available for the Company any document and/or information required for such defense.

 

10.5 The Company shall at its own expense obtain commercial insurance, commensurate with level of risk as it should be reasonably anticipated in the present and as it may develop, to insure against its liability during the period immediately beginning prior to any Commercialization and continuing during the entire period that the License is in force, plus any additional period any such product, process, or service is being Commercialized by the Company and/or an Affiliate and/or Sublicensee. Such insurance shall be in reasonable amounts and on reasonable terms in the circumstances, having regard, in particular, to the nature of the Leukemia Licensed Products and the Licensed Products and/or the Licensed IP, and shall be subscribed for from a reputable insurance company. The Licensors shall be included as additional insureds under such insurance and the beneficiaries thereof. The said insurance policy shall include a “cross-liability” provision pursuant to which the insurance is deemed to be separate insurance for each named insured (without right of subrogation as against any of the insured under the policy, or any of their representatives, employees, officers, directors or anyone in their name) and shall further provide that the insurer will be obliged to notify each insured in writing at least thirty (30) days in advance of the expiry or cancellation of the policy or policies. The Company hereby undertakes to comply with all obligations imposed upon it under such policy or policies and in particular, without limiting the generality of the foregoing, to pay in full and punctually all premiums and other payments for which it is liable pursuant to such policy or policies. The Company shall be obliged to submit to Licensors a certificate of insurance within fourteen (14) days of the date of issue of each such policy.

 

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10.6 The provisions of this Section 10 shall survive the expiration or termination of this Agreement for whatsoever reason.

 

11. TERM AND TERMINATION

 

11.1 The term of this Agreement shall commence on the Effective Date and shall be in full force and effect for an unlimited period of time, unless earlier terminated as provided in this Section 11.

 

11.2 Either Party shall be entitled to forthwith terminate this Agreement (without prejudice to other rights and remedies to which it may be entitled pursuant to this Agreement and/or applicable law) by giving notice in writing to the other in any of the following events:

 

11.2.1 The other Party commits any material breach of this Agreement or fails in any other respect to comply with any material term of this Agreement and shall fail to remedy such breach or failure to comply with this Agreement within a period of thirty (30) days from the service on it of a notice from the other Party, specifying the breach of failure and requiring it to be remedied; or

 

11.2.2 The other Party enters into liquidation or is declared insolvent or bankrupt, or has a liquidator or an interim liquidator or a receiver or an interim receiver of a material part of its assets appointed, and such appointment is not removed within a period of sixty (60) days, or seeks or is subject to any other similar relief or procedure under any bankruptcy laws, insolvency laws or similar statutes.

 

11.3 In addition to the aforesaid, the Company shall be entitled to terminate this agreement forthwith in any of the following events:

 

11.3.1 If, at any time during the period of 5 years following the Effective Date (“ R&D Period ”), the Company at its sole discretion determines that Commercialization of Leukemia Licensed Products and the Licensed Products is not commercially beneficial;

 

11.3.2 If, during the period of 2 years following the R&D Period, the Company at its sole discretion determines that Commercialization of Leukemia Licensed Products and the Licensed Products is not commercially beneficial.

 

11.4 In addition to the aforesaid, Licensors shall be entitled to terminate this Agreement forthwith if the Company materially fails to fulfill its obligations under Section 6 above or is not demonstrably engaged in in-house research, development, manufacturing, marketing and licensing programs for a consecutive period of 90 days (and the date in which same occurs shall be hereinafter referred to as “ Non Commercialization Date ”). Notwithstanding the above. Licensors shall not realize such right to terminate the Agreement in case that Company shall transfer to Licensors, as of the Non Commercialization Date and onwards, Annual Minimum Royalty in the amount of US$ 50,000.

 

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12. EFFECTS OF TERMINATION

 

12.1 Upon the termination of this Agreement (without prejudicing any additional rights or remedies available to either Party pursuant to this Agreement and/or the applicable law):

 

12.1.1 The Company shall promptly return to Licensors or otherwise dispose of, as Licensors may instruct, all confidential information, including inter alia, documentation, technical pamphlets, photographs, specifications and other materials, documents and papers whatsoever relating to the Leukemia Licensed Products and the Licensed Products and/or the Licensed IP and/or any relating know how, process, improvements and/or to the business of Licensors which the Company may have in its possession or under its control. It is hereby clarified that all information containing the Company IP, shall not be returned. Any and all Company IP which may have been disclosed or provided to the Licensors, or any of them, shall be returned promptly upon termination of this Agreement.

 

12.1.2 All rights granted to the Company by the Licensors hereunder shall cease, and shall revert to Licensors, and the Company shall not thereafter be entitled, directly or indirectly, to make any use of the Licensed IP and any relating know how, process and/or improvements, including the Commercialization of the Leukemia and the Licensed Products and/or the Licensed IP.

 

12.1.3 Company shall at its own cost and no later than 30 days following the date of termination revoke its status (in any registry) as an exclusive licensee under any patent and patent application (if such status has been recorded according to the provisions of Section 8.1 above). Company shall not bear associated costs as aforementioned if termination of the Agreement is the result of Licensors’ breach of this Agreement.

 

12.1.4 The Company shall not be entitled, by reason of the termination or expiration of this Agreement, to claim any compensation, indemnity or damages, whether actual or contingent, for any reason whatsoever (and on the basis of any cause of action, including unjust enrichment), including, without limitation, on account of the loss of present or prospective profits on sales or anticipated sales, or expenditures, investments or commitments made in connection therewith, and Licensors shall not be liable to pay any compensation, indemnity or damages, as aforesaid.

 

12.2 For the avoidance of any doubt, it is hereby further agreed and understood that the expiration or termination of this Agreement, for any reason whatsoever, shall not release the Company and/or Licensors from any:

 

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12.2.1 Obligations, duties or liabilities that have been incurred prior to such expiration or termination;

 

12.2.2 Obligations, duties or liabilities which, from the contents hereof or the nature thereof, are intended to survive the expiration or termination of this Agreement, including inter alia, the undertakings subject of Sections 4.2 through 4.6, 5, 7 through 10, 12, 13 and 1215 hereto.

 

13. RIGHT OF FIRST OFFER

 

Subject to the fulfillment of Company’s obligations hereunder, in the event that Licensors resolve to transfer, sell or assign (“ Transfer ”) the Licensed IP or any part thereof (“ Transferred IP ”) to any Third Party subject to Section 15.4 hereof, the Company shall have the right of first offer to purchase the Transferred IP according to the following procedure (the “ Right Of First Offer ”): (i) Licensors shall notify the Company with regard to their intention to effect a Transfer and will identify the Transferred IP subject of the Transfer; (ii) at Company’s election the Parties will negotiate in good faith the terms of the Transfer within a period of thirty (30) days as of such notification of Licensors (“ Negotiation Period ”); (iii) in case the Parties fail to execute a Transfer agreement during the Negotiation Period, Licensors may Transfer the Transferred IP to any Third Party provided however that no Transfer to a Third Party shall be effected on terms more favorable to such Third Party then the terms offered by Company during the Negotiation Period, without re-initiating the mechanism of the Right of First Offer subject of this Section.

 

14. GOVERNING LAW, MEDIATION AND ARBITRATION

 

14.1 This Agreement, its interpretation, validity and breach shall be governed exclusively by the laws of the State of Israel without regard to its conflict of laws rules.

 

14.2 The Parties shall endeavor to amicably settle any dispute which may arise between them under or in connection to this Agreement (a “ Dispute ”). Any Dispute arising between the Parties not amicably resolved within fifteen (15) days or any extension thereof agreed to by the Parties, shall be referred to arbitration (the “ Arbitration ”) by a single arbitrator to be appointed jointly by the Parties (the “ Arbitrator ”). If the Parties fail to appoint the Arbitrator within a period of fourteen (14) days following a written request of any Party to appoint an Arbitrator, then the arbitrator shall be appointed by the chairman of the Israeli Bar Association. The Arbitration shall be held in Tel-Aviv in Hebrew language. The decision of the Arbitrator shall be final and binding upon the Parties. This constitutes an arbitration agreement pursuant to the arbitration law, 1968.

 

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15. MISCELLANEOUS

 

15.1 For the sake of clarity it is agreed that: (i) any right granted to Licensors pursuant to this Agreement, except for the right of termination and the rights to have the Licensed Patents registered in the name of Licensors, that should be exercised by Licensors jointly, may be exercised by each Licensor separately (except for the rights to receive royalties which shall be exercised in accordance with Section 4.4 above); (ii) any obligation of the Company towards Licensors pursuant to this Agreement shall be fulfilled towards all Licensors and the Company shall not be deemed as having discharged such obligation if it has been fulfilled only toward some but not all Licensors (iii) the right of ter min ation granted to Licensors pursuant to this Agreement may only be exercised by Licensors jointly; and (iv) any consent required from Licensors under this Agreement, shall mean the consent of all Licensors, except if expressly provided otherwise.

 

15.2 If any provision contained in this Agreement is determined to be invalid or unenforceable, in whole or in part, the remaining provisions and any partially enforceable provision will, nevertheless, be binding and enforceable, and the Parties hereby agree to substitute for the invalid provision a valid provision which most closely approximates the intent and the economic effect of the invalid provision.

 

15.3 The Parties undertake, during the term of this Agreement, to comply with all applicable laws, regulatory requirements and codes of practice in carrying out their respective obligations under this Agreement and in all matters relating hereto.

 

15.4 Neither Party shall assign this Agreement or its respective rights, duties and obligations hereunder to any Third Party or parties without having obtained the prior written consent of the other Party, which consent shall not be unreasonably withheld. Such consent shall not be required where the assignee is an Affiliate or a successor to a Party’s business in connection with a merger or sale of all or substantially all its assets relating to the subject matter hereof. Notwithstanding the aforesaid, BG Negev shall be entitled to assign to BGU any rights in IP granted to it in this Agreement and Mor shall be entitled to assign to the Institute any rights in IP granted to it in this Agreement, without the approval of the Company, provided the Company’s rights hereunder shall not be adversely affected.

 

15.5 The failure or delay of a Party to the Agreement to claim the performance of an obligation of the other Party shall not be deemed a waiver of the performance of such obligation.

 

15.6 No amendment or alteration of the Agreement shall be valid unless agreed in advance in writing by both Parties hereto.

 

15.7 The Company hereby undertakes, to the fullest extent permitted under any law, that in the event that the Company shall desire to employ any employee, including without limitations any researcher, who has been employed by BGU and/or Licensors after the date hereof, shall require the prior written consent of Licensors which shall not be unreasonably denied. For clarification purposes – the Company may engage such person, including without limitations any researcher as consultant or service provider. In respect of the following persons: Udi Zelig, the Licensors acknowledge that they have no objections whatsoever to such persons being employed or otherwise engaged with the Company and further acknowledge that they will be working on the Commercialization of the Licensed IP and development of die Company IP.

 

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15.8 For the avoidance of any doubt, the Company hereby undertakes not to solicit, engage as sub-contractor or agent, or employ, directly or indirectly, any of BGU’s and/or Licensors’ employees and/or consultant and/or service providers, other than in terms and conditions of Section 15.7.

 

15.9 The relationship between the Licensor and the Company is solely that of independent contractors. Each of the Parties is in no way the legal representative or agent of the other Party for any purpose and shall have no power to assume or create any obligation or responsibility of any kind on behalf of the other Party.

 

15.10 Neither Party shall be liable to the other under this Agreement for any failure or delay in the performance of its obligations hereunder to the extent that such failure is caused by a duly evidenced event of Force Majeure. For the purpose of this Agreement, “Force Majeure” shall mean any contingency, which is beyond the control of the prevented Party, which cannot be practically remedied by such Party, and which arises without the fault or negligence of such Party, and that such Party could not be reasonably expected to have taken such event and its effects upon its ability to perform into account at the time of signing this Agreement, including, without limitation war (declared or undeclared), riot, political insurrection, rebellion or revolution; acts or orders of or expropriation by any government (whether de facto or de jure); fuel shortage; fire, flood, explosion, earthquake, or other similar natural events, beyond the reasonable control of any of the Parties. A Party claiming to be unable to perform its obligations under this Agreement shall promptly inform the other Party of the occurrence, nature, extent, effect and likely duration of such event of Force Majeure, shall use all reasonable endeavors to minimize the effect of the Force Majeure event on the performance of its obligations under this Agreement and shall forthwith after the cessation of the Force Majeure event, notify the other Party thereof and resume full performance of its obligations under this Agreement. Should the delay caused by any event of Force Majeure continue for more than 45 (forty five) consecutive days or more than 90 (ninety) days in any given calendar year, the non-affected Party shall be entitled to terminate this Agreement by giving a written notice to the affected Party.

 

16. NOTICES

 

16.1 Notices to be given by one Party to another shall be deemed properly given if reduced to writing and transmitted to the Party’s address appearing in the first page of this Agreement, by regular mail, certified registered mail - all to be effective 5 (five) days after their sending date, or by facsimile with confirmation receipt - to be effective at the first business day following the date of transmission, or by messenger with confirmation receipt - to be effective at the date of the confirmation receipt.

 

16.2 The addresses of the Parties, listed in page 1 (one) of this Agreement, shall be subject to any change of such address notified in writing by one Party to the other, according to the procedure stipulated in this Section 16.

 

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16.3 Notwithstanding the above, a notice to Licensors shall be considered properly given, only in case a copy thereof was communicated to Eytan Liraz & Co. Law Offices, 52 Menachem Begin Road, Sonol Tower, Tel Aviv, Israel, Fax: 03 – 5377399.

 

[Remainder of page deliberately left blank]

 

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IN WITNESS THE HANDS OF THE PARTIES

 

Crow Technologies 1977 Ltd.   B.G. Negev Technologies and Applications Ltd.   Mor Research Applications Ltd.
         
By: /s/  Samuel Melman   By: /s/  Netta Cohen   By: /s/ Pini Ben-Elazar
         
Name:  SAMUEL MELMAN   Name:  NETTA COHEN   Name:  Pini Ben-Elazar
         
Title: CEO   Title: CEO   Title: CEO
         
Date: 08/04/2010   Date: 08/04/2010   Date: 26/4/2010

 

I hereby confirm that I have read and understood the Agreement, that its contents are acceptable to me and that I will be bound and act in accordance with its terms.

 

/s/ Ilana Nathan   /s/ Joseph Kapelushnik  
Prof. Ilana Nathan   Prof. Joseph Kapelushnik  
       
11/4/10   11/4/10  
Date:   Date:  
       
  /s/ Udi Zelig  
Prof. Shaul Mordechai   Dr, Udi Zelig.  
       
    11/4/10  
Date:   Date:  

 

 

 

 

June 25 2012

 

First Amendment to a Research and License Agreement

 

Reference is hereby made to that certain research and license agreement dated April 8, 2010 by and between Crow Technologies 1977 Ltd. (on behalf of Todos Medical Ltd. hereinafter; “Todos” prior to its incorporation), B.G. Negev Technologies and Applications Ltd. and Mor Yissum Ltd., a copy of which is attached hereto as Exhibit A (the “Agreement”).

 

The Parties to the Agreement hereby agree as follows:

 

The term “Company IP”, as set forth in Section 1.5.5 of the Agreement shall be amended to read as follows: “Company Research Results, Company Improvements and all IP independently developed by the Company prior to and after execution of this Agreement in the field of diagnosis of cancer, including all such IP developed in the field of diagnosis of cancer by consultants to the Company who were and/or are employees of a Licensor in the course of their consultancy for the Company.

 

All sections of the Agreement, not specifically modified herein, shall remain unchanged.

 

IN WITNESS WHEREOF, the Parties have executed this First Amendment as of the date first above written.

 

/s/ Rami Zigdon   /s/ Netta Cohen
     
Todos Medical Ltd.   B.G. Negev Technologies and Applications Ltd.
     
By (Signature):   By (Signature):
     
Print Name:  Rami Zigdon   Print Name: Netta Cohen
     
Title: CEO   Title: CEO
     
25/6/2012    
    /s/ Pini Ben Elazar
     
    Mor Yissum Ltd.
     
    By (Signature):
     
    Print Name: Pini Ben Elazar
     
    Title: CEO

 

 

 

 

Exhibit 10.2

 

[Convenience Translation from Hebrew]

 

Employment Agreement

Entered in Airport City on 1.1.2012

 

Between: Todos Medical Ltd.  
  Of 12 Kineret Street, Airport City, Ben Gurion  
  (the " Company ")  
    On one side
And Udi Zelig ID number 031664477  
  Of Kibbutz Nir Yitzhak  
  (the " Employee ")  
    On the other side

 

Whereas               And parties are interested that the Employee will be employed as a researcher and developer of medical systems with the Company "Todos Medical Ltd"; and

 

Whereas               The parties wish to settle the terms of employment of the Employee;

 

Thus stated, is agreed between the parties as follows: -

 

1. Introduction and Interpretation

 

1.1 The preamble to this Agreement and the annexes attached to it, form an integral part hereof.

 

1.2 The section headings are for purposes of convenience only and should not be used for interpretation of this Agreement.
1.3 The term "Employee" - in masculine form for convenience purposes only and the intention is also for an employee [female]

  

2. Representations of the Parties

 

2.1 The parties declare and confirm that this Agreement is personal and unique, which regulates the relationship between the Company and the Employee, and therefore do not apply to any Employee collective agreement rules, industries or special, including any special collective agreement of the Company.

 

2.2 The parties declare that this Agreement covers all payments, benefits and other terms of any kind the Employee is entitled to, and the Employee is not entitled to and will not require any payment and/or benefit from the Company, unless they expressly specified in this Agreement.

 

2.3 Employee acknowledges and agrees that:

 

 

 

 

(A) He has the skills and ability to perform the role defined in this Agreement;

 

(B) His signature on this Agreement or employment with the Company shall not constitute a breach of any agreement or undertaking that is a party or is subject to, and that he does not need anyone's approval for such purposes;

 

 Attached as "Appendix B" written assignment of rights from Crow technologies 1977 Ltd to the  Company.

 

(C) The Employee shall not use during his employment with the Company any confidential information of any third party, including the Employee's previous employer, unless by consent.

 

3. Role and Commencement of Work

 

3.1 The Employee will serve and will be employed by the Company as researcher and developer of medical systems.

 

3.2 The commencement of Employees work is on 1.1.2012 (" The date of commencement of work")

 

3.3 In performing his role with the Company, the Employee shall be subject to and act on the guidelines as defined by the work description, as determined from time to time by division manager and/or CEO. Duties of the Employee in performing his role shall be determined from time to time by him.

 

3.4 Employee affirms and confirms the following:

 

(A) That the Employee's duties among senior management roles requiring a special degree of personal trust, and that working conditions do not allow the Company to control the working hours and rest and the Hours of Work and Rest Law - 1951 does not apply.

 

(B) That his employment requires him to work outside of normal working hours and on holidays and rest days, and he undertakes to work overtime in accordance with the needs of the work. The salary of the Employee is determined considering the above, and he will not be entitled to any additional payment beyond the consideration specified in the Agreement for any overtime.

 

4. Employee Undertakings

 

4.1 Employee undertakes to fulfill his duties honestly, faithfully and loyally, and to devote to his work and to promote the Company's affairs all his energy, knowledge, time, expertise, and abilities.

 

4.2 During the term of employment under this Agreement, the Employee will not be entitled to engage, directly or indirectly, in any other work, including with the provision of any service for or without consideration, unless he has received the Company's prior written consent.

 

 

 

 

4.3 Except as stated in this Agreement, the Employee does not receive for his work any compensation or any benefit, from any other party, whether directly or indirectly.

 

4.4 Employee undertakes to inform the Company of any matter in which he may have an interest that may create a conflict of interest with his position in the Company or entities controlled by the Company or its shareholders.

 

4.5 Employee undertakes that during the term of his employment and thereafter, he will not assist in the filing of any civil action against the Company unless his assistance is required by law and he undertakes to reasonably assist the Company, at its request in any claim that the Company may be involved.

 

4.6 Employee undertakes to deliver to the Company any knowledge and information relating to the Company and/or which may be useful to the Company, not to remove, transfer or deliver information as aforesaid to any third party and not to use same for personal purposes and/or not in the performance of his role.

 

4.7 Employee undertakes to refrain from acts and/or omissions that could impair the Company's property and/or rights, its interests and/or good name and/or its reputation, and to take all necessary steps to avoid damage to the Company and to protect its property, rights, good name and reputation.

 

5. Work Remuneration

 

5.1 Employee's monthly salary will amount to NIS 15,000 gross (fifteen thousand NIS) plus global remuneration in respect of overtime in the amount of NIS 2,500 ₪gross (two thousand five hundred ₪) per month (monthly salary gross of the Employee plus the rewards of the global shall be referred to as " Total Salary ".

 

5.2 It is hereby declared explicitly that in respect of overtime, the global remuneration specified above, will be a full and complete consideration in respect of the Employee overtime hours as may be required from time to time according to the needs, in accordance with section 3.4 above, and the Employee will not be entitled to any additional payment except for the amount specified in this section for work overtime or during holiday and rest days.

 

5.3 The Parties reaffirm that the remuneration in respect of overtime as stated above, is an expression of reasonable and honest assessment of overtime the Employee will be required to work.

 

6. Managers Insurance/Pension

 

6.1 The Company will manage for the Employee "manager insurance", subject to guidelines determined from time to time by the Income Tax Commission.  The Company set aside and transfer insurance Company premiums in respect of such insurance at a rate of 13.33% of the Total Salary as follows: amount at the rate of 8.33% for severance pay, and the amount at the rate of 5% for remuneration.

 

In addition the Company will deduct from the base salary of the Employee and will transfer an amount at the rate of 5% for Employees' contribution. Employee hereby gives the Company an irrevocable instruction to deduct from the Total Salary the amount of 5%, as mentioned above.

 

 

 

 

6.2 In addition, the Company will insure the Employee insurance against disability Working at the rate of 1.1% of Total Salary, which will be paid by the Company.

 

7. Education fund

 

  The Company set aside and transfer for the Employee every month, to a recognized education fund an amount at the rate of 7.5% of the Total Salary, and will withhold and transfer the same an amount at the rate of 2.5% of the Total Salary, all up to the amount recognized for income tax purposes. Employee hereby irrevocably instructs the Company to deduct from his basic salary the amount that amount that he is required to contribute to the education fund as aforesaid and to transfer such amount to the fund. Upon termination of employment for any reason except for the breach of trust or a crime involving moral turpitude, the Company will release the its contributions to the fund, to the Employee.

 

8. Annual vacation, recreation and illness

 

8.1 The Employee shall be entitled to annual leave of 18 working days. Holiday days will be determined by the Company in coordination with the Employee considering the needs of the Company. The Company may split vacation, taking into account, where possible, the Employee wishes.
     
8.2 The Employee shall be entitled to recreation payment as required by Recreation Pay law.
     
8.3 The Employee shall be entitled to sick days, as stated by the Sick Pay Law 1976.

 

9. Car and Mobile Phone
     
9.1 The Company will provide the Employee a company car. The Company will bear all operation, maintenance, repair expenses, including insurance and registration except for fines, premiums and/or payments that the Company is not obliged and/or permitted to bear. The vehicle shall be at the responsibility of the Employee. The Employee will use the vehicle reasonable and careful use in accordance with Company's guidelines and the applicable laws.
     
9.2 The use of the vehicle by the Employee shall be subject to Company's instructions as may be given from time to time.
     
9.3 Each month, value of use shall be added to Employee's monthly salary as described by the Income Tax regulations and taxes shall be withheld by law.
     
9.4 The Company shall provide to the Employee a cellular phone. Each month, the value of use shall be added to the Employee's monthly salary as described by the Income Tax regulations and taxes shall be withheld by law.
     
9.5 The vehicle, cellular phone and any other equipment that was used by the Employee during his work will be returned to the Company immediately upon termination. Employee shall not have not right of lien over the vehicle, phone and such equipment.

 

 

 

 

10. Term
     
10.1 Each party shall be entitled to terminate this Agreement by a prior written notice of at least 30 days.

 

10.2 In any event that Company will be entitled to terminate Employee's work immediately or bring it to an end at any time during the prior notice period and in such event, the Company shall pay the Employee redemption of prior notice for the prior notice period during which employer-employee relations will cease to exist between the Company and the Employee.

 

10.3 Notwithstanding the foregoing, in the event that an Employee's act (or omission) entitles exclusion of severance pay, in whole or in part, based on the applicable laws in Israel including without derogating from the generality of the aforesaid, circumstances which harm the integrity or breach fiduciary duty or in the case of an offense involving moral turpitude, or a serious breach of his obligations to the Company, the Company shall be entitled to terminate this Agreement immediately, without notice period.

 

10.4 Employee undertakes that in any case he will cease working for the Company, he shall - in an orderly manner and according to the procedures determined by the role and- transfer the documents and the projects handled by him – to the person entrusted with continuing the duties of the Employee, in an orderly fashion and without causing damage to the Company.

 

11. Obligations to confidentiality, non compete and intellectual property – attached as Appendix A.

 

12. Miscellaneous

 

12.1 It is hereby declared that unless this Agreement otherwise specifies, Employee shall bear the taxes and mandatory payments to be applied in connection with all funds, benefits, rights and benefits granted to him under this Agreement and that the Company may deduct from any payment due from the Employee any amount of tax, or other mandatory payment deduction is required by law.

 

12.2 This Agreement exhaust the agreement between the Parties in all matters discussed in this Agreement and shall not be all negotiations, commitments, consents made, if made in relation to such matters, orally or in writing, implicitly or explicitly, prior to this Agreement, shall not be valid.

 

12.3 No waiver or non-insistence by the Company on fulfillment of any provision by the Employee in one instance, will constitute waiver or oblige it in another instance.

 

12.4 No amendment to this Agreement will be valid unless made in writing and signed by the parties to this Agreement.

 

 

 

 

12.5 Addresses of the parties for the purposes of this Agreement are as described in the preamble hereof, and any notification sent by registered mail from one side to another, to the said address shall be deemed to have been received by the addressee 72 hours from the time of delivery mail delivery in Israel, and if delivered by hand or sent by facsimile (with confirmation of receipt) – upon its delivery.

 

- IN WITNESS WHEREOF the parties have signed -

 

[signature]   [signature]
     
The Company   Employee

 

 

 

 

Appendix A to an Employment Agreement dated 1.1.2012

 

To

Todos Medical Ltd.

12 Kineret Street Airport city

 

Dear Madam/Sir

 

Re: Undertaking of Maintaining Confidentiality, non-competition and Intellectual Property

  

I, the undersigned Udi Zelig, Id number 031664477 represent and warrant to Todos Medical Ltd. ( The " Company ") as follows:

 

1) I am aware that during my work under the employment agreement between me and the Company 1.1.2012 (the "Employment Agreement"), I will be exposed to or will become aware of Information (as defined below) of the Company and I am aware that such Information is among the primary and vital assets of the Company.

 

I hereby undertake to maintain in absolute confidence the Information and not to disclose and/or to transfer, directly or indirectly, to any person or entity, whether receive or will be received by me, orally in writing or otherwise in any form and/or media, directly or indirectly, including Information received from third parties related to the Company and not to make any use, directly or indirectly, in the information which is not for the purpose of my employment. My undertaking shall apply without any time limitation, even following the termination of my engagement with the Company in accordance with the employment agreement.

 

In this deed of undertaking, " Information " is any information and know-how existing or which shall come into existence at the Company, related or connected in any way to the Company and/or its operations, and/or activities and/or entities or corporations or related parties including (without limitation) – all information related directly or indirectly to research and development of existing or future products, inventions, hardware, software, manufacturing processes, discoveries, improvements, developments, sketches, calculations, designs, calculations, diagrams, formulae, computer files, computer programs, data, planning processes, client list, supplier list, financial data, costs, prices, payment terms, plans, trade secrets, business plans, client names, sales, prices and any other information related to the business of the Company and/or its customers and/or suppliers including potential customers that the company is under negotiations with, whether the information is patentable or otherwise.

 

I am aware that the Company is bound by confidentiality and non compete by virtue of agreements that it has with suppliers, clients and third parties and I hereby undertake to fulfill in loyalty the Company's obligations towards such entities to preserve secrecy and non compete.

 

2) in case of termination of engagement between me and the Company in accordance with the employment agreement, for any reason whatsoever, I hereby undertake that all Information in any media that shall be in my possession and/or control shall be returned to the Company immediately upon such termination.

 

3) I hereby commit to inform, disclose and provide to the Company all information that I shall receive, in any way, information that is the fruit of an idea or development of mine during my time of employment with the Company whether patentable or not, whether can be protected by copyright or other intellectual property right, whether registrable or not.

 

 

 

 

4) In my signing this undertaking deed, I hereby waive and assign to the Company and undertake waiver and assign in the future all rights (as such may exist), in any Information, know-how, development, result, improvement, invention, idea, creation, formulae, code, finding, research, conclusions, whether patentable or not, able to be protected by copy right or other intellectual property rights, registrable or not that I made/will make, develop/will develop, discovered/will discover, by myself or together with others, during or in connection with my employment with the Company (" Work Products "). I hereby confirm that the Company will have exclusive intellectual property rights in the Work Products in Israel and abroad and I will not be entitled to any additional consideration for them except for the consideration paid to me under my employment agreement.

 

5) I hereby commit to cooperate, deliver all detail required to effect registration, assist in preparation and registration of patents and/or any other intellectual property right for the benefit of the Company in Israel or abroad and to sign all document required for such registration in Israel or abroad and to cooperate and assist the Company in protecting its rights. My undertaking will apply, without any time limitation, even after termination of my employment with the Company under my employment agreement.

 

6) I hereby declare that the consideration to be paid to me by the Company under the employment agreement includes special consideration in respect of my commitments pursuant to section 6 above and I shall have no claim or demand in connection with section 6 above.

 

7) I hereby confirm and declare that I am aware that breach of my undertakings above (or any of them) may cause the Company irreparable and severe damages and that monetary compensation may not be an adequate remedy and therefore I hereby agree and undertake not to object in case of breach of any of my undertakings according to this deed of undertaking, that a competent court will issue a temporary or other injunction in order to prevent or stop the breach.

 

8) without derogating from the aforesaid in section 8, I hereby undertake to indemnify and compensate the Company for any damage and/or expense caused to it as a result of my breach, including court fees and legal expenses, loss or damage to reputation, without derogating from any remedy afforded to the Company by law.

 

9) I declare and confirm that I am aware that without my undertaking according to this deed of undertaking, the Company would not have engaged with me in the employment agreement.

 

In witness whereof, I signed today:

 

Signature: [signature] Date: [1.1.2012]
     
Witness to signature:   [Rami Zigdon signature ]  

 

 

 

 

Appendix B to the Employment Agreement dated            , 2011

To

Todos Medical Ltd.

12 Kineret Street Airport City

 

Dear Sir/Madam,

 

Re: Assignment of Rights

 

We, the undersigned, Crow Technologies 1977 Ltd. (the " Assignor "), hereby assign to Todos Medical Ltd., irrevocably and absolutely, all intellectual property rights, as may exist now or in the future, by law and in accordance with the employment agreement dated November 15, 2009 between us and Mr. Udi Zelig Id number 031664477 (" Employee ") in all results of Employee's employment, in Israel and abroad.

 

     
Crow Technologies 1977 Ltd.    
Company number 52-0039033    

 

 

 

Exhibit 10.3

 

Execution Copy

 

EMPLOYMENT AGREEMENT

 

This Agreement (the “ Agreement ”) is made on this 18 th day of August, 2015 and effective as of the Effective Date, as defined below, by and among Todos Medical Ltd. , with principal offices at 1 Hamada Street, Rehovot, Israel (the “ Company ”) and Rami Zigdon, Israeli ID number 057685943 of Asher 6 Street, Ra'anana, Israel (the “ Employee ”).

 

WHEREAS : the Company is primarily engaged in research, development and commercialization of a certain technology and wishes to employ Employee as the Chief Executive Officer (“ CEO ”) of the Company; and

 

WHEREAS : Employee provided management services to the Company and serves as the CEO of the Company as an independent contractor since April 1, 2010 and at his request, commencing as of May 1, 2015, would like to provide management services to the Company in a position of CEO as an employee of the Company and the Company agreed to employ Employee as of May 1, 2015 in the position of CEO, all subject to the terms and conditions below; and

 

WHEREAS: Employee represents that he has the necessary qualifications, skills, knowledge and experience required; and

 

WHEREAS : the Company and Employee desire to define the relationship between them in accordance to the terms and conditions of this Agreement.

 

NOW THEREFORE, the parties hereto agree as follows:

 

1. General Part

 

1.1. The preamble to this Agreement constitutes an integral part hereof.

 

1.2. All headings of the Sections and subsections of this Agreement are intended for convenience of reference and shall not be used in interpreting this Agreement.

 

2. Scope of Employment

 

2.1. Commencing on May 1, 2015 (the " Effective Date ") and during the Term, as defined below, Employee will serve the Company and perform such executive duties for the Company as are required and consistent with the title of and bear all duties and responsibilities of CEO of the Company. Employee shall report to the Board of Directors of the Company (the “ Board ”) and shall be subject to the direction of the Board.

 

2.2. Employee shall devote his full business time and attention in his capacity as CEO of the Company and shall not, during the Term, be retained or involved in any other business activity which competes with the business activities of the Company. Employee shall act in performance of his position as CEO to the best of his skill, ability and effort in a diligent, trustworthy, businesslike and efficient manner for the purpose of advancing the best interest of the Company.

 

 

 

 

Execution Copy

 

2.3. Employee hereby declares and confirms that he is aware of, and agrees to the fact that his employment with the Company will require him to do work outside of the regular working hours, and he agrees to work during such hours according to the reasonable requirements of the Company. Due to the fact that Employee’s duties shall be in the nature of management duties, and will require a special level of fiduciary - the Law of Work Hours and Rest 5711 - 1951 shall not apply to Employee’s work hereunder. Employee confirms that the non-applicability of said Law has been taken into account in stipulating his compensation and benefits in this Agreement.

 

2.4.

The Company hereby agrees that during each calendar year of the Term (as defined below), Employee will be entitled to annual leave of twenty four (24) working days (the " Non Working Days "). In the event that Employee shall not use all the Non Working Days in each calendar year Employee shall be entitled to carry over any unused Non Working Days to the next year. At termination, Employee shall be entitled to redeem any unused vacation days under law.

 

3. Compensation

 

3.1. Subject to Employee’s undertaking and the performance of his obligations contained hereunder, the Company shall pay and grant the Employee the compensation and benefits as detailed in Exhibit A .

 

3.2. Taxes. The Company shall be entitled to withhold from payments any and all amounts as may be required from time to time and shall deduct at source any and all taxes as shall be due according to Israeli law.

 

4. Confidentiality

 

4.1. Employee will maintain in confidence any information: (a) concerning the Company; or (b) concerning the business of any client or customer of the Company, which may be disclosed to or learned by Employee during the period of this Agreement or prior to the Effective Date while providing management services to the Company.

 

4.2. For the purposes of this Agreement “ Confidential Information ” shall mean information that: (i) has been created, discovered, developed, or otherwise become known to the Employee (including without limitation information created, discovered, developed, or made known by Employee during the period of this Agreement) or in which property rights have been assigned or otherwise conveyed to the Company, including but not limited to trade secrets, processes, formulas, data, know-how, improvements, inventions, techniques, marketing plans, strategies, forecasts, and customer lists (“ Proprietary Information ”) whether during this Agreement or prior to that while Employee providing management consulting services to the Company; (ii) that is disclosed in furtherance of the business of the Company, the Company’s technical, business and financial information, documentation, records, files, memoranda, reports, drawings, plans, price lists, customer lists, and the like; and (iii) that contains financial projections and forecasts concerning developments of the Company’s future business.

 

4.3. Confidential Information shall not include information that: (a) is or becomes public domain without fault on the part of Employee (or any person related to, or on behalf of Employee with whom Employee shared the information); (b) is expressly released in writing from the obligations of confidentiality, imposed by this Agreement, by the Company; or (c) is required to be disclosed pursuant to any applicable law, regulation, judicial or administrative order or decree, or request by other regulatory organization having authority pursuant to the law, so long as Employee provides reasonable notice to the Company of such requirement prior to any such disclosure;

 

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Execution Copy

 

4.4. In dealing with Confidential Information Employee shall:

 

4.4.1. Use the Confidential Information received solely in furtherance of his employment by the Company;

 

4.4.2. Take reasonable precautions to maintain the confidentiality of the Confidential Information received from the date of receipt, and shall take appropriate action, by instruction, agreement or otherwise with any person permitted access to the Confidential Information received, solely on a “need to know basis”, to ensure that Employee will be able to satisfy his obligations under this Agreement;

 

4.4.3. Refrain from copying or disclosing to any third party, including any consultants and/or advisors, the Confidential Information received, except with the Company’s prior written consent and except for the other consultants and/or advisors and/or employees of the Company who will enter into similar covenants;

 

4.4.4. Upon the written request of the Company, promptly destroy or return any and all copies or take with it any documents or data of any description or any reproduction of any description containing or pertaining to any Proprietary Information.

 

4.5. Employee’s undertakings in this Section 4 shall not affect any other undertaking of Employee to the Company and shall remain in full force and effect after termination of this Agreement or any renewal thereof.

 

5. Ownership of Inventions and Work Product

 

5.1.

During the term of this Agreement, Employee shall promptly disclose to the Company, or any persons designated by it, all improvements, inventions, designs, original works of authorship, formulas, concepts, methods, systems, processes, techniques, compositions of matter, computer software programs, data bases, mask works, trade secrets, know-how and data, whether or not patentable, copyrightable or protectable as trade secrets, that are related to the technology and/or the business of the Company and made or conceived or reduced to practice or learned by Employee, either alone or jointly with others, in the course of his employment with the Company or prior to that as a service provider of management services to the Company, or results from tasks assigned by the Company or result from use of premises of the Company as long that is relate to the field of activities of the Company, actual or anticipated (hereinafter referred to as “ Inventions ”).

 

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Execution Copy

 

5.2. During the term of this Agreement, Employee agrees that all Inventions shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owners of all patents and other rights in connection with such Inventions. Employee hereby irrevocably assigns to the Company any rights he may have or acquire in such Inventions. Employee further agree as to all such Inventions to assist the Company in every reasonable fashion (but at the Company’s expense) in obtaining and from time to time enforcing patents on such Inventions in any and all countries, and to that end Employee shall execute all documents for use in applying for and obtaining patents covering and enforcing such Inventions, as the Company may request, together with any assignments of such Inventions to the Company or persons designated by it. Such assistance shall include, without limitation, the execution and delivery of any requested affidavits and documents of assignment and conveyance and the provision of testimony in connection with any proceeding affecting the right, title or interest of the Company in any Invention. Employee shall assist the Company in obtaining and enforcing patents for such Inventions in any or all countries after termination of Employee’s engagement (with such assistance to be granted at Company's reasonable expense).

 

5.3. During the term of this Agreement, in addition, Employee hereby irrevocably transfers and assigns to the Company: (a) all worldwide patents, patent applications, copyrights, mask works, trade secrets and other intellectual property rights in any Invention (as defined above) and (b) any and all “Moral Rights” (as defined below) that it may have in or with respect to any Invention. Employee also hereby forever waives and agrees never to assert any and all Moral Rights it may have in or with respect to any Invention, even after termination of its work on behalf of the Company. “Moral Rights” mean any rights of paternity or integrity, any right to claim authorship of an invention, to object to any distortion, mutilation or other modification of, or other derogatory action in relation to, any invention, whether or not such would be prejudicial to its honor or reputation, and any similar right, existing under judicial or statutory law of any country in the world, or under any treaty, regardless of whether or not such right is denominated or generally referred to as a “moral right”.

 

5.4. This Section 5 shall remain in full force and effect following the termination of this Agreement .

 

6. Non-Competition

 

6.1. Employee agrees and undertakes that so long as he is employed by the Company and for a further period detailed below (the " Additional Non-Compete term ") following the effective date of the termination of this Agreement for any reason (the term of this Agreement and the Additional Non-Compete Term shall be referred to collectively as the “ Non Compete Period ”) he will not, directly or indirectly, as owner, partner, stockholder, employee, officer, director, or in any similar capacity, engage in any business or venture that is engaged primarily in activities substantially similar or related to the activities of the Company, including but not limited to activities involving products similar or related to actual products then produced, developed or marketed by the Company (a “ Competing Business ”); The Additional Non-Compete Term is defined as follows: (a) in case Employee terminates this Agreement – three months following the effective date of termination; (b) in case Company terminates this Agreement – the term shall be based on the number of installments of the Adjustment Bonus paid to the Employee.

 

6.2. Employee undertakes during the Non Compete Period not to, directly or indirectly, including without limitations, personally, by agents or affiliates at his behest or by any business in which it is a shareholder, partner, owner, employee, director or consultant:

 

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Execution Copy

 

6.2.1. Induce any employee of the Company to leave his employment therewith; or

 

6.2.2. Solicit, receive from customers of the Company or any of its subsidiaries, any duties, offers or other employment or business in competition with the Company or which involve activities in which the Company was engaged while Employee was employed with the Company;

 

6.3. This Section 6 shall not affect any other undertaking given by Employee to the Company and shall remain in full force and effect following the termination of this Agreement.

 

7. Acknowledgements

 

7.1. Employee acknowledges that given his position and access to information regarding the Company, the provisions of this Agreement herein, are reasonable and necessary to protect the Company’s business. Employee further acknowledges that he has carefully reviewed the provisions of this Agreement, it fully understands the economic consequences thereof, he has assessed the respective advantages and disadvantages of entering into this Agreement and it has concluded that in light of his education, skills and abilities, the restrictions set forth in this Agreement will not prevent him from entering into this Agreement.

 

7.2. If any one or more of the terms contained in this Agreement shall for any reason be held to be excessively broad with regard to time, geographic scope or activity, the term shall be construed in a manner to enable it to be enforced to the extent compatible with applicable law.

 

8. Term and Termination

 

8.1. The Agreement shall stay in effect unless terminated by either party pursuant to this Section 8 and such terms shall be referred to as the “ Term ”.

 

8.2. Except with respect to termination for Company's Cause (defined below) employee shall be entitled to terminate this Agreement by ninety (90) days prior written notice (Company may waive such prior notice period in writing pursuant to the full payment of salary and benefits for the full prior notice term). Except with respect to termination for Cause (defined below) in accordance with Section 8.3 below, the Company shall be entitled to terminate the Agreement by ninety (90) days prior written notice (the " Notice Period "). In the event of termination under this Section 8.2 by the Company or Employee as described in the previous two sentences, the Company shall continue to pay and provide all compensation and benefits under Section 3 during the Notice Period. In the absence of any instructions from the Company, it shall be deemed to have requested Employee to continue his work during the notice period. This Agreement shall automatically terminate upon Employee’s death or thirty (30) days after he suffers a permanent disability that disables Employee from performing his obligations and duties hereunder in the same manner as were performed prior to the permanent disability.

 

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Execution Copy

 

8.3. Notwithstanding anything else to the contrary herein, the Company may terminate Employee’s engagement at any time for Cause (as defined herein) without advance notice, without derogating from any other remedy to which the Company may be entitled, provided that Employee was granted the opportunity to present his position to the Board prior to the effective date of such termination. For the purposes of this Agreement the term “ Cause ” shall mean the following: (i) Final verdict of Employee’s embezzlement of funds of the Company; (ii) Final verdict of Employee’s material breach of Sections 4, 5 or 6 of this Agreement; (iii) Final verdict of any material act of personal dishonesty taken by the Employee in connection with his responsibilities to the Company; (iv) the conviction of a felony, which the Board believes, in good faith, that had or will have a detrimental effect on the Company’s reputation or business; (v) Final verdict of a willful act by Employee which constitutes gross misconduct and which has a detrimental effect on the Company’s reputation or business or (vi) Final verdict of an act that causes Employee to be disqualified from the right of severance under law (in whole or in part).

 

8.4. Notwithstanding anything else to the contrary herein, the Employee may terminate the engagement at any time for Company's Cause (as defined herein) without advance notice, without derogating from any other remedy to which the Employee may be entitled. For the purposes of this Agreement the term “ Company's Cause ” shall mean the following: (i) Final verdict of Company's material breach of this Agreement; (ii) delay in salary and/or benefits payments of more than 30 days; (iii) any circumstances that relieves the employee of his obligation to deliver notice period by law.

 

8.5. Upon the termination of Employee’s employment with the Company, Employee shall promptly deliver to the Company all books, memoranda, plans, computer software, customer lists, records and data of every kind in whatever form or medium relating to the business and affairs of the Company which are then in his possession or control. Upon termination of this Agreement, for any reason, Employee shall cooperate with the Company and use its best efforts to assist with the integration into the Company's organization of the person or persons who will assume his responsibilities.

 

8.6. Employee shall not be relieved of his obligations under Sections 4, 5, or 6 hereof upon termination of this Agreement for any reason.

 

8.7. Any proven and calculated money owed to the Company by Employee may be offset by the Company against payments due to Employee during the Notice Period or after.

 

9. Representations, Warranties & Covenants

 

9.1. Employee represents and warrants that (i) the execution and delivery of this Agreement and the fulfillment of the terms hereof will not constitute a default under or breach of any agreement and/or undertaking and/or other instrument to which he is a party or by which he is bound, including without limitation, any confidentiality or non competition agreement, and do not require the consent of any person or entity; and (ii) it shall not utilize, during the term of his engagement any proprietary information of any third party.

 

9.2. The Company represents and warrants that the execution and delivery of this Agreement and the fulfillment of the terms hereof have been duly authorized by all corporate action on behalf of the Company, will not constitute a default under or breach of its or incorporation documents or any agreement and/or undertaking and/or other instrument to which the Company is a party or by which the Company is bound, and do not require the consent of any person or entity.

 

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Execution Copy

 

9.3. Employee represents that he has received all compensation, payments, rights and benefits in respect of providing the Company with management services prior to the Effective Date and that he has no claims or demands against the Company in respect of such period prior to the Effective Date.

 

10. Miscellaneous

 

10.1. Assignment . Employee shall not assign, transfer, pledge or otherwise in any way, any of his obligations or rights under this Agreement to any third party without the express prior written consent of the Company.

 

10.2. Complete Agreement; Amendments . This Agreement constitutes the entire agreement between the parties with respect to the matters referred to herein, and no other arrangement, understanding or agreement, verbal or otherwise, shall be binding upon the parties hereto. This Agreement may not be amended or modified except by the written consent of the parties hereto.

 

10.3. Governing Law . This Agreement shall be governed by the laws of the State of Israel and the courts of the city of Tel-Aviv-Jaffa will have exclusive jurisdiction over any disputes arising hereunder.

 

10.4. No Waiver . No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver granted hereunder must be in writing and shall be valid only in the specific instance in which given.

 

10.5. Severability . If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

 

10.6. Notices . All notices hereunder will be in writing mailed by registered mail addressed to the parties at their respective addresses as set out above or delivered by hand or transmitted by facsimile. Notices will be deemed received by the receiving party within seven (7) days of mailing, if mailed; when actually delivered by hand, if so delivered; and on the first business day following transmission, if transmitted by facsimile.

 

10.7. This Agreement constitutes Notification of Employment Conditions pursuant to the Notice to the Employee Law (Employment Conditions) 5762-2002.

 

[Remainder of page intentionally left blank]

 

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Execution Copy

 

IN WITNESS WHEREOF , the parties have signed this Agreement as of the date hereof.

 

TODOS MEDICAL LTD.

 

     
Title:    
Name:    
     
     
RAMI ZIGDON    

 

Company affirms the execution of indemnity and release agreement entered into on October 4, 2014.

 

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Execution Copy  

 

Exhibit A

 

Compensation and Benefits

 

1. Gross Monthly Salary – NIS 15,000. The monthly salary shall be linked to an increase in the Israeli Consumer Price Index where the base index is the index known on May 1, 2015 (i.e. April 15, 2015 index). The Gross Monthly Salary will be increased to NIS 25,000 as from the date on which the Company shall have cash at its bank account at least NIS 3,500,000 (the " Triggering Date ") that is sourced from capital injections/non-repayable amounts only, as confirmed by the Company's CFO in writing.

 

2. In the event that during the term of this Agreement, on a certain date (the " Relevant Date ") the Company shall have at least NIS 4,000,000 cash at its bank account that is sourced from capital injection/non-repayable amounts only, as confirmed by the Company's CFO, the Employee shall be entitled to a payment in the sum of NIS 12,333 multiplied by the number of calendar months that had passed from May 1, 2015 and until the month ending prior to the Triggering Date. All taxes applicable to such payment shall be withheld by the Company by law.

 

3. Reimbursement of car expenses – reimbursement of monthly car expenses against receipts to be furnished by Employee, provided that the annual expenses shall not exceed NIS16,000. Fuel expenses shall be separately reimbursed. All payments shall be made against valid receipts. Company shall either provide the Employee with a cellular phone or bear the usage expenses of the cellular phone – at Company's choice.

 

4. Prior Notice Period – In accordance with Section 8 of the Agreement

 

5. Adjustment Bonus upon Termination In the event that Company terminates the employment of the Employee pursuant to this Agreement the Employee shall be entitled to an Adjustment Bonus in the sum equal to three times (X3) the last gross monthly salary prior to termination and if on the date of termination the Company has cash at bank of at least USD 3,000,000 (as confirmed by the Company's CFO), then the Adjustment Bonus shall be in the sum equal to six times (X6) the last gross monthly salary prior to termination. The Adjustment Bonus shall be paid in equal installments and be subject to all taxes to be withheld from such amounts in accordance with the law. For the avoidance of doubt, no employer-employee relations shall exist during the time of payment of the Adjustment Bonus.

 

6. Additional cash bonuses - shall be in accordance with a bonus plan that may be adopted by the appropriate organs of the Company in accordance with the applicable laws.

 

7. Options entitlement in accordance with Option Plan to be adopted by the appropriate organs of the Company in accordance with the applicable laws by October 30, 2015.

 

8. Severance Pay and Managers Insurance Fund

 

a. The Company shall effect a Manager's Insurance Policy (the " Policy ") and shall contribute to the Policy, on its own account, effective as of the Effective Date, the following monthly installments, as percentages of the Monthly Salary:

 

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Execution Copy

 

i.  5% for savings and risk component;
ii.  8.33% for the severance pay component; and
iii.  Up to 2.5% for the loss of earning capacity component

 

b. In addition the Company shall deduct from the Salary a monthly amount equal to 5% of the Monthly Salary, on account of the Employee's own contribution towards the Policy.

 

c. It is hereby clarified that the Company's contribution to the Policy and the Employee's entitlement to severance pay, if any, shall be calculated solely based on the Monthly Salary, as defined in (1) above and no other payment, right or benefit to which the Employee is entitled under this Agreement or by law shall be taken into account in such calculation.

 

d. The Employee, hereby confirms that Section 14 of the Severance Pay Law 5723- 1963 (" Severance Pay Law ") and the related General Approval ( אישור כללי ) (“Section 14”), a copy of which is attached hereto as Exhibit B applies to him in respect of his employment with the Company and termination thereof. The Company waives any possible right to have its payments refunded, unless the right of Employee to severance pay is denied by a judgment according to Section 16 or 17 of the Severance Pay Law.

 

9. Further Education Fund (Keren Hishtalmut) Contributions .

 

The Company shall make monthly contributions on behalf of Employee to a recognized Further Education Fund (the " Keren Hishtalmut ") recognized by the Income Tax Authorities in an amount equal to 7.5% of the Monthly Compensation. In addition, the Company shall deduct 2.5% of the Gross Monthly Salary as Employee's contribution to Keren Hishtalmut. All funds accumulating in the Keren Hishtalmut shall belong to Employee, and upon his written request, the Company shall submit a written request to the Keren Hishtalmut for the release of such funds to Employee.

 

10. Recuperation Pay (D'mei Havra'a) . Employee shall be entitled according to recuperation pay according to the law and/or expansion order and/or any special or general collective bargaining agreement that may apply to the relations between the Company and Employee.

 

11.

Sick Leave the Employee shall be entitled to sick leave according to the law but shall be entitled to full payment starting at the first sick day. The Employee shall not be entitled to any compensation with respect to unused sick leave.

 

     
     
RAMI ZIGDON   TODOS MEDICAL LTD.

 

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Exhibit 10.4

 

English Summary of the Lease Agreement dated as of January 18, 2015 by and between Mishorim Kiriyat Hamada Rehovot Ltd. (the “ Landlord ”) and Todos Medical Ltd. (the “ Company ”) (the “ Lease Agreement ”).

 

    Subject Matter of the Lease Agreement : Unprotected Lease of Office Space and Parking Spaces for the purpose of conducting business in the Hi-Tech field. Premises are located in Rehovot, Israel.

 

    Term of Original Lease :

 

    The term of the Lease is twelve (12) months commencing on February 1, 2015 and ending January 31, 2016 (the " Original Lease "). Under the Original Lease, the Company was given an option to extend the term of the lease, by a twenty four (24)-month period (subject to certain prior notices to the Landlord). The Company exercised the option. The Landlord may terminate the Lease Agreement for any material breach not cured within the time specified in the Lease Agreement, transfer of the rights under the Lease Agreement by the Company, use of the Property for any purpose other than permitted under the Lease Agreement or liquidation/insolvency of the Company.

 

    The term of the lease of all parking spaces leased by the Company from time to time is linked to the lease term of the main premises.

 

    Premises Covered by the Lease Agreement :

 

    Property – Under the Lease, the Company leased 108 square meters (gross).

 

    Parking – The Company leases two (2) parking spaces.

 

    Monthly Rental Fees :

 

    Under the Lease, during the original lease term the Company was to pay monthly rental fees of NIS 6,780 (for the Property, parking spaces and management fees) During the option period, the monthly rental fee increased to NIS 7,000. Rental fees are linked to the Consumer Price Index published by the Central Bureau of Statistics in Israel (the “ Index ”) with the base Index as published on February 15, 2015 provided that the rental fees shall not be less than the nominal values as paid during the original term of lease.

 

    Guarantees

 

    An autonomous unconditioned bank guarantee in the sum of NIS 20,000, linked to the Index.  

  

    Other Terms under the Lease Agreement :

 

    The Company has a right to sub-lease the premises (or any portion thereof), subject to the Landlord’s prior written consent (not to be unreasonably withheld).

 

    Similar to other lease agreements, the Company agreed to assume responsibility for all fees, municipal or local taxes, utility payments, etc.; provided that the Landlord shall bear any and all taxes and fees, which by their nature are levied on property owners.

 

    Similar to other lease agreements, each party has agreed to assume responsibility for any damage, injury or loss (bodily or otherwise) resulting from any act, omission or negligence on its part, and with respect of the Company – relating to its use of the property being leased.

 

    The Lease Agreement further includes terms concerning the following non-material matters:

 

    Renovations Generally, the Company may not perform any major renovations on the premises without prior written authorization from the Landlord.

 

    Late Rental Fees – In the event the Company fails to pay any of its rental fees on time, the amount overdue accrues interest based on Bank Leumi LeIsrael Ltd.’s standard rate for unauthorized overdrafts starting from the sixth day following the payment due date until the actual date of payment.

 

    Termination of the lease, vacating of premises and fixtures Upon the termination of the Lease Agreement, the Company shall vacate the premises from any person or object which is not owned by the Landlord and return it to the Landlord in an undamaged, usable state. The Company has sole discretion to remove any fixtures, provided such removal does not damage the premises and provided that the Landlord will have no duty to compensate the Company for fixtures which it decides to leave.

 

     

 

 

 

Exhibit 10.5

 

Share Purchase Agreement

 

This Share Purchase Agreement (the “ Agreement ”) is made and entered into as of the 7th day of October, 2014, by and among Todos Medical Ltd. , a company organized and existing under the laws of the State of Israel having its principal offices at Givaat Ha’Shlosha, Israel (the “ Company ”), D.P.H. Investments Ltd. (the “ Investor ”) and Mr. David Wasserman (the " Entrepreneur "). The Company, the Investor and the Entrepreneur are referred to, collectively herein as the “ Parties ” and separately as a “ Party ”.

 

WHEREAS , the Board of Directors of the Company has determined that it is in the best interest of the Company to raise capital by means of the issuance of Ordinary Shares, nominal value NIS 0.10 per share (“ Ordinary Shares ”) for a total investment of NIS1,300,000 (out of which an amount of NIS 230,000 has already been wired to the Company as part of the total investment by the Investor) (the “ Total Investment Amount ” and after deducting the advance funds already wired to the Company, the “ Remaining Investment Amount ”); and

 

WHEREAS , in addition, the Board of Directors of the Company has determined that it is in the best interest of the Company to try and raise additional capital by means of the Company going public (either by way of IPO, Reverse Merger, etc.), and since the Entrepreneur has the necessary connections in order to help the Company to do so, and is willing to finance the required external investors necessary in order to complete such move, the Company would like the Entrepreneur to lead such move on its behalf; and

 

WHEREAS , the Investor desires to invest in the Company and the Entrepreneur desires to help the Company going public, pursuant to the terms and conditions more fully set forth in this Agreement.

 

NOW THEREFORE , in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, and intending to be legally bound hereby, the Parties agree as follows: 

 

1. TRANSACTION

 

1.1. Issuance and Purchase of Ordinary Shares. Subject to the terms and conditions set forth in this Agreement, at the Closing (as defined below), the Company shall issue and allot to the Investor, in consideration of the Total Investment Amount, a total of 30,000 Ordinary Shares (the “ Purchased Shares ”). Such Purchased Shares shall be allocated and shall be issued and become fully paid upon payment of the Remaining Investment Amount. The Purchased Shares shall be allocated to Adv. Roy Avneri (the " Trustee "), who will hold the Purchased Shares in trust and release the Purchased Shares to the Investor, all - in accordance with the trust instructions attached as Exhibit 1.1 . Upon such issuance, the Trustee shall hold in trust Purchased Shares constituting 15% of the outstanding share capital of the Company, on a fully-diluted basis, as set forth in the capitalization table of the Company attached as Exhibits 3.2.3 (the “ Cap Table ”).

 

1.2. Amendment of Corporate Documents . At the Closing, the Company shall replace its current Articles of Association by adopting the Amended and Restated Articles of Association (“ Amended Articles ”) in the form attached hereto as Exhibit 1.2 .

 

 

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1.3. Going Public; Issuance and Purchase of IPO Shares. The Entrepreneur shall make his best efforts to help the Company raise additional funds by way of any type of public investment (IPO, Reverse Merger, etc.), as agreed upon between the Entrepreneur and the Company (the " IPO "), provided that the Entrepreneur shall solely bear all the external advisors' costs related to the IPO. It is agreed that the Entrepreneur shall lead the investment process, and shall be entitled, inter alia, to choose the stock exchange to be used for the funds' raising and to nominate all of the Company's relevant external advisors (lawyers, accountants, underwriters, etc.), according to his sole discretion. In exchange for its efforts in connection with the IPO, as well as the finance of its costs, and subject to the terms and conditions set forth in this Agreement, at the Closing (as defined below), the Company shall issue and allot to the Trustee, a total of additional 70,000 Ordinary Shares (the “ IPO Shares ”), which the Trustee will hold in trust and release the IPO Shares to a new entity designated by the Entrepreneur, according to his sole discretion, all - in accordance with the trust instructions attached as Exhibit 1.3 . Upon such issuance, the Trustee shall hold in trust IPO Shares constituting 35% of the outstanding share capital of the Company, on a fully-diluted basis, as set forth in the Cap Table. Notwithstanding the above, it is agreed that as part of the IPO or the Exit Event (as defined in the Company's Amended Articles), as applicable, the Parties shall implement a mechanism according to which the first 7.5% of the Company's share capital to be issued to external investors after the completion of the IPO shall dilute the Investor and the Entrepreneur only, and any additional issuance of shares shall dilute all Company's shareholders, pro rata to their holdings in the Company's share capital.

 

2. CLOSING

 

2.1. The Closing . Subject to the fulfillment of the closing conditions set forth below, the closing (the “ Closing ”) shall be held at the offices of Golan, Goldschmidt & Co on October 7, 2014 or at such other time and place as the Company, the Investor and the Entrepreneur mutually agree upon orally or in writing (the date of the Closing being herein referred to as the “ Closing Date ”) at which the issuance and sale of the Purchased Shares, the purchase thereof by the Investor, the issuance of the IPO Shares and the registration of the Purchased Shares and the IPO Shares in the name of the Trustee in the share register of the Company, shall take place.

 

2.2. Deliveries and Transactions at the Closing . At the Closing, the following transactions shall occur simultaneously (no transaction shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered):

 

2.2.1. Shareholders Resolutions . The Company shall deliver to the Investor and the Entrepreneur copies of duly executed unanimous resolutions of the Company’s shareholders in the form attached hereto as Exhibit 2.2.1 , by which (i) the execution, delivery and performance by the Company of this Agreement and the Ancillary Agreements (as defined below), including without limitation, the performance of the Company’s obligations hereunder and thereunder and including the trust instructions - Exhibit 1.1 and Exhibit 1.3, shall have been approved, to the extent such approval is necessary; and (ii) the Amended Articles shall have been adopted.

 

2.2.2. Board Resolutions . The Company shall deliver to the Investor and the Entrepreneur copies of duly executed resolutions of the Board of Directors of the Company in the form attached hereto as Exhibit 2.2.2 , by which, inter alia: (i) the execution, delivery and performance by the Company of this Agreement and all documents and agreements ancillary to such agreements (including the trust instructions – Exhibit 1.1 and Exhibit 1.3) (collectively, the " Ancillary Agreements ") shall have been approved; (ii) the Purchased Shares and the IPO Shares shall be issued and allotted to the Trustee; (iii) the Amended Articles shall have been adopted; (iv) the signatory rights on behalf of the Company shall be amended in a manner satisfactory to the Investor and the Entrepreneur; and (v) the Budget, as defined in Section 7.2, shall have been approved.

 

2.2.3. Waivers and Release of any Participation Rights . As part of the shareholders resolution ( Exhibit 2.2.1 ), the Company shall deliver to the Investor and the Entrepreneur a waiver signed by each shareholder of the Company holding preemptive rights or any similar rights, by virtue of which such shareholder may be entitled to purchase or receive securities of the Company upon the consummation of the transactions contemplated herein (collectively, “ Participation Rights ”), pursuant to which he, she or it has waived such Participation Rights with respect to the transactions contemplated by this Agreement.

 

 

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2.2.4. Registration . The Company shall register the issuance of the Purchased Shares and the IPO Shares in the Company's Shareholder Register on the name of the Trustee and shall deliver a copy of the register to the Investor and the Entrepreneur.

 

2.2.5. Compliance Certificate . The Company shall deliver to the Investor and the Entrepreneur a certificate (substantially in the form attached hereto as Exhibit 2.2.5 ) duly executed by the CEO of the Company, and dated as of the Closing Date; such certificate confirming and certifying that the representations and warranties set forth in Section 3 of this Agreement are true and correct as of and through the Closing Date, and that the Company has performed and complied with all of its covenants, agreements, and undertakings required to be performed and complied with at or prior to the Closing and that to the Company’s best knowledge, since the date of execution hereof, there has not been a material adverse change in the financial or business condition of the Company.

 

2.2.6. Nomination of Board Members . The Board of Directors of the Company shall have been replaced with the new Board of Directors to be designated in accordance with the Amended Articles.

 

2.2.7. Indemnity Agreements . The Company shall execute and deliver the Indemnity Agreements, as defined in Section 6.4 below.

 

2.2.8. Consents . The Company shall deliver to the Investor a copy of all third party approvals, consents, waivers, undertakings and agreements required in connection with the transactions contemplated in this Agreement as described in Section 3.5 of the Schedule of Exceptions.

 

2.2.9. Payment . The Investor shall pay to the Company the Remaining Investment Amount, in 7 equal installments of NIS 150,000 and one last installment of NIS 20,000, the first one of them to be paid at the Closing and the other installments to be paid at the 9 th of each calendar month, by way of a bank transfer to the Company’s account in immediately available funds, pursuant to wiring instructions given in writing by the Company prior to the Closing Date, or by such other form of payment as is mutually agreed by the Company and the Investor.

 

2.3. Conditions to Closing by the Investor and the Entrepreneur . The obligations of the Investor to pay the Remaining Investment Amount and the obligations of the Entrepreneur to lead and finance the IPO process are subject to the fulfillment on or before the Closing of the following conditions precedent, any one or more of which may be waived in whole or in part by the Investor and/or the Entrepreneur, respectively, in their sole discretion.

 

 

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2.3.1. Accurate Representations and Warranties . The representations and warranties set forth in Section 3 below shall be true and correct when made and as of the Closing Date, as though the Closing Date was substituted for the date set forth in the representations and warranties set forth in Section 3 of this Agreement.

 

2.3.2. Compliance with Covenants . The Company shall have performed and complied with all of their covenants, agreements and undertakings as set forth herein.

 

2.3.3. Qualifications. The Company shall have obtained all permits, consents, approvals and authorizations that shall be necessary or required lawfully for the Company to consummate the transaction contemplated by this Agreement and the Ancillary Agreements (and all of the foregoing shall be effective as of the Closing).

 

2.3.4. No Action. No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any state, municipal, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would: (i) prevent consummation of any of the transactions contemplated by this Agreement; (ii) cause any of the transactions contemplated by this Agreement, the Amended Articles and the Ancillary Agreements to be rescinded following consummation; or (iii) affect adversely the right of the Company to own its intellectual property or other material assets or to operate its business as currently conducted or as currently proposed to be conducted.

 

2.3.5. Actions Taken; Delivery of Documents . All the actions to be taken as set forth in Section 2.2 above shall have been completed and all documents to be delivered by the Company, as set forth in Section 2.2 above, shall be delivered to the Investor’s counsel.

 

2.3.6. Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated by this Agreement and Ancillary Agreements shall be in the form agreed upon with the Investor and its counsel, and the Investor and its counsel shall have received all such counterpart originals or certified or other copies of such documents as the Investor or its counsel may reasonably request.

 

2.3.7. Agreements . The written employment, secrecy, assignment of intellectual property rights and non-competition agreements of the Company shall be in effect with all of the officers of the Company and with all the then current employees and consultants of the Company involved in or with access to intellectual property and/or product planning.

 

2.4. Conditions to Closing by the Company . The Company's obligation at the Closing to consummate the transactions contemplated hereby is subject to the satisfaction and fulfillment, prior to or at the Closing, of each of the following conditions precedent (any or all of which may be waived, in whole or in part, by the Company, which waiver shall be at the sole discretion of the Company):

 

2.4.1. Accurate Representations and Warranties . The representations and warranties of the Investor and the Entrepreneur set forth in Section 5 below shall be true and correct in all material respects when made and as of the Closing Date, as though the Closing Date was substituted for the date set forth in the representations and warranties set forth in Section 5 of this Agreement.

 

 

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2.4.2. Compliance with Covenants . The Investor and the Entrepreneur shall have performed and complied with all of its covenants, agreements, and undertakings as set forth herein and, without derogation from the generality of the aforesaid, the first installment of the Remaining Investment Amount was paid to the Company at the Closing.

 

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to the Investor and the Entrepreneur that, except as set forth on the Schedule of Exceptions (“ Schedule of Exceptions ”) attached hereto as Exhibit 3 , whether or not such Schedule is specifically referenced herein (which Schedule of Exceptions shall be divided into sections corresponding to the provisions hereof and shall be deemed to be representations and warranties as if made hereunder), the statements contained in this Section 3 are true and correct as of the date of this Agreement, and will be true and correct as of the Closing Date as though the Closing Date was substituted for the date set forth in the representations and warranties set forth in this Section 3.

 

3.1. Incorporation; Corporate Power; Validity; No Breach . The Company is duly incorporated and validly existing under the laws of the State of Israel, and has full corporate power and authority to own its properties and assets and to conduct its business as now being conducted and as proposed to be conducted. The Articles of Association of the Company, as currently in effect, are attached hereto as Exhibit 3.1 (the " Corporate Documents "). The Company does not transact business in any jurisdiction in which it does not have all requisite corporate power and authority, as applicable or in which it is not in good standing.

 

This Agreement, the Ancillary Agreements and the documents to be delivered to the Investor and the Entrepreneur at the Closing were duly executed by the Company and at the Closing shall constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. All corporate action on the part of the Company, its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement, the Amended Articles and the Ancillary Agreements, the performance of all obligations of the Company hereunder and thereunder, and the issuance, sale and delivery of the Ordinary Shares has been taken or will be taken prior to the Closing.

 

The Company is not in violation or default of any provision of its Corporate Documents or any contract to which it is a party or by which it is bound. The execution and the delivery of this Agreement, the Amended Articles and the Ancillary Agreements, and the consummation of the transactions contemplated hereby and thereby, will not, (i) violate any law, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Company is subject or by which it is bound; (ii) conflict with, result in a breach of, constitute a default by the Company under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, cancel, or require any notice under any agreement, lease, license, instrument, or other arrangement to which the Company is a party or by which each is bound, or to which the Company's owned assets are subject, or result in the imposition of any lien, pledge, claim, charge, encumbrance or third party rights of any kind (" Security Interest ") upon such assets; or (iii) violate any provision of the Company's Corporate Documents.

 

 

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3.2. Share Capital .

 

3.2.1. Prior to the Closing, the authorized share capital of the Company consists of 990,000 Ordinary Shares, par value NIS 0.10 each (“ Ordinary Shares ”), and 10,000 Preferred Shares, par value NIS 0.10 each (" Preferred Shares "), of which 90,000 Ordinary Shares and 10,000 Preferred Shares are issued and outstanding.

 

3.2.2. Immediately after the Closing, the authorized share capital of the Company shall consist of 990,000 Ordinary Shares and 10,000 Preferred Shares, of which 190,000 Ordinary Shares and 10,000 Preferred Shares are issued and outstanding.

 

3.2.3. Capitalization . A complete and correct list of all the security holders of the Company (including, for the avoidance of doubt, holders of all of the outstanding options, warrants, convertible securities and other rights to purchase or otherwise acquire shares of the Company) immediately prior to the Closing and immediately following the Closing are as set forth in Exhibit 3.2.3(a) attached hereto. Except as set forth in Section 3.2.3(b) , the individuals and entities identified in Exhibit 3.2.3(a) are the holders of record and beneficially of all of the issued and outstanding share capital of the Company, on a fully-diluted basis and of all rights thereto, free and clear of any Security Interest, Participation Rights, restrictions, rights, options to purchase, proxies, voting trust and other voting agreements, calls or commitments of every kind, and, except as set forth in Exhibit 3.2.3(a) , there are no other shares, options, warrants, convertible securities or other rights to subscribe for, purchase or acquire any share capital of the Company from the Company, or from each of the other shareholders of the Company listed therein.

 

3.2.4. Valid Issuance . The share capital of the Company outstanding on the date hereof is all duly and validly authorized and issued, fully paid and non-assessable, was issued free of any Participation Rights or Security Interest, and was issued in compliance with all applicable laws, including the relevant securities laws of the United States and the State of Israel.

 

3.3. Subsidiaries . The Company does not currently own or control any equity interest in any other corporation, partnership, trust, joint venture, limited liability Company, association, or other business entity.

 

3.4. Financial Statements .

 

3.4.1. Section 3.4 of the Schedule of Exceptions includes the audited financial statements for the fiscal year ended on December 31, 2012 (the “ Financial Statements ”). The Financial Statements are true and correct in all material respects, are in accordance with the books and records of the Company and have been prepared in accordance with Israeli generally accepted accounting principles (“ GAAP ”), and present fairly the financial condition of the Company at the date therein indicated in all material respects.

 

3.4.2. Except as set forth in Section 3.4.2 of the Schedule of Exceptions or in the Financial Statements, the Company is not a guarantor of any debt or obligation of another, nor has the Company agreed to become directly liable for any obligation of any person, and no person has given any guarantee of, or security for, any obligation of the Company.

 

3.4.3. Since December 21, 2012 , except as set forth in Section 3.4.3 of the Schedule of Exceptions and as contemplated by this Agreement and its Exhibits, there has not been:

 

 

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(a) any material adverse change in the assets, liabilities, financial condition, operating results or business of the Company from that reflected in the Financial Statements, other than changes in the ordinary course of business; 

(b) any damage, destruction or, to the Company's knowledge, loss, whether or not covered by insurance, materially and adversely affecting the Condition of the Company (as defined below); 

(c) any waiver by the Company of a valuable right or of a material debt owed to it; 

(d) any satisfaction or discharge of any lien or payment of any material obligation by the Company, except in the ordinary course of business and that is not, individually or in the aggregate, materially adverse to the assets, liabilities, financial condition, operating results or business of the Company as currently conducted (collectively, the " Condition of the Company ”); 

(e) any material change or amendment to an agreement to which the Company is a party; 

(f) any material change in any compensation arrangement or agreement with any key employee of the Company; 

(g) any loans made by the Company to its employees, officers, or directors other than travel advances made in the ordinary course of business; 

(h) any sale, transfer or lease of (except in the ordinary course of business) or mortgage or pledge or imposition of lien on, any of the Company’s material assets, except liens for taxes not yet due or payable; 

(i) any change in the accounting methods or accounting principles or practices employed by the Company; or 

(j) to the Company's knowledge, any other material event or condition of any character that by itself or in conjunction with other events or conditions would materially and adversely affect the Condition of the Company.

 

3.5. Governmental Consents or Third Party Consents . At the Closing, no consent, approval, order, permit, action by or authorization of, or registration, qualification, designation, declaration or filing with, any governmental authority or any third party, on the part of the Company is required in connection with the valid execution, delivery and performance of this Agreement (including the Ancillary Agreements and actions ancillary and related thereto) and the transactions contemplated hereby and thereby, including the issuance of the Ordinary Shares, except for the certain filings with the Companies’ Registrar. Each of the shareholders of the Company has waived any Participation Rights it may have had with respect to the transactions contemplated by this Agreement.

 

3.6. Liabilities . Except (i) as set forth on Section 3.6 of the Schedule of Exceptions; or (ii) as set forth in the Financial Statements; or (iii) in the ordinary course of business, the Company does not have any material liabilities, debts or obligations, whether accrued, absolute or contingent, and since its incorporation, the Company has operated only in the ordinary course of business.

 

 

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3.7. Agreements . Other than as set forth in Section 3.7 of the Schedule of Exceptions, there are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or by which it is bound that involve or may involve (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of US$10,000 (ten thousand USD) in the aggregate or that extend for more than one year beyond the date of this Agreement, (ii) the license of any patent, copyright, trade secret or other proprietary right to or from the Company, (iii) provisions restricting or affecting the development, manufacture or distribution of the Company’s products or services or limiting or restricting its right to compete with any person in any respect; (iv) funding from the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor, and the Company has not received or been the beneficiary of any grants or other support or benefit from any other Israeli or non-Israeli governmental authority; or (v) indemnification by the Company with respect to infringements of proprietary rights. All the material agreements to which the Company is a party are listed in Section 3.7 of the Schedule of Exceptions. The Company is not in violation in any material respect of any provision of such agreements to which it is subject, nor in violation of any provision which could reasonably have a material adverse effect on the current condition, financial or otherwise, operations of the Company and as proposed to be conducted. All such agreements are to the best knowledge of the Company in full force and effect, and the Company has no knowledge of the invalidity of or grounds for rescission of any of these agreements, or of any intention to terminate any such agreements. The Company has not assumed, guaranteed, endorsed or otherwise become directly or contingently liable on any indebtedness of any other person (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor, or otherwise to assure the creditor against loss), except for guaranties by endorsement of negotiable instruments for deposit or collection in the ordinary course of business, nor is any person, firm or corporation a guarantor of any indebtedness of the Company. The Company is not party to and is not bound by any contract, agreement or instrument, or subject to any restriction under the Corporate Documents that affects its business as now conducted and as proposed to be conducted, its properties and assets or its current financial condition.

 

3.8. Proprietary Information and Service Providers . Each officer, employee and consultant of the Company has executed or shall have executed prior to Closing, a Confidentiality and Proprietary Information and Inventions Agreement, or are otherwise bound by confidentiality undertakings, and each such agreement remains in full force and effect pursuant to its terms. None of such employees, officers or consultants is in violation or breach thereof, and the Company will use its best efforts to prevent any such violation. All consultants to or vendors of the Company with access to confidential information of the Company are party to a written agreement pertaining to confidentiality of confidential information of the Company. None of the Company's consultants or vendors is in violation of such agreements. To the Company's best knowledge, no such officer or employee or consultant is in violation of any prior employee contract, proprietary information agreement or other agreement relating to the right of any such individual to be employed by, or to contract with, the Company, and, to the Company's knowledge, the continued employment by the Company of its present employees, and the performance of the Company’s contracts with its independent contractors, will not result in any such violation. The Company has not received any written notice alleging that any such violation has occurred.

 

3.9. Intellectual Property

 

3.9.1. General . The Company owns or has the right to use pursuant to written license, sublicense, agreement, or permission, free and clear (other than, with regard to intellectual property rights owned by third parties set forth in Section 3.9.1 of the Schedule of Exceptions, subject to the rights of the owner/licensor thereof) of any Security Interest, third party rights and royalties, all patents, trademarks, service marks, trade names, mask works, copyrights and all trade secrets, including know-how, invention, designs, processes, computer programs, algorithms, firmware and technical data, concepts, techniques, methods, systems, drawings, photographs, models, prototypes, research materials, formulas, development or experimental work, work in progress, cost data, marketing plans, product plans, business strategies, financial information, forecasts, personnel information and customer or supplier lists, all as currently used or as proposed to be used by the Company (collectively: “ Intellectual Property ”). Each item of Intellectual Property owned, licensed or used by the Company immediately prior to the Closing hereunder will be owned or available for use by the Company on substantially the same terms and conditions immediately subsequent to the Closing hereunder. Except for readily and commercially available off-the-shelf software, no other Intellectual Property of any kind required by the Company to conduct its contemplated business, is owned by a third party or would require the payment of any fee or royalty.

 

 

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3.9.2. Ownership of Intellectual Property . All of the Intellectual Property evidenced by or embodied in and/or attached, connected or related to: (i) the Company’s technology, and (ii) any work product created by or for the Company prior and up to the Closing Date, is owned solely and exclusively by the Company. The Company's current and former employees, consultants, and other persons who, either alone or in concert with others, developed, invented, discovered, derived, programmed or designed the Intellectual Property, have entered into written agreements with the Company assigning all rights in any and all Intellectual Property as developed in the course of their employment by or provision of services to the Company. Section 3.9.2 of the Schedule of Exceptions identifies each: (a) patent, trade mark, domain name or registration which has been issued to the Company with respect to any of the Intellectual Property; (b) pending patent or trade mark application or application for registration which the Company has made with respect to any of the Intellectual Property; (c) trade name or unregistered trademark used by the Company; and (d) license, agreement, or other permission which the Company has received from or granted to any third party with respect to any of the Intellectual Property. With respect to each item of Intellectual Property required to be identified as set forth in this Section 3.9.2, and unless set forth otherwise in the Schedule of Exceptions: (i) the Company possesses all right, title, and interest in and to the item, free and clear of any Security Interest, license, royalty, commission or similar arrangements or other restriction; (ii) the item is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; (iii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand is pending or to the best knowledge of the Company is threatened which challenges the legality, validity, enforceability, use, or ownership of the item; (iv) the Company has never agreed to indemnify any person for or against any interference, infringement, misappropriation, or other conflict with respect to the item; and (v) the Company has not granted, and there are not outstanding, any options, licenses or agreements of any kind relating to the Intellectual Property, nor is the Company bound by or a party to any option, license or agreement of any kind with respect to any of the Intellectual Property.

 

3.9.3. No Infringement . (i) To the best knowledge of the Company, the Company has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any intellectual property rights of any third party; (ii) the Company has never received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that the Company must license or refrain from using any intellectual property rights of any third party) and to the Company’s best knowledge, there is no basis for such claim; and (iii) to the best knowledge of the Company, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property of the Company.

 

 

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3.9.4. Protection of IP Rights and Trade Secrets . The Company takes such actions to maintain and protect each item of Intellectual Property which actions are reasonable and customary in the industry in which the Company operates. All the confidential information is being (and has been) continuously maintained in confidence by the Company and the Company has taken measures reasonable and/or customary to protect and prevent its disclosure to unauthorized parties. The Company has complied, in all material respects with the requirements of, and has filed all material documentation required in dealing with, all Patent and Trademark Offices and any other patent registry agency in which its patent applications were filed, as instructed by its professional patent counsel; and, to the best knowledge of the Company, all patents (if any) and patent applications are in effect, and there is no prior art or any other claim which renders the inventions of the Company referred to in the patents, patent applications and related documentation (if any) invalid in any manner.

 

All technical information developed by and belonging to the Company which has not been patented has been kept confidential and disclosed only under a written confidentiality agreement with the recipient.

 

3.10. Directors and Officers . Section 3.10 of the Schedule of Exceptions lists the officers and directors of the Company as of the date of the Closing. All agreements, commitments and understandings of the Company, whether written or oral, with respect to any compensation to be provided to any of the Company's directors and officers have been fully disclosed to the Investor. No option plan, share purchase, share option or other written agreement or understanding has been entered into between the Company and any director, officer or other holder of any securities or rights exercisable or convertible for securities which provides for acceleration or other changes in the vesting provisions or other terms of such agreement or understanding as the result of the occurrence of the transactions contemplated by this Agreement. Each officer and key employee of the Company is devoting, and to the Company's knowledge, is currently intending to continue to devote one hundred percent of his or her business time to the conduct of the business of the Company

 

3.11. Litigation . To the best knowledge of the Company, (a) there are no claims, actions, suits or other legal or arbitration proceedings or to the Company's knowledge governmental inquiry or investigations pending or threatened against the Company or any of its officers or directors (in their capacity as such) before any court, tribunal, arbitrator or governmental agency, and (b) the Company is not subject to any order, writ, injunction, judgment or decree of any kind which questions the validity or consummation of this Agreement.

 

3.12. Employees; Independent Contractors . Section 3.12 of the Schedule of Exceptions contains a list of all promises, agreements, arrangements and understandings, with officers, directors, employees and consultants (other than attorneys and accountants) of the Company, which are presently in effect, detailing the name, title or position, terms and conditions of engagement, annual salary/compensation (including bonuses, commissions, and deferred compensation), company cars, electronic devices, pensions (including those required by all laws), retirement benefits, profit sharing, any interests in any incentive compensation plan and unused accrued vacation. Other than as set out in the Schedule of Exceptions, the Company has complied in all material respects with all legal requirements relating to employment, wages, hours, benefits, pensions, the payment of social security and similar taxes. The Company is not liable for the payment of any damages, taxes, fines, penalties, or other amounts, however designated, for failure to comply with any of the foregoing legal requirements. To the Company’s best knowledge, no officer or key employee, nor any group of key employees, intends to terminate their employment with the Company, nor does the Company have a present intention to terminate the employment of any of the foregoing. Other than as set out in the Schedule of Exceptions, the employment of each officer and employee of the Company is terminable upon 30 days prior notice at the will of the Company. The Company is not aware of any circumstance whereby any employee might demand (whether legally entitled to or not) any claim for compensation on termination of employment beyond the amount of statutory severance pay to which such employee may be entitled and/or otherwise provided for in such employee’s employment agreement with the Company. All obligations of the Company with respect to statutorily required severance payments have been fully satisfied or have been funded by contributions to appropriate insurance funds. To the best knowledge of the Company, none of the Company's employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee's best efforts to promote the interests of the Company, or that would conflict with the Company's business. The Company has complied in all material respects with all applicable laws relating to the employment of labor, including provisions relating to wages, hours, equal opportunity, collective bargaining and the payment of social benefits and other taxes

 

 

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3.13. Compliance with Laws and Other Instruments . The Company has conducted its business in all material respects in accordance with all applicable laws of the countries in which it has conducted its business and there is no violation or default with respect to any law or judgment of any court or any governmental agency which could have a material adverse effect upon the assets or business of the Company. To the Company’s best knowledge, there is no existing law, rule, regulation or order which would prohibit or restrict the Company from, or otherwise materially adversely affect the Company in, conducting its business in any jurisdiction in which it is now conducting business or, to the Company’s knowledge, in which it currently proposes to conduct business.

 

3.14. Related-Party Transactions . Except as contemplated by this Agreement and the exhibits thereto, and as set forth in Section 3.14 of the Schedule of Exception, no key employee, shareholder, officer, or director of the Company or member of his or her immediate family or any affiliate of any such person or entity is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them other than (i) for compensation for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company, (iii) for other standard employee benefits made generally available to all employees. To the Company’s knowledge, none of such persons has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company, except that employees, officers, or directors of the Company and members of their immediate families may own shares in publicly traded companies (not to exceed 5% of their outstanding capital) that may compete with the Company. To the Company’s knowledge, no member of the immediate family of any employee, shareholder, officer or director of the Company or any affiliate of any such person or entity is directly or indirectly interested in any material contract with the Company or in any person or entity which (i) furnished or sells services or products which are furnished or sold or are proposed to be furnished or sold by the Company, or (ii) purchases from or sells or furnishes to the Company any goods or services

 

3.15. Permits . Except as set forth in Section 3.15 of the Schedule of Exception, the Company has all franchises, permits, licenses, and any similar authority from each governmental authority or agency necessary for the conduct of its business as now being conducted by it, the lack of which would have a material adverse effect of the Condition of the Company. The Company is not in default in any material respect under any of such franchises, permits, licenses, or other similar authority.

 

 

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3.16. Registration Rights . Except as provided in the Corporate Documents, the Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity.

 

3.17. Labor Agreements and Actions . The Company is not bound by or subject to (and none of its assets or properties are bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union (other than agreements by virtue of statutory general applicability, such as by virtue of labor laws), and no labor union has requested or, to the Company’s best knowledge, has sought to represent any of the employees, representatives or agents of the Company.

 

3.18. Tax Matters . (a) The Company has no liability of any nature, accrued or contingent, including without limitation, liabilities for Israeli taxes or any other foreign taxes or any penalties, interest, and additions to taxes or any liabilities to customers or suppliers, other than liabilities incurred in the ordinary course of business and has paid or fully provided in its books of account for all taxation for which it has or may hereafter become liable or accountable in the period from the date of its incorporation; (b) the Company has at all times and within the requisite time limits, fully and accurately observed, performed and complied with all obligations and conditions imposed on it, or to which any claim deduction, allowance or relief made, claimed by or afforded to it was made subject under any legislation relating to taxation; (c) The Company is not aware of any circumstances which will or may, whether by lapse of time or the issue of any notice of assessment or otherwise, give rise to any dispute with any relevant taxation authority in relation to its liability or accountability for taxation, any claim made by it, any relief, deduction, or allowance afforded to it, or in relation to the status or character of the Company under or for the purpose of any provision of any legislation relating to taxation; (d) the Company has never had any tax deficiency proposed or assessed against it and has not executed any waiver of any statute of limitations on the assessment or collection of any tax or governmental charge; (e) none of the Company’s income tax returns have ever been audited by governmental authorities; and (f) the Company has withheld or collected from each payment made to each of its employees, the amount of all taxes required to be withheld or collected therefrom, and has paid the same to the proper tax receiving officers or authorized depositories.

 

3.19. No Powers of Attorney . There are no outstanding powers of attorney executed on behalf of the Company. Excluding the authorized signatories of the Company as set forth in Section 3.19 of the Schedule of Exception, no person, as agent or otherwise, is entitled to or authorized to bind or commit the Company to any obligation, and the Company is not aware of any person purporting to do so.

 

3.20. Brokers . No agent, broker, investment banker, person or firm acting in a similar capacity on behalf of or under the authority of the Company is or will be entitled to any brokerage or finders’ fees or agents’ commissions or any similar fee in connection with this Agreement.

 

3.21. Disclosure of Information . There is no material fact or information relating to the business, condition (financial or otherwise), affairs, operations, or assets of the Company as currently conducted that has not been disclosed to the Investor and the Entrepreneur in writing by the Company. The representations and warranties in Section 3 of this Agreement are each accurate, correct and complete in all material respects, and neither this Agreement (including any exhibit to this Agreement) nor any documents, certificates or other items supplied by the Company with respect to the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading.

 

 

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4. INDEMNIFICATION AND REMEDIES

 

4.1. Compensation by the Company

 

Subject to the following limitations of indemnification provisions, the Company agrees to protect, defend, compensate, indemnify, and hold harmless the Investor and the Entrepreneur against and in respect of all loss, liability, damage, cost, or expense (including reasonable legal fees and expenses, and including a reduction in the value of its shares in the Company) (collectively: “ Loss ”), as and when incurred by it due to any breach or falsity of any of the representations, warranties, or covenants of the Company herein contained.

 

4.2. Indemnity Procedure

 

Promptly after receipt by the Investor or the Entrepreneur (together in this section, the " Investor ") of notice of the commencement of any action, proceeding, or investigation by a third party in respect of which indemnity may be sought (a " Claim "), the Investor shall notify the Company. The Company shall promptly assume the defense of the Claim with counsel satisfactory to such Investor, and the fees and expenses of such counsel shall be borne by the Company. The Investor will cooperate with the Company in the defense of any Claim for which the Company assumes the defense, at Company's cost and expense. The Company shall not be liable for a settlement made by the Investor in any Claim effected without the Company’s consent. The Company shall not withhold their consent to a settlement of such Claim if the settlement would not subject them to any financial liability to which they are not exposed not taking into consideration the proposed settlement. The Company shall not enter into any settlement in any Claim, unless such settlement includes a general release of the Investor with no payment by the Investor of consideration, with no affirmative or negative restrictions on the Investor and without an admission of liability by the Investor.

 

4.3. Maximum Liability

 

Without derogating from the other limitations of liability of the Company, the maximum aggregate monetary liability of the Company for any breaches or misrepresentations under and/or in connection with this Agreement as to the Investor, shall not exceed the lesser of the following amounts: (i) the amount actually invested by the Investor in the Company pursuant to this Agreement (including, in order to remove doubt, the funds transferred to the Company prior to the signing of this Agreement) plus interest at the rate of 8% per year, compounded annually and expenses of enforcement of the Investor’s rights under this Agreement; or (ii) the Loss plus the expenses of enforcement of the Investor’s rights under this Agreement.

 

The limitations set forth in this Subsection 4.3 shall not apply in case of a fraudulent or willful misrepresentation or fraudulent or willful breach of warranty by the Company.

 

4.4. Time Limitation

 

The Company shall have no liability (and such liability shall be fully discharged and any cause of action shall be extinguished) and a claim by the Investor for indemnification based on the representations and warranties of the Company shall be forever barred, unless notice of such claim is given before the expiration of four (4) years following the Closing, except in the event of Sections 3.1, 3.2, 3.8, 3.9 and 3.18 with respect to fraudulent or willful misrepresentation or fraudulent or willful breach of warranty, each of which shall extend until the expiration of the applicable statute of limitations.

 

 

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4.5. Threshold

 

Without derogating from the other limitations with regard to indemnification herein, no claims shall be asserted against the Company unless the aggregate Loss claimed exceeds US$10,000 (ten thousand USD) at which point claims may be made for the full amount of any Loss from the "first Dollar".

 

5. REPRESENTATIONS & WARRANTIES OF THE INVESTOR AND THE ENTREPRENEUR

 

The Investor and the Entrepreneur hereby represent and warrant to the Company that the statements contained in this Section 5 are true and correct as of the date of this Agreement and will be true and correct as of the Closing Date, as though the Closing Date was substituted for the date set forth in the representations and warranties set forth in this Section 5.

 

5.1. Authorization . The Investor and the Entrepreneur have full power and authority to enter into this Agreement and the Ancillary Agreements and the Agreement and the Ancillary Agreements constitute a valid and legally binding obligation, enforceable in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

5.2. Purchase Entirely for Own Account . This Agreement is made with the Investor and the Entrepreneur in reliance upon such Investor’s and Entrepreneur's representation to the Company, that the Ordinary Shares to be received by such Investor and/or the Entrepreneur, are being acquired for investment for the Investor's and/or the Entrepreneur's own account, and not with an immediate view to the resale or distribution of any part thereof, and that the Investor and the Entrepreneur has no present intention of selling, granting any participation in, or otherwise distributing the same.

 

5.3. Investment Experience . Without derogating from the representations and warranties set forth in Section 3 above, the Investor and the Entrepreneur has experience in investing in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Ordinary Shares pursuant to this Agreement.

 

5.4. Brokers . No agent, broker, investment banker, person or firm acting in a similar capacity on behalf of or under the authority of such Investor is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, on account of any action taken by the Investor and/or the Entrepreneur in connection with any of the transactions contemplated under this Agreement.

 

5.5. Economic Risk . The Investor and the Entrepreneur acknowledge that in purchasing the Ordinary Shares they must be prepared to continue to bear the economic risk of such investment for an indefinite period of time because, among others, the Ordinary Shares have not been registered under the Securities Act or any other comparable securities law of another jurisdiction and cannot be sold unless they are subsequently registered under the Securities Act and applicable state laws, or unless exemptions from such registrations are available.

 

 

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5.6. No Conflict . The investment in the Company by the Investor and the Entrepreneur, and the execution, delivery and performance of this Agreement and all other instruments and documents relating thereto do not conflict with or violate any other agreement, instrument, document, court order or judgment to which the Investor and/or the Entrepreneur are bound or subject and do not require the consent or approval of any other person or government agency.

 

6. AFFIRMATIVE COVENANTS OF THE COMPANY

 

6.1. Rights, Powers and Privileges of the Investor and the Ordinary Shares . The Ordinary Shares being issued hereunder and the Investor, shall have the rights, powers and privileges set forth in this Agreement, the Amended Articles and the Ancillary Agreements, all as may be amended from time to time as permitted therein.

 

6.2. Use of Proceeds . The Company shall use the proceeds of the issuance and sale of the Ordinary Shares in accordance with the budget attached hereto as Exhibit 7.2 (the " Budget ").

 

6.3. Registration Rights . If upon consummation of the Company's next round of equity financing, the Company shall grant registration rights to the future investors, then, the Investor and the Entrepreneur shall be entitled to registration rights identical to the rights granted to such future investors, mutatis mutandis.

 

6.4. Indemnity Agreements . At or prior to the Closing, the Company, as applicable, shall enter into an indemnity agreement with each of its directors (including the newly designated directors being designated upon the consummation of the Closing), in the form attached hereto as Exhibit 6.4 (the " Indemnity Agreements ").

 

6.5. Restrictive Agreements Prohibited/Existing Agreements Conformed . The Company shall not become a party to any agreement which by its terms restricts the Company’s performance of any terms or conditions of this Agreement or any of the Ancillary Agreements or the Amended Articles. The Company shall cause the amendment of any existing agreements among the shareholders of the Company as and to the extent necessary so as not to conflict with or derogate from any of the terms and conditions of this Agreement or any of the Ancillary Agreements or the Amended Articles.

 

6.6. Compliance with Laws . The Company shall comply, and cause each subsidiary (if any) to comply, with all applicable laws, rules, regulations and orders, noncompliance with which could materially adversely affect its business or condition, financial or otherwise.

 

6.7. Keeping of Records and Books of Account . The Company shall keep, and cause each subsidiary (if any) to keep, adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and such subsidiary (if any), and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

 

 

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7. MISCELLANEOUS

 

7.1. Aggregate Shareholdings . For purposes of computing any minimum shareholding required for any purposes under this Agreement, the Amended Articles, or the Ancillary Agreements, the shares of the Company held by each shareholder and those held by any person or entity that is or would be a Permitted Transferee of such shareholder (as such term defined in the Amended Articles) shall be entitled to be aggregated in order to be considered one shareholder.

 

7.2. Applicable Law . This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Israel without giving effect to its principles or rules of conflicts of laws. The competent courts of the Tel-Aviv-Jaffa district shall have exclusive jurisdiction to hear all disputes arising in connection with this Agreement and no other courts shall have any jurisdiction whatsoever in respect of such disputes.

 

7.3. Survival and Limitations of Representations and Warranties . The representations and warranties set forth in this Agreement shall survive the Closing.

 

7.4. Counterpart Signatures . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that two parties need not sign the same counterpart. In the event that any signature is delivered by facsimile or PDF transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile or PDF signature page were an original thereof.

 

7.5. Entire Agreement . This Agreement, the Amended Articles and the Ancillary Agreements constitute the full and entire agreement, covenants, promises and understandings between the Parties hereto with respect to the subject matter hereof, and supersede any and all prior agreements, understandings, promises and representations made by all or some of the Parties (or by any Party to another), written or oral, concerning the subject matter hereof and the terms applicable hereto.

 

7.6. Amendment & Waivers . Any term of this Agreement may be amended and the non-observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Investor.

 

7.7. Severability . If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

 

7.8. Notice . All notices or other communications provided for in this Agreement shall be in writing and shall be given in person, by registered mail (registered air mail if mailed internationally), by an overnight courier service which obtains a receipt to evidence delivery, by facsimile transmission (evidenced by written confirmation of transmission) or by e-mail transmission, addressed as set forth below:

 

 

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Company

Todos Medical Ltd.

Givat Ha'Shlosha, Israel

Attention: Rami Zigdon, CEO

Tel:

e-mail: 

   
Investor and Entrepreneur

Mr. David Wassermann

Ashdod, Israel

Tel:__________

e-mail: __________________

 

with a copy to (which shall not constitute service of process on): 

Golan, Goldschmidt & Co., Law Office

Tel Aviv, Israel

Attention: Roy Avneri, Adv.

Tel:

Fax:

E-mail: 

 

or such other address as any party may designate to the other in accordance with the aforesaid procedure. All notices and other communications delivered in person shall be deemed to have been given upon delivery. Notices and other communications delivered by facsimile transmission or e-mail transmission shall be deemed to have been given as of one business day after sending thereof. All notices and other communications delivered by overnight air courier shall be deemed to have been given as of the third business day after posting; and all notices and other communications sent by registered mail shall be deemed given ten (10) days after posting.

 

 

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7.9. Payment of Tax . The Company shall pay all stamp tax, franchise tax or other taxes or duties which may be due in connection with the execution of this Agreement, the Ancillary Agreements or the issuance of the Ordinary Shares.

 

7.10. The Company hereby confirms and represents that it is fully aware that Adv. Roy Avneri represented the Investor and the Entrepreneur only in the transaction contemplated in this Agreement.

 

7.11. Further Actions . At any time and from time to time, each party agrees, without further consideration, to take such actions and to execute and deliver such documents as may be reasonable necessary to effectuate the purposes of this Agreement.

 

[Remainder of Page Left Intentionally Blank]

 

[Signature Page to Follow]

 

 

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IN WITNESS WHEREOF , the Parties hereto have executed this Share Purchase Agreement on the date first above written.

 

 

  Todos medical Ltd.
   
   
  By:  /s/ Rami Zigdon
 

Name: Rami Zigdon 

Title: CEO 

Date: October 7, 2014

     

 

  D.P.H. INVESTMENTS LTD.
 
By:
   
   
  By:  /s/ David Wasserman
 

Name: David Wasserman 

Title: Director 

Date: October 7, 2014

     

   

 

  DAVID WASSERMAN
   
  /s/ David Wasserman
     
     

 

 

 

 

19  

 

Addendum and Clarification to Share Purchase Agreement

 

This Addendum to Share Purchase Agreement (the “ Addendum ”) is made and entered into as of the ____day of August, 2015, by and among Todos Medical Ltd. , a company organized and existing under the laws of the State of Israel having its principal offices at 1 Hamada Street, Rehovot, Israel (the “ Company ”), D.P.H. Investments Ltd. (the “ Investor ”), Mr. David Wasserman (the " Entrepreneur ") and the persons/entities listed in Exhibit A attached hereto (the collectively, the " Beneficial Shareholders "). The Company, the Investor, the Beneficial Shareholders and the Entrepreneur are referred to, collectively herein as the “ Parties ” and separately as a “ Party ”.

 

WHEREAS , the Company, the Investor and the Entrepreneur entered into that Share Purchase Agreement dated October 7, 2014 (the " Original Agreement "); all Capitalized Terms shall have the meaning ascribed to them in the Original Agreement, unless otherwise expressly defined herein; and

 

WHEREAS , the Company, Investor and Entrepreneur wish to enjoin the Beneficial Shareholders to the Original Agreement and to clarify that (A) the IPO Shares (ie 21,000,000 ordinary shares post split and issuance of bonus shares) issued in the name of Adv. Roy Avneri (the " Trustee ") in trust for the Entrepreneur, were issued to him as trustee for the Beneficial Shareholders (including the Entrepreneur) as further explained below; (B) that the IPO Shares were issued to the Beneficial Shareholders (including the Entrepreneur) in exchange for their investment in the IPO Shares; (C) the Entrepreneur is under no obligation to fund or provide any services or assistance in connection with any process of going public by the Company contrary to the terms of the Original Agreement; and

 

WHEREAS , the Parties agreed that in lieu of implementation of a mechanism pursuant to Section 1.3 of the Original Agreement in respect of dilution of the Beneficial Shareholders only, out of the IPO Shares, 2,880,000 ordinary shares of the Company in total will be returned to the Company (from which 2,784,000 ordinary shares were already returned to the Company by the Trustee so that immediately prior to the execution of this Addendum, the Trustee holds 18,120,000 ordinary shares out of the IPO Shares (the " Remaining Trust Shares ");

 

NOW THEREFORE , in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, and intending to be legally bound hereby, the Parties agree as follows:

 

1. The preamble to this Addendum and exhibits attached hereto form an integral part hereof.

 

2. The Remaining Trust Shares (issued to the Trustee and held in trust by him) have been issued for an investment in the aggregate sum of USD 150,000 (which sum has been invested in the Company as of the date of execution of this Addendum).

 

3. On the date of this Addendum, the Remaining Trust Shares will be released by the Trustee to the Beneficial Shareholders in accordance with the distribution table detailed in Exhibit A , at which time all trust agreements and arrangement in respect of those Shares shall cease. A copy of the share transfer deeds for the transfer of those Shares by the Trustee to the Beneficial Shareholders is attached hereto as Exhibit B . The Company shall record the transfer of shares and advise the Israeli Registrar of Companies of such change. The Beneficial Shareholders will provide all documents required by the Company in order to register them as shareholders in the Company.

 

 

20  

 

4. Notwithstanding anything to the contrary in the Original Agreement (including the provisions of section 1.3 thereof), the Entrepreneur is under no obligation to fund any "going public" process and/or to provide any services, assistance or advice to the Company in relation to such process.

 

5. Each Beneficial Shareholder confirms the representations under Section 5 of the Original Agreement.

 

6. Beneficial Shareholders acknowledge that they have purchased the Remaining IPO Shares on an AS IS basis in lieu of representations made by the Company pursuant to the Original Agreement.

 

7. All other terms of the Original Agreement shall remain unchanged.

 

 

IN WITNESS WHEREOF , the Parties hereto have executed this Addendum on the date first above written.

 

 

         
/s/ Rami Zigdon   /s/ David Wasserman   /s/ David Wasserman
Todos Medical Ltd.   Mr. David Wassermann   D.P.H. INVESTMENTS LTD.

 

 

[signatures in Exhibit A]    
Beneficial Shareholders   Adv. Royi Avneri
[see Exhibit A for signatures]    

 

 

 

21  

Exhibit A

 

 

Shareholder Name Contact Information Number of Shares Signature
       
Ephraim Schlisser

5,021,327

/s/ Ephraim Schlisser
       
Ari Leblanc 155,815 /s/ Ari Leblanc
       
David Wasserman   3,558,858 /s/ David Wasserman
       
Ben Zion Hasid   3,861,857 /s/ Ben Zion Hasid
       
Avram Bancrot   1,287,286 /s/ Avram Bancrot
       
Aharon Shpritzer   3,861,857 /s/ Aharon Shpritzer
       
Dan Hirsch   70,000 /s/ Dan Hirsch
       
Yehuda Broiner   303,000 /s/ Yehuda Broiner

 

 

 

22  

 

Exhibit B – Form of Share Transfer Deeds in Hebrew Omitted

 

 

 

Exhibit 10.6

 

 

 

AGREEMENT

 

THIS AGREEMENT (this “ Agreement ”) made as of the 29 th day of September , 2015 (the “ Effective Date ”), by and between Yitzhak Ostrovitzky of Tel Aviv, Israel (“ Borrower ”), and Todos Medical Ltd. , of Kibbutz Givat Hashlosha, Israel 48800, Israel (the “ Company ”); and Adeline Holding Limited, a Cypriot private company (" Adeline ") (hereinafter Borrower, Adeline and Company shall be referred to collectively the “ Parties ” and each of them individually - a “ Party ”)

 

W I T N E S S E T H:

 

WHEREAS, the Borrower requested the Company to extend to the Borrower the Loan, as defined below; and

 

WHEREAS, the Company agreed to extend the Borrower the Loan under the terms and conditions specified herein; and

 

WHEREAS, Adeline agrees to provide the Securities in order to secure repayment of the Loan by the Borrower, under the terms specified below;

 

NOW THEREFORE, the Parties hereby agree as follows:

 

1. Loan

 

1.1 Loan . On the date hereof, the Company shall lend to the Borrower the aggregate sum of NIS 180,000 (one hundred eighty thousand New Israeli Shekels) (the “ Loan ”).

 

1.2 Given the short term nature of the Loan, the Loan is not linked and does not bear any interest.

 

2. Repayment

 

2.1 Repayment . The unpaid and outstanding Loan shall be due and payable to the Company, by not later than forty five (45) days from the date hereof, i.e. by November 13, 2015 (the " Term" or the “Maturity Date") , or at an earlier date in the event of mandatory repayment pursuant to Section 4 below.

 

2.2 Default Interest. Any delay in repaying the Loan by the Maturity Date will be deemed and will constitute as a material breach of this Agreement. In such case the Loan will bear an a default interest of 7% per annum with respect to the period commencing seven (7) days after the Maturity Date, without derogating from any securities that may be exercised by the Company pursuant to the terms of this Agreement.

 

3. Securities; Authorization to Trustee

 

3.1 As security for repayment of the Loan by the Maturity Date and performance of Borrower's obligations hereunder, Adeline is transferring on the date hereof to Mr. Uri Sher (" Trustee "), 6,162,600 ordinary shares par value NIS 0.01 each of the Company held by Adeline (the " Securities ") to be held by the Trustee in trust to secure repayment of the Loan. Trustee is hereby irrevocably authorized to transfer the Securities to the Company upon Company's written notice to Trustee that the Loan has not been repaid by the Maturity Date (" Notice "). The Company and Borrower authorize Trustee to return the Securities to the Borrower (or to any third party that the Borrower may instruct in writing) upon written notice by Company to the Trustee that the Loan has been repaid by the Maturity Date to the Company (" Repayment Notice ").

 

 

- 1  -

 

3.2 Trustee may act in reliance upon any writing or instrument or signature which Trustee, in good faith, believes to be genuine; Trustee may assume the validity and accuracy of any statement or assertion contained in such a writing or instrument and may assume that any person purporting to give any writing, notice, advice or instructions in connection with the provisions hereof has been duly authorized to do so. Parties acknowledge that Trustee shall not be liable in any manner for the sufficiency or correctness as to form, manner of execution, or validity of any instrument deposited pursuant to this Agreement, nor as to the identity, authority, genuineness of signature, or right of any person executing the same, or for determining the adequacy or inadequacy of the performance of obligations by any party hereof, either under this Agreement or any other agreement or understanding of any kind; and Trustee's duties hereunder shall be limited to the custody and release the Securities in accordance with the terms hereof.

 

3.3 Trustee shall not in any event be liable for any mistake of fact or error of judgment, or for any act or omission of any kind.

 

3.4 Parties shall indemnify and hold Trustee harmless from and against any and all claims, liabilities, losses, actions, suits or proceedings at law or in equity, or any other expenses, fees, or charges of any character or nature, including but not limited to reasonable attorney's fees and the cost of defending (or, if Trustee deems it advisable, bringing) any action, suit, proceeding or claim, whether of interpleader or otherwise, which Trustee may incur or with which Trustee may be threatened by reason of serving as the trustee under this Agreement.

 

3.5 Trustee nomination shall be terminated upon the earlier of (a) release of the Securities to the Company upon receipt of the Notice; or (b) release of the Securities to the Borrower (or to any third party as specified in the Repayment Notice) upon receipt of the Repayment Notice; or (c) resignation by the Trustee from his position hereunder where the Parties will advise the Trustee to whom to deliver the Securities within seven (7) days and in the event of no instruction by Company, Adeline and Borrower – Trustee may transfer the Securities to whomever it may decide in good faith to continue to act as trustee according to the terms hereof.

 

4. Default . Notwithstanding anything herein to the contrary, the entire unpaid Loan shall be due and payable at any time without any further demand, immediately upon the occurrence of an Event of Default.

 

For the purposes of this Section 4, an “ Event of Default ” shall be deemed to exist upon the occurrence of any of the following:

 

4.1 the Borrower or Adeline file a petition in bankruptcy, a petition seeking any reorganization, arrangement, composition, or similar relief under any law regarding insolvency or relief for debtors, or makes an assignment for the benefit of creditors;

 

4.2 a receiver, trustee, or similar officer is appointed for the business or a significant part of the property of the Borrower or Adeline, and such appointments are not stayed, enjoined, or discharged within forty five (45) days from their commencement;

 

 

- 2  -

 

4.3 any involuntary petition or proceeding under bankruptcy or insolvency laws is instituted against the Borrower or Adeline, and such actions are not stayed, enjoined, or discharged within forty five (45) days from their commencement;

 

4.4 Adeline adopts a resolution for discontinuance of its business or for its liquidation, dissolution or winding-up;

 

4.5 the Borrower or Adeline are unable to pay their debts as they become due; or

 

4.6 the Borrower or Adeline are in material breach of any provision of this Agreement and same is not remedied within thirty (30) days after the Company has notified them in writing of said breach; or

 

4.7 the levy of an attachment or the institution of execution proceedings against the whole or a substantial part of Adeline or Borrower's assets, where such attachment or execution proceeding is not discharged within forty five (45) days.

 

Borrower and Adeline shall notify the Company within two (2) business days of the occurrence of any such event as specified above.

 

5. Representations and Warranties .

 

5.1.1 Each Party represents that this Agreement constitutes a legally binding obligation of such Party and is enforceable against such Party in accordance with its respective terms.

 

5.1.2 Each Party has taken all actions and has filed all necessary filings and registrations with all governmental authorities, and has procured (and shall maintain in force) all necessary consents, approvals and/or authorizations, in connection with the entry into, performance, validity and enforceability of this Agreement and transactions contemplated herein.

 

5.1.3 neither the execution nor the delivery of this Agreement, nor the transactions contemplated hereby, nor compliance with the terms, conditions and provisions thereof shall conflict with, contravene, or result in a breach of any agreement, negative pledge, any law, rule, restriction and/or regulation, to which a Party is subject, and/or constitute a default thereunder or result in the creation of imposition of any lien;

 

5.1.4 Adeline and Borrower represent and warrant that (a) the Securities are free and clear of all pledges, encumbrances, liens and other third party rights and that Adeline is the sole owner of the Securities; (b) neither the Borrower nor Adeline made any commitment to any third party to hypothecate, sell, transfer or otherwise pledge the Securities in favor of any third party; (c) the Borrower is the sole beneficial owner of Adeline and that he has sole investment and control over the Securities; (d) Adeline is in good standing and exists at the time of execution of this Agreement and no claims or demands are known by any of them that would possibly result in the liquidation or insolvency or any similar actions and proceedings against Adeline.

 

5.1.5 Adeline and Borrower confirm that the Loan granted by the Company pursuant to this Agreement by no means constitute repayment of any loan granted previously by the Borrower to the Company and Borrower does not have any right to set off any amounts owed by him hereunder from the any amounts owed by the Company to the Borrower and Borrower specifically waives all rights and claims of set off.

 

 

- 3  -

 

5.1.6 Adeline and Borrower acknowledge that Adv. Dana Livneh-Zemer only represented the Company in drafting this Agreement and did not represent any of them in the negotiations or in any matter related to this Agreement. Adeline and Borrower acknowledge that they have read and understood the terms of this Agreement and entered into this Agreement of their own free will.

 

6. Remedies in an Event of Default .

 

6.1 Upon the occurrence and continuance of any Event of Default Company shall have all other rights and remedies available under this Agreement and under any applicable law. The Company may apply all of the reasonable expenses including reasonable attorney's fees and legal expenses and other expenses which may be incurred by the Company in due to the Event of Default.

 

6.2 Without derogating from the aforesaid, upon the occurrence and continuance of any Event of Default the Company: (i) shall declare that all obligations contemplated under this Agreement, including the outstanding Loan be immediately due and payable; (ii) at its sole and absolute discretion, may take any lawful action to exercise its rights hereunder and according to the law in order to enable it to receive all amounts due on that date, inclusive of the appointment of a receiver or a liquidator, that shall be entitled to all powers and authorities available under the law and may specifically set off any amount owed by Borrower or Adeline to the Company against any amount owed by Company to any of them.

 

The failure at any time to take any action shall not constitute a waiver of the right to make any such action at any other time.

 

7. Miscellaneous .

 

7.1 Further Actions and Cooperation . Each of the Parties hereto shall perform such further acts and execute such further documents and/or instruments as may reasonably be necessary to carry out and give full effect to the provisions of this Agreement and the intentions of the Parties as reflected hereby or thereby.

 

7.2 Governing Law . This Agreement shall be exclusively governed by and the laws of the State of Israel. Any dispute arising under or in relation to this Agreement shall be exclusively resolved in the competent court of Tel Aviv, Israel and each of the Parties hereby submits irrevocably to the jurisdiction of such court.

 

7.3 Successors, Assigns & Assignment . Except as otherwise expressly limited herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, administrators of the Parties hereto, provided that , none of duties shall be delegated and/or none of the rights, privileges, or obligations set forth in, arising under, or created by this Agreement, may be assigned, transferred or otherwise conveyed by either Party hereto without the prior consent in writing of the other Party.

 

 

- 4  -

 

7.4 Entire Agreement . This Agreement shall constitute the full and entire understanding(s) and agreement(s) between the Parties with regard to the subject matters hereof and thereof, and supersedes all previous understanding(s) and agreement(s). The preamble, the exhibits hereof constitute an integral part hereof.

 

7.5 Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term hereof may be waived (either prospectively or retroactively and either generally or in a particular instance) only with the written consent of both Parties.

 

7.6 Continuity . All covenants, representations and warranties made in this Agreement shall continue to remain in full force and effect for as long as this Agreement is still in effect pursuant to its terms.

 

7.7 Notices . All notices and other communications required or permitted hereunder to be given to a Party to this Agreement shall be in writing and shall be faxed or mailed by registered or certified mail, postage prepaid, or otherwise sent by electronic mail, receipt confirmed by recipient, or otherwise delivered by hand or by messenger, to the Party's address set forth above, or such other address with respect to a Party as such Party shall notify each other Party in writing as above provided. Any notice sent in accordance with this Section 7.7 shall be effective: (i) if mailed, seven (7) days after mailing; (ii) if sent by messenger, upon delivery; or (iii) if sent via fax, upon transmission confirmation of receipt or (if transmitted and received on a non-business day) on the first business day following transmission confirmation of receipt; or (iv) if sent by electronic mail –upon confirmation of recipient of the electronic mail.

 

7.8 Delays or Omissions . No delay or omission to exercise any right, power, or remedy accruing to any Party upon any breach or default under this Agreement shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, either under this Agreement or by law or otherwise afforded to any of the Parties, shall be cumulative and not alternative.

 

7.9 Severability . If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement or the applicable other agreements and the remainder of this Agreement or the applicable other agreements shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however , that in such event this Agreement or the applicable other agreements shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

 

7.10 Counterparts . This Agreement may be executed in two or more counterparts, including without limitation by fax, each of which shall be deemed an original but all of which constitute one and the same instrument.

 

 

- 5  -

 

IN WITNESS WHEREOF the parties have signed this Agreement in one or more counterparts as of the date first appearing above set forth.

 

 

/s/ Rami Zigdon     /s/ Yitzhak Ostrovitzky  
todos medical Ltd.    

Yitzhak Ostrovitzky

 
         
By:          
         
         
         
/s/ Yitzhak Ostrovitzky        
Adeline Holding Limited        
         
         

 

I the undersigned, agree to serve as trustee pursuant to the terms of this Agreement

 

 

/s/ Uri Sher        
Uri Sher        
         
           
         

 

 

 

- 6  -

 

 

Todos Medical Ltd.

  (the " Company ")

Unanimous Written Resolution

 Of the Board of Directors

 

Effective as of September 29, 2015

 

The undersigned, constituting all of the members of the Company's Board of Directors, acting pursuant to Section 103 of the Companies Law, 1999, after having waived all requirements under the law or pursuant to the Company’s Articles of Association to prior notice necessary (if necessary) for the adoption of the following resolutions, hereby adopt the following resolutions effective as of the date first set forth above (all capitalized terms as used herein shall have the meaning assigned to them in the Agreement, unless otherwise specifically stated herein):

 

WHEREAS, the Borrower requested the Company to lend the Borrower the Loan and the Company pursuant to the terms and conditions of the Agreement attached hereto as Exhibit A (the " Loan Agreement "); and

 

WHEREAS, the Board of Directors of the Company has determined, with respect to the Agreement to agree to extend the Loan to the Borrower given the short term nature of the Loan and the Securities securing the repayment of the Loan;

 

NOW, THEREFORE, BE IT RESOLVED; that the Board of Directors of the Company authorizes and approves the execution performance and delivery of the Loan Agreement by the Company and the lending of the Loan to the Borrower under the terms of the Loan Agreement.

 

IN WITNESS WHEREOF, the undersigned have executed this Unanimous Written Resolution of the Board of Directors of Todos Medical Ltd. as of the date first written above.

 

 

         

Alon Ostrovizky

 

Eliezer Marmarush

 

Judit Weingut 

 

 

 

 

- 7  -

 

Exhibit A

 

Share Transfer Deed

 

We, the undersigned, Adeline Holding Limited, a Cypriot private company (hereinafter the " Transferor "), hereby transfer to Uri Sher, ID number _________ as trustee (hereinafter the " Transferee "), 6,162,600 (six million one hundred sixty two thousand six hundred) ordinary shares par value NIS 0.01 each of Todos Medical Ltd., and the Transferee hereby accepts such transfer under the conditions of the Agreement attached hereto.

 

IN WITNESS WHEREOF, the Transferor and the Transferee have executed this instrument effective as of this __ day of ______, 2015.

 

 

 

         
Uri Sher     Adeline Holding Ltd.  
         
           
         

 

 

 

ADDENDUM TO AGREEMENT

 

THIS ADDENDUM TO AGREEMENT (this “ Addendum ”) made as of this 12 day of November, 2015 (the “ Effective Date ”), by and between Yitzhak Ostrovitzky of Tel Aviv, Israel (“ Borrower ”), and Todos Medical Ltd. , of 1 Hamada Street, Rehovot, Israel (the “ Company ”); and Adeline Holding Limited, a Cypriot private company (" Adeline ") (hereinafter Borrower, Adeline and Company shall be referred to collectively the “ Parties ” and each of them individually - a “ Party ”)

 

 

W I T N E S S E T H:

 

WHEREAS, the Parties entered into an agreement dated September 29, 2015 (the " Agreement ") and agree to make the following changes to the Agreement as detailed in this Addendum below; 

 

NOW THEREFORE, the Parties hereby agree as follows:

 

1. Capitalized terms shall have the meaning ascribed to them in the Agreement, unless otherwise defined herein.

 

2. Section 2.1 of the Agreement shall be replaced with the following:

 

"2.1 Repayment . The unpaid and outstanding Loan shall be due and payable to the Company, by not later than fifty nine (59) days from the date hereof, i.e. by November 27, 2015 (the " Term" or the “Maturity Date") , or at an earlier date in the event of mandatory repayment pursuant to Section 4 below."

 

3. All other provisions of the Agreement shall remain without change.

   

IN WITNESS WHEREOF the parties have signed this Addendum in one or more counterparts as of the date first appearing above set forth.

 

 

/s/ Rami Zigdon /s/ Yitzhak Ostrovitzky

 

todos medical Ltd.

 

By: Rami Zigdon                                             

  Yitzhak Ostrovitzky

 

     
     
/s/ Yitzhak Ostrovitzky    
Adeline Holding Limited    
     

I confirm.

 

/s/ Uri Sher _______________________

URI SHER 

 

 

 

 

 

 

 

 

Exhibit 10.7

 

TODOS MEDICAL LTD.

 

THE 2015 ISRAELI SHARE OPTION PLAN

 

(*In compliance with Amendment No. 132 of the Israeli Tax Ordinance, 2002)

 

This plan, as amended from time to time, shall be known as Todos Medical Ltd. 2015 Israeli Share Option Plan (the “ ISOP ”).

 

1. PURPOSE OF THE ISOP

 

The ISOP is intended to provide an incentive to retain, in the employ of the Company, persons of training, experience, and ability, to attract new employees, directors, consultants, service providers and any other entity which the Board shall decide their services are considered valuable to the Company, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company by providing them with opportunities to purchase shares in the Company, pursuant to the ISOP.

 

2. DEFINITIONS

 

For purposes of the ISOP and related documents, including the Option Agreement, the following definitions shall apply:

 

2.1. Approved 102 Option ” means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Optionee.

 

2.2. Board” means the Board of Directors of the Company.

 

2.3. Capital Gain Option (CGO) ” as defined in Section 5.4 below.

 

2.4. Cause” means, (a) to the extent the term “Cause” is defined in an employment or consulting agreement with the Optionee, the meaning ascribed to such term in such agreement, or (b) (i) conviction of any felony involving moral turpitude or affecting the Company; (ii) any refusal to carry out a reasonable directive of the chief executive officer, which involves the business of the Company and was capable of being lawfully performed; (iii) embezzlement of funds of the Company; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company; including without limitation disclosure of confidential information of the Company; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company.

 

2.5. Chairman ” means the chairman of the Board.

 

2.6. Company ” means Todos Medical Ltd, an Israeli company.

 

2.7. Companies Law ” means the Israeli Companies Law 5759-1999.

 

2.8. Controlling Shareholder ” shall have the meaning ascribed to it in Section 32(9) of the Ordinance.

 

2.9. Date of Grant ” means, the date of grant of an Option, as determined by the Board and set forth in the Optionee’s Option Agreement.

 

2.10. " Disability " means total and permanent physical or mental impairment or sickness of an Optionee, making it impossible for the Optionee to continue their employment with or service to the Company.

 

2.11. Employee ” means a person who is employed by the Company, including an individual who is serving as a director or an office holder, but excluding Controlling Shareholder.

 

     

 

 

2.12. Expiration Date ” means the date upon which an Option shall expire, as set forth in Section 10.2 of the ISOP.

 

2.13. Fair Market Value ” means as of any date, the value of a Share determined as follows:

 

(i) If the Shares are listed on any established stock exchange or a national market system, including without limitation the NASDAQ National Market system, or the NASDAQ SmallCap Market of the NASDAQ Stock Market, the Fair Market Value shall be the closing sales price for such Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in the Wall Street Journal, or such other source as the Board deems reliable.

 

without derogating from the above, solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the Date of Grant the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the Date of Grant, the Fair Market Value of a Share at the Date of Grant shall be determined in accordance with the average value of the Company’s shares on the thirty (30) trading days preceding the Date of Grant or on the thirty (30) trading days following the date of registration for trading, as the case may be;

 

(ii) If the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Shares on the last market trading day prior to the day of determination, or;

 

(iii) In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the Board.

 

2.14. IPO ” means the initial public offering of the Company’s shares and the listing of such shares for trading on any recognized stock exchange or over-the-counter or computerized securities trading system.

 

2.15. ISOP ” means this 2015 Israeli Share Option Plan.

 

2.16. ITA ” means the Israeli Tax Authorities.

 

2.17. Non-Employee ” means a consultant, adviser, service provider, Controlling Shareholder or any other person who is not an Employee.

 

2.18. Ordinary Income Option (OIO) ” as defined in Section 5.5 below.

 

2.19. Option ” means an option to purchase one or more Shares of the Company pursuant to the ISOP.

 

2.20. 102 Option ” means any Option granted to Employees pursuant to Section 102 of the Ordinance.

 

2.21. 3(i) Option ” means an Option granted pursuant to Section 3(i) of the Ordinance to any person who is Non- Employee.

 

2.22. Optionee ” means a person who receives or holds an Option under the ISOP.

 

2.23. Option Agreement ” means the share option agreement between the Company and an Optionee that sets out the terms and conditions of an Option.

 

2.24. Ordinance ” means the 1961 Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as hereafter amended, and any regulations, rules, orders or procedures promulgated thereunder.

 

2.25. Purchase Price ” means the price for each Share subject to an Option, which is to be paid to the Company.

 

  2  

 

 

2.26. " Relative " means a spouse, sibling, parent, parent's parent, descendent, spouse's descendent, and any spouse of the foregoing.

 

2.27. Section 102 ” means section 102 of the Ordinance as now in effect or as hereafter amended.

 

2.28. Share(s) ” means an ordinary share of the Company, having a par value of NIS 0.01.

 

2.29. Successor Company ” means any entity the Company is merged to or is acquired by, in which the Company is not the surviving entity.

 

2.30. Transaction ” means (i) merger, acquisition or reorganization of the Company with one or more other entities in which the Company is not the surviving entity (or in case of a reverse triangular merger – a merger in which the control in the Company is transferred to a third party who did nor control the Company prior to such merger), (ii) a sale of all or substantially all of the assets of the Company.

 

2.31. Trustee ” means any individual or corporate entity appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance and/or any rules or regulations promulgated thereunder.

 

2.32. Unapproved 102 Option ” means an Option granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee.

 

2.33. Vested Option ” means any Option, which has already been vested according to the Vesting Dates.

 

2.34. Vesting Dates ” means, as determined by the Board, the date as of which the Optionee shall be entitled to exercise the Options or part of the Options, as set forth in section 11 of the ISOP.

 

3. ADMINISTRATION OF THE ISOP

 

3.1. The Board shall have the power to administer the ISOP, all as provided by applicable law and in the Company’s Articles of Association.

 

3.2. The Board shall have the full power and authority to: (i) designate participants; (ii) determine 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; (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 ISOP; (vii) interpret the provisions of the ISOP and to amend from time to time the terms of the ISOP.

 

3.3. The Board shall have the authority to grant, at its discretion, to the holder of an outstanding Option, in exchange for the surrender and cancellation of such Option, a new Option having a purchase price equal to, lower than or higher than the Purchase Price of the original Option so surrendered and canceled and containing such other terms and conditions or to change the Purchase Price, all in accordance with the provisions of the ISOP.

 

3.4. Subject to the Company’s Articles of Association, all decisions and selections made by the Board pursuant to the provisions of the ISOP shall be made by a majority of its members except that no member of the Board shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Board relating to any Option to be granted to that member or to a Relative thereof. Any decision reduced to writing shall be executed in accordance with the provisions of the Company’s Articles of Association, as the same may be in effect from time to time.

 

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3.5. Subject to the Company’s Articles of Association and the Company’s decision, and to all approvals legally required, including, but not limited to the provisions of the Companies Law, each member of the Board shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the ISOP unless arising out of such member's own fraud or bad faith, to the extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the member may have as a director or otherwise under the Company's Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.

 

4. DESIGNATION OF PARTICIPANTS

 

4.1. The persons eligible for participation in the ISOP as Optionees shall include any Employees and/or Non-Employees of the Company; provided, however, that (i) Employees may only be granted 102 Options; (ii) Non-Employees may only be granted 3(i) Options; and (iii) Controlling Shareholders may only be granted 3(i) Options.

 

4.2. The grant of an Option hereunder shall neither entitle the Optionee to participate nor disqualify the Optionee from participating in, any other grant of Options pursuant to the ISOP or any other option or share plan of the Company.

 

4.3. Anything in the ISOP to the contrary notwithstanding, all grants of Options to directors and office holders shall be authorized and implemented in accordance with the provisions of the Companies Law or any successor act or regulation, as in effect from time to time.

 

5. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102

 

5.1. The Company may designate Options granted to Employees pursuant to Section 102 as Unapproved 102 Options or Approved 102 Options.

 

5.2. The grant of Approved 102 Options shall be made under this ISOP adopted by the Board as described in Section 15 below, and shall be conditioned upon the approval of this ISOP by the ITA.

 

5.3. Approved 102 Option may either be classified as Capital Gain Option (“ CGO ”) or Ordinary Income Option (“ OIO ”).

 

5.4. Approved 102 Option elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) shall be referred to herein as CGO .

 

5.5. Approved 102 Option elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) shall be referred to herein as OIO .

 

5.6. The Company’s election of the type of Approved 102 Options as CGO or OIO granted to Employees (the “ Election ”), shall be appropriately filed with the ITA before the Date of Grant of an Approved 102 Option. Such Election shall become effective beginning the first Date of Grant of an Approved 102 Option under this ISOP and shall remain in effect at least until the end of the year following the year during which the Company first granted Approved 102 Options. The Election shall obligate the Company to grant only the type of Approved 102 Option it has elected, and shall apply to all Optionees who were granted Approved 102 Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the Company from granting Unapproved 102 Options simultaneously.

 

5.7. All Approved 102 Options must be held in trust by a Trustee, as described in Section 6 below .

 

5.8. For the avoidance of doubt, the designation of Unapproved 102 Options and Approved 102 Options shall be subject to the terms and conditions set forth in Section 102 of the Ordinance and the regulations promulgated thereunder.

 

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5.9. With regards to Approved 102 Options, the provisions of the ISOP and/or the Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the ISOP and of the Option Agreement. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the ISOP or the Option Agreement, shall be considered binding upon the Company and the Optionees.

 

6. TRUSTEE

 

6.1. Approved 102 Options which shall be granted under the ISOP and/or any Shares allocated or issued upon exercise of such Approved 102 Options and/or other shares received subsequently following any realization of rights, including without limitation bonus shares and/or any other securities issued according to the provisions of Section 9.5 below, shall be allocated or issued to the Trustee and held for the benefit of the Optionees for such period of time as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the “ Holding Period ”). In the case the requirements for Approved 102 Options are not met, then the Approved 102 Options may be treated as Unapproved 102 Options, all in accordance with the provisions of Section 102 and regulations promulgated thereunder.

 

6.2. Notwithstanding anything to the contrary, the Trustee shall not release any Shares allocated or issued upon exercise of Approved 102 Options prior to the full payment of the Optionee’s tax liabilities arising from Approved 102 Options which were granted to him and/or any Shares allocated or issued upon exercise of such Options.

 

6.3. With respect to any Approved 102 Option, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, an Optionee shall not sell or release from trust any Share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance. Notwithstanding the above, if any such sale or release occurs during the Holding Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedures promulgated thereunder shall apply to and shall be borne by such Optionee.

 

6.4. Upon receipt of Approved 102 Option, the Optionee will sign an undertaking to release the Trustee from any liability in respect of any action or decision taken and bona fide executed in relation with the ISOP, or any Approved 102 Option or Share granted to him thereunder.

 

7. SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON

 

7.1. The Company has reserved 6,000,000 authorized but unissued Shares, for the purposes of the ISOP and for the purposes of any other share option plans which may be adopted by the Company in the future, subject to adjustment as set forth in Section 9 below. Any Shares which remain unissued and which are not subject to the outstanding Options at the termination of the ISOP shall cease to be reserved for the purpose of the ISOP, but until termination of the ISOP the Company shall at all times reserve sufficient number of Shares to meet the requirements of the ISOP. Should any Option for any reason expire or be canceled prior to its exercise or relinquishment in full, the Shares subject to such Option may again be subjected to an Option under the ISOP or under the Company’s other share option plans.

 

7.2. Each Option granted pursuant to the ISOP, shall be evidenced by a written Option Agreement between the Company and the Optionee, in such form as the Board shall from time to time approve. Each Option Agreement shall state, among other matters, the number of Shares to which the Option relates, the type of Option granted thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(i) Option), the Vesting Dates, the Purchase Price per Share, the Expiration Date and such other terms and conditions as the Board in its discretion may prescribe, provided that they are consistent with this ISOP.

 

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7.3. Until the consummation of an IPO, such Shares issued upon exercise of Options under the ISOP shall be voted by an irrevocable proxy (the ” Proxy ”) pursuant to the directions of the Board, such Proxy to be assigned to the person or persons designated by the Board. Such person or persons designated by the Board shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him/her, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the voting of such Proxy unless arising out of such member's own fraud or bad faith, to the extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the person(s) may have as a director or otherwise under the Company's Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise. Without derogating from the above, with respect to Approved 102 Options, such Shares shall be voted in accordance with the provisions of Section 102 and any rules, regulations or orders promulgated thereunder.

 

7.4. Without derogating from any other undertaking of the Optionee pursuant to this ISOP or otherwise, so long as the Shares have not been listed for trade on a stock exchange in Israel or abroad, the Company will be entitled at any time to require the Optionee, and the Optionee shall be obliged to furnish the Company with any certificate, affidavit or other document which the Company deems as legally and/or commercially required, whether under local or foreign laws, or otherwise, or any confirmation or agreement, including an undertaking from the Optionee not to sell his Shares for some period, as obliged by the requirements of an underwriter, investment bank or any other entity for the purpose of any issue, whether private or public, and also any certificate or agreement which the Company needs to obtain, if at all, from the Optionees as the members of a class of shareholders, or otherwise, or any certificate, affidavit or other document which the Company deems fit or necessary to obtain in order to facilitate any Transaction and/or the merger of the Company with any other entity, following which merger the Company shall be the surviving entity, and/or the registration of the Company in any foreign jurisdiction, the exercise of a flip transaction, whether in Israel or abroad, and/or the Company's reorganization, all in accordance with what the Company deems necessary and desirable, and the terms of any document which the Optionee is required to sign shall be as determined by the Company after obtaining a legal opinion so far as necessary, provided that in the Company's opinion the raising of additional capital, the merger or such other change as aforesaid will not materially impair the value of the Optionee's investment in the Company. It is hereby acknowledged, without limitation, that the following events shall not be deemed to impair the value of the Optionee's holdings in the Company or to derogate from, limit or adversely effect in any extent, the Company’s discretion with regard to the evaluation of the effect of certain business transactions on the value of the Optionee's investment in the Company: (i) the dilution of the Optionee's holdings in the Company deriving from the raising of additional capital or a merger or a flip transaction or from the exercise of any existing or future options in the Company of any type whatsoever; (ii) the registration of the Company and/or of any securities thereof in any jurisdiction and/or stock exchange, irrespective of the legal regime, tax regime, tradability, etc. resulting from, or connected with, such registration.

 

8. PURCHASE PRICE

 

8.1. The Purchase Price of each Share subject to an Option shall be determined by the Board in its sole and absolute discretion in accordance with applicable law.

 

8.2. The Purchase Price shall be payable upon the exercise of the Option in a form satisfactory to the Board, including without limitation, by cash or check. The Board shall have the authority to postpone the date of payment on such terms as it may determine.

 

8.3. The Purchase Price shall be denominated in the currency of the primary economic environment of, either the Company or the Optionee (that is the functional currency of the Company or the currency in which the Optionee is paid) as determined by the Company.

 

9. ADJUSTMENTS

 

Upon the occurrence of any of the following described events, Optionee's rights to purchase Shares under the ISOP shall be adjusted as hereafter provided:

 

9.1. In the event of Transaction, and subject to the determination of the Board, at in its sole discretion, the unexercised Options then outstanding under the ISOP may be assumed or substituted for an appropriate number of shares of each class of shares or other securities of the Successor Company (or a parent or subsidiary of the Successor Company) as were distributed to the shareholders of the Company in connection and with respect to the Transaction. In the case of such assumption and/or substitution of Options, appropriate adjustments shall be made to the Purchase Price so as to reflect such action and all other terms and conditions of the Option Agreements shall remain unchanged, including but not limited to the vesting schedule, all subject to the determination of the Board, which determination shall be in their sole discretion and final. The Company shall notify the Optionee of the Transaction in such form and method as it deems applicable at least ten (10) days prior to the effective closing date of such Transaction but in no event before the signing of the transaction agreements. Any unexercised Option which is not assumed or substituted shall terminate as of the closing date of such Transaction.

 

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9.2. Notwithstanding the above and subject to any applicable law, the Board shall have full power and authority to determine that in certain Option Agreements there shall be a clause instructing that, if in any such Transaction as described in section 9.1 above, the Successor Company (or parent or subsidiary of the Successor Company) does not agree to assume or substitute for the Options, the Vesting Dates shall be accelerated so that any unvested Option or any portion thereof shall be immediately vested as of the date which is ten (10) days (or such other date as the Board shall determine in its sole discretion) prior to the effective closing date of the Transaction but in no event before the signing of the transaction agreements.

 

9.3. For the purposes of section 9.1 above, an Option shall be considered assumed or substituted if, following the Transaction, the Option confers the right to purchase or receive, for each Share underlying an Option immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by holders of shares held on the effective date of the Transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Transaction is not solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary, the Board may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option to be solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary equal in Fair Market Value to the per Share consideration received by holders of a majority of the outstanding shares in the Transaction; and provided further that the Board may determine, in its discretion, that in lieu of such assumption or substitution of Options for options of the Successor Company or its parent or subsidiary, such Options will be substituted for any other type of asset or property including cash which is fair under the circumstances.

 

9.4. If the Company is voluntarily liquidated or dissolved while unexercised Options remain outstanding under the ISOP, the Company shall immediately notify all unexercised Option holders of such liquidation, and the Option holders shall then have ten (10) days to exercise any unexercised Vested Option held by them at that time, in accordance with the exercise procedure set forth herein. Upon the expiration of such ten-day period, all remaining outstanding Options will terminate immediately.

 

9.5. If the outstanding shares of the Company shall at any time be changed or exchanged by declaration of a share dividend (bonus shares), share split, combination or exchange of shares, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class and kind of the Shares subject to the ISOP or subject to any Options therefore granted, and the Purchase Prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares without changing the aggregate Purchase Price, provided, however, that no adjustment shall be made by reason of the distribution of subscription rights (rights offering) on outstanding shares. Upon happening of any of the foregoing, the class and aggregate number of Shares issuable pursuant to the ISOP (as set forth in Section 7 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted, all as will be determined by the Board whose determination shall be final.

 

9.6. Anything herein to the contrary notwithstanding, if prior to the completion of the IPO all or substantially all of the shares of the Company are to be sold, or in case of a Transaction, all or substantially all of the shares of the Company are to be exchanged for securities of another Company, then each Optionee shall be obliged to sell or exchange, as the case may be, any Shares such Optionee purchased under the ISOP, in accordance with the instructions issued by the Board in connection with the Transaction, whose determination shall be final.

 

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9.7. Without derogating from the provisions of Section 7.4 above, the Optionee acknowledges that in the event that the Company’s shares shall be registered for trading in any public market, Optionee’s rights to sell the Shares may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Optionee unconditionally agrees and accepts any such limitations.

 

10. TERM AND EXERCISE OF OPTIONS

 

10.1. Options shall be exercised by the Optionee by giving written notice to the Company and/or to any third party designated by the Company (the “ Representative ”), in such form and method as may be determined by the Company and when applicable, by the Trustee in accordance with the requirements of Section 102, which exercise shall be effective upon receipt of such notice by the Company and/or the Representative and the payment of the Purchase Price at the Company’s or the Representative’s principal office. The notice shall specify the number of Shares with respect to which the Option is being exercised.

 

10.2. Without derogating from any other provision of this ISOP, Options, to the extent not previously exercised, shall terminate forthwith upon the earlier of: (i) the date set forth in the Option Agreement; and (ii) the expiration of any extended period in any of the events set forth in section 10.5 below.

 

10.3. The Options may be exercised by the Optionee in whole at any time or in part from time to time, to the extent that the Options become vested and exercisable, prior to the Expiration Date, and provided that, subject to the provisions of section 10.5 below, the Optionee is employed by or providing services to the Company, at all times during the period beginning with the granting of the Option and ending upon the date of exercise.

 

10.4. Subject to the provisions of section 10.5 below, in the event of termination of Optionee’s employment or services, with the Company, all Options granted to such Optionee will immediately expire. A notice of termination of employment or service shall be deemed to constitute termination of employment or service. For the avoidance of doubt, in case of such termination of employment or service, the unvested portion of the Optionee’s Option shall not vest and shall not become exercisable.

 

10.5. Notwithstanding anything to the contrary hereinabove and unless otherwise determined in the Optionee’s Option Agreement, an Option may be exercised after the date of termination of Optionee's employment or service with the Company during an additional period of time beyond the date of such termination, but only with respect to the number of Vested Options at the time of such termination according to the Vesting Dates, if:

 

(i)         termination is without Cause, in which event any Vested Option still in force and unexpired may be exercised within a period of ninety (90) days after the date of such termination; or-

 

(ii)         termination is the result of death or disability of the Optionee, in which event any Vested Option still in force and unexpired may be exercised within a period of twelve (12) months after the date of such termination; or –

 

(iii)       prior to the date of such termination, the Board shall authorize an extension of the terms of all or part of the Vested Options beyond the date of such termination for a period not to exceed the period during which the Options by their terms would otherwise have been exercisable.

 

For avoidance of any doubt, if termination of employment or service is for Cause, any outstanding unexercised Option (whether vested or non-vested), will immediately expire and terminate, and the Optionee shall not have any right in connection to such outstanding Options.

 

10.6. To avoid doubt, the Optionees shall not have any of the rights or privileges of shareholders of the Company in respect of any Shares purchasable upon the exercise of any Option, nor shall they be deemed to be a class of shareholders or creditors of the Company for purpose of the operation of sections 350 and 351 of the Companies Law or any successor to such section, until registration of the Optionee as holder of such Shares in the Company’s register of shareholders upon exercise of the Option in accordance with the provisions of the ISOP, but in case of Options and Shares held by the Trustee, subject to the provisions of Section 6 of the ISOP.

 

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10.7. Any form of Option Agreement authorized by the ISOP may contain such other provisions as the Board may, from time to time, deem advisable.

 

10.8. With respect to Unapproved 102 Option, if the Optionee ceases to be employed by the Company, the Optionee shall extend to the Company a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.

 

11. VESTING OF OPTIONS

 

11.1. Subject to the provisions of the ISOP, each Option shall vest following the Vesting Dates and for the number of Shares as shall be provided in the Option Agreement. However, no Option shall be exercisable after the Expiration Date.

 

11.2. An Option may be subject to such other terms and conditions on the time or times when it may be exercised, as the Board may deem appropriate. The vesting provisions of individual Options may vary.

 

12. SHARES SUBJECT TO RIGHT OF FIRST REFUSAL

 

12.1. Notwithstanding anything to the contrary in the Articles of Association of the Company, none of the Optionees shall have a right of first refusal in relation with any sale of shares in the Company.

 

13. DIVIDENDS

 

With respect to all Shares (but excluding, for avoidance of any doubt, any unexercised Options) allocated or issued upon the exercise of Options purchased by the Optionee and held by the Optionee or by the Trustee, as the case may be, the Optionee shall be entitled to receive dividends in accordance with the quantity of such Shares, subject to the provisions of the Company’s Articles of Association (and all amendments thereto) and subject to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of Section 102 and the rules, regulations or orders promulgated thereunder.

 

14. RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS

 

14.1. No Option or any right with respect thereto, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to it given to any third party whatsoever, other than by will or pursuant to the laws of descent and distribution and except as specifically allowed under the ISOP, and during the lifetime of the Optionee each and all of such Optionee's rights to purchase Shares hereunder shall be exercisable only by the Optionee.

 

Any such action made directly or indirectly, for an immediate validation or for a future one, shall be void.

 

14.2. Without derogating from the provisions of Section 14.1 above, as long as Options and/or Shares are held by the Trustee on behalf of the Optionee, all rights of the Optionee over the Shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or pursuant to the laws of descent and distribution.

 

14.3. No transfer of any Option or right with respect thereto and/or Shares by will or by the laws of descent shall be effective unless the Company shall have been furnished with the following notarized documents (and any additional documents as may be advised by the Board): (a) a written request for such transfer and a copy of the legal documents creating and confirming the right of the person acting with respect to the Optionee's estate and of the transferee; and (b) written consent by the transferee to pay any amounts in connection with a Share, Option and any payment due according to the provision of the ISOP and otherwise abide by all the terms of the ISOP;

 

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15. EFFECTIVE DATE AND DURATION OF THE ISOP

 

The ISOP shall be effective as of the day it was adopted by the Board and shall terminate at the end of ten (10) years from such day of adoption.

 

16. AMENDMENTS OR TERMINATION

 

The Board may at any time, but when applicable, after consultation with the Trustee, amend, alter, suspend or terminate the ISOP. No amendment, alteration, suspension or termination of the ISOP shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Company, which agreement must be in writing and signed by the Optionee and the Company. Termination of the ISOP shall not affect the Board’s ability to exercise the powers granted to it hereunder with respect to Options granted under the ISOP prior to the date of such termination.

 

17. GOVERNMENT REGULATIONS

 

The ISOP, and the granting and exercise of Options hereunder, and the obligation of the Company to sell and deliver Shares under such Options, shall be subject to all applicable laws, rules, and regulations, whether of the State of Israel or any other State having jurisdiction over the Company and the Optionee and the Ordinance and to such approvals by any governmental agencies or national securities exchanges as may be required. Nothing herein shall be deemed to require the Company to register the Shares under the securities laws of any jurisdiction.

 

18. CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

 

Neither the ISOP nor the Option Agreement with the Optionee shall impose any obligation on the Company, to continue any Optionee in its employ or service, and nothing in the ISOP or in any Option granted pursuant thereto shall confer upon any Optionee any right to continue in the employ or service of the Company or restrict the right of the Company to terminate such employment or service at any time.

 

19. GOVERNING LAW & JURISDICTION

 

The ISOP shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to the ISOP.

 

20. TAX CONSEQUENCES

 

20.1. Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company, the Trustee or the Optionee), hereunder, shall be borne solely by the Optionee. The Company and/or the Trustee shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Optionee shall agree to indemnify the Company and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Optionee.

 

20.2. The Company and/or, when applicable, the Trustee shall not be required to release any Share certificate to an Optionee until all required payments have been fully made.

 

21. NON-EXCLUSIVITY OF THE ISOP

 

The adoption of the ISOP by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangements or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of Options otherwise than under the ISOP, and such arrangements may be either applicable generally or only in specific cases.

 

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For the avoidance of doubt, prior grant of options to Optionees of the Company under their employment agreements, and not in the framework of any previous option plan, shall not be deemed an approved incentive arrangement for the purpose of this Section.

 

22. MULTIPLE AGREEMENTS

 

The terms of each Option may differ from other Options granted under the ISOP at the same time, or at any other time. The Board may also grant more than one Option to a given Optionee during the term of the ISOP, either in addition to, or in substitution for, one or more Options previously granted to that Optionee.

 

23. LOCK-UP

 

The Optionee acknowledges that in the event that the Company’s shares shall be registered for trade in any public market, Optionee’s rights to sell the Shares may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Optionee unconditionally agrees and accepts any such limitations. Without derogating from the above, the Optionee shall abide by a lock-up for the following periods, unless otherwise specified by the Board: (i) one hundred and eighty (180) days beginning on the effective date of the registration statement pursuant to which an IPO was effected; and (ii) ninety (90) days beginning on the effective date of any subsequent underwritten registration of the Company’s equity securities.

 

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Exhibit 10.8

 

Iberica Investments LLC

 

 
161 Woodbine Street, Bergenfield, NJ, 07631 Tel: 1-888-237-8943

 

PRIVATE AND CONFIDENTIAL

 

Dear Rami

 

Further to our various meetings and telephone conversations and based on the facts and information you have provided, this letter will serve to confirm our mutual understanding of the terms and conditions under which Todos Medical wishes to retain the services of Iberica Investments LLC (“Iberica”) as it’s financial advisor and consultant

 

1. Iberica is hereby engaged by the Company to provide its best efforts assistance (“the Financing”) to the Company. In furtherance of its engagement by the Company, Iberica shall seek to:

 

(a) Identify, negotiate and secure one or more equity funding arrangements including proceeds from the exercise of warrants for up to $ 12MM as may be required by and acceptable to the Company;

 

(b) Identify, negotiate and secure one or more merger(s), acquisition(s), strategic alliance(s) and/or joint venture(s) partner (s) as may be acceptable to and as may be required by the Company.

 

2. The Company agrees that during the term of this agreement, the Company and its respective authorized representatives will provide Iberica and its respective authorized representatives with all relevant material information and/or documentation, or subsequent changes thereto. This material information includes, but is not limited to an offering memorandum and/or any suitable offering documentation, non-disclosure agreements and/ or marketing material. Furthermore, Iberica and its respective authorized representatives and the Company and its respective authorized representatives, except as required by applicable law, shall keep confidential all non-public information, documentation and advice (“communication”) that is provided by either side to each other and their respective authorized representatives in furtherance of this agreement. Iberica and the Company and their respective authorized representatives shall not disclose such communication to others and Iberica and the Company and their respective authorized representatives shall at no time, directly or indirectly, undertake to independently utilize such communication or convey such communication to any third party, except to outside advisors and potential investors and their advisors, who need access thereto, for the purpose hereof and from whom Iberica and the Company and their respective authorized representatives have obtained undertakings of confidentiality.

 

At the outset of this engagement, as may be needed in furtherance of this agreement, Iberica shall:

 

(a) Conduct preliminary due diligence with representatives of and any other individuals having specific knowledge relating to the objectives to be achieved.

 

(b) Review and analyse all relevant financial information and/or documentation as well as any relevant strategic and operational information and/or documentation.

 

 
 

 

(c) Assist in the revisions and/or augmentation of its business and financial plan and/or marketing materials.

 

4 In consideration for the services to be rendered, Iberica shall be entitled to:

 

a) A success fee equal in amount to ten percent (10%) of the total value of the benefit, monetary or otherwise derived by the Company shall be earned in connection with any other activities as defined in section 1 of this Agreement. Iberica will share its fee with any broker that brings in investors based on what they negotiate so that the Company will not be required to make any additional payments or commissions to any third party other than Iberica.

The fee will be paid out of the escrow account of the closing attorney.

 

b) In the event that Company is acquired by a third party introduced by Inberica and with the assistance and involvement of Iberica in respect of such acquisition, the fee will be seven percent (7%) of the total value of the benefit, monetary or otherwise derived by the Company, provided that if any fee is payable to any additional third party in respect of the consummation of such transaction, Iberica’s fees hereunder shall be included in the fees of such third party and will not be cumulative to such third party’s fees.

 

c) A success fee equal in amount to ten percent (10%) of the total of any success fee earned by any registered dealer introduced to the Company by Iberica in connection with any pre and/or post IPO M&A activity. Iberica will be entitled to earn this fee in connection with any transaction that is either completed and/or initiated by the registered dealer.

 

Transaction Value is defined as the total of cash and cash equivalent value that is payable upon closing or at some future date.

 

6) The Company agrees to reimburse Iberica for all reasonable out of pocket expenses incurred in the performance of the engagement described herein, payable upon receipt of statements of expenses submitted by Iberica and receipts, and such expenses are not to exceed $1,500 without the prior written consent of the Company.

 

7) This agreement shall be governed by and construed in accordance with the laws of the State of the State of Israel.

 

8) In the event of any dispute between the parties, as to the interpretation, performance or enforcement of any of the terms of this Agreement, the prevailing party shall be entitled to reimbursement from the other of all legal costs and expenses attendant, thereto, including reasonable attorneys fees.

 

9) Notwithstanding the foregoing, the provisions contained herein, relating to confidentiality, to the payment of fees and expenses, will survive any termination or expiration of this Agreement.

 

10) The foregoing constitutes the entire Agreement between the parties and only shall be subject to amendment or modification by mutual written consent of the parties. This Agreement will be in effect for a minimum period of three months, commencing on the date of signature of this engagement. Company may terminate this Agreement at any time with thirty (30) days prior written notice.

 

11) If the foregoing correctly reflects the basis upon which you agree to retain Iberica in this connection, kindly sign and return to Iberica the enclosed copy of this letter of Agreement

 

Very truly yours,

 

 
 

 

Iberica Investments LLC  
   
Per:    
  Ephraim Schlisser  
  President & CEO  
     
Todos Medical Ltd.  
     
Per:    
  Rami Zigdon  
  CEO  

 

 

 

Exhibit 23.1

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We have issued our report dated August 24, 2015, with respect to the financial statements of Todos Medical Ltd. contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption Experts.

 

/s/ FAHN KANNE &CO. GRANT THORNTON ISRAEL

 

Tel Aviv, Israel

February 26, 2016

 

 

 

Exhibit 99.1

 

January 21, 2016

 

Re: Todos Medical Limited

Draft Registration Statement on Form F-1

Application for Waiver of Requirements of Form 20-F, Item 8.A.4

CIK Code No. 0001645260

 

Division of Corporation Finance

Office of the Chief Accountant
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549

 

Ladies and Gentlemen:

 

Todos Medical Limited, a foreign private issuer organized under the laws of Israel (the “Company”), in connection with a proposed initial public offering of the Company’s ordinary shares, hereby respectfully requests that the Securities and Exchange Commission (the “Commission”) waive the requirement of Item 8.A.4 of Form 20-F, which states that in the case of a company’s initial public offering (“IPO”) the Registration Statement on Form F-1 (the “Registration Statement”) must contain audited financial statements of a date not older than 12 months from the date of the offering unless a waiver is obtained. See also Division of Corporation Finance, Financial Reporting Manual, Section 6220.3.

 

At the time of initial submission in August 2015, the draft Registration Statement satisfied Item 8.A.4 of Form 20-F, which is applicable to the Registration Statement pursuant to Item 4(a) of Form F-1, because it contained audited financial statements for the two years ended December 31, 2013 and 2014 prepared in accordance with United States generally accepted accounting principles (“US GAAP”). The amended draft Registration Statement filed in November 2015 satisfied Items 8.A.4 and 5 of Form 20-F because it contained the audited financials and unaudited financial statements for the six months ended June 30, 2013 and 2014, also prepared in accordance with US GAAP. However, the Company is now, in January 2016, filing an amendment to the Registration Statement containing the same financial statements as those that are contained in the November 2015 filing because its audited financial statements are not yet available at the time of the January 2016 filing.

 

The Company is submitting this waiver request pursuant to Instruction 2 to Item 8.A.4 of Form 20-F, which provides that the Commission will waive the 12-month age of financial statements requirement “in cases where the company is able to represent adequately to us that it is not required to comply with this requirement in any other jurisdiction outside the United States and that complying with this requirement is impracticable or involves undue hardship.” See also the 2004 release entitled International Reporting and Disclosure Issues in the Division of Corporation Finance (available on the Commission’s website at: http://www.sec.gov/divisions/corpfin/internatl/cfirdissues1104.htm) at Section III.B.c, in which the staff of the Division of Corporation Finance notes that:

 

“the instruction indicates that the staff will waive the 12-month requirement where it is not applicable in the registrant’s other filing jurisdictions and is impracticable or involves undue hardship. As a result, we expect that the vast majority of IPOs will be subject only to the 15-month rule. The only times that we anticipate audited financial statements will be filed under the 12-month rule are when the registrant must comply with the rule in another jurisdiction, or when those audited financial statements are otherwise readily available” (emphasis added).

 

In connection with this request, the Company represents to the Commission that:

 

1. The Company is not currently a public reporting company in any other jurisdiction.

 

     

 

 

2. The Company is not required by any jurisdiction outside the United States to prepare, and has not prepared, financial statements audited under any generally accepted auditing standards for any interim period of 2015.

 

3. Compliance with Item 8.A.4 is impracticable and involves undue hardship for the Company.

 

4. The Company does not anticipate that its audited financial statements for the year ended December 31, 2015 will be available until March 31, 2016.

 

5. In no event will the Company seek effectiveness of the Registration Statement if its audited financial statements are older than 15 months at the time of the offering.

 

We will file this letter as an exhibit to the Registration Statement pursuant to Instruction 2 to Item 8.A.4 of Form 20-F.

 

Please do not hesitate to contact me at (972) 8-633-3964, or Gregg E. Jaclin at (609) 275-0400, if you have any questions regarding the foregoing or if we can provide any additional information.

 

Very truly yours,

 

/s/ Rami Zigdon

 

Rami Zigdon