ITEM 1. FINANCIAL STATEMENTS
ONLINE DISRUPTIVE TECHNOLOGIES, INC.
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 2019
(Unaudited)
Online Disruptive Technologies, Inc.
Condensed
Interim Consolidated Balance Sheets
(U.S.
Dollars)
(Unaudited)
|
|
June 30, 2019
|
|
|
December 31, 2018
|
|
|
|
$
|
|
|
$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
121,980
|
|
|
120,245
|
|
Restricted Cash (Note 12(3))
|
|
30,976
|
|
|
29,185
|
|
Prepaid Expenses
|
|
13,776
|
|
|
23,467
|
|
VAT Receivable
|
|
22,591
|
|
|
20,141
|
|
Total Current Assets
|
|
189,323
|
|
|
193,038
|
|
|
|
|
|
|
|
|
Fixed Assets (Note 4)
|
|
39,054
|
|
|
45,274
|
|
Right-of-use Assets (Note 3)
|
|
76,964
|
|
|
-
|
|
Total
Assets
|
|
305,341
|
|
|
238,312
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts Payable
|
|
226,289
|
|
|
194,400
|
|
Accrued Liabilities
|
|
184,005
|
|
|
196,316
|
|
Promissory Note (Note 7)
|
|
42,544
|
|
|
50,000
|
|
Current Portion of
Lease Liability (Note 3)
|
|
57,181
|
|
|
-
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
510,019
|
|
|
440,716
|
|
|
|
|
|
|
|
|
Convertible Debentures (Note 8)
|
|
2,061,388
|
|
|
2,061,388
|
|
Convertible Loan (Note 9)
|
|
603,201
|
|
|
537,000
|
|
Lease
Liabilities (Note 3)
|
|
25,769
|
|
|
-
|
|
Total Liabilities
|
|
3,200,377
|
|
|
3,039,104
|
|
|
|
|
|
|
|
|
DEFICIT
|
|
|
|
|
|
|
Authorized:
20,000,000 Preferred Shares,
par value $0.001
500,000,000 Common Shares, par value
$0.001
Issued and outstanding:
Nil Preferred Shares
127,240,587 Common Shares (December 31, 2018:
124,063,122 Common Shares)
|
|
127,241
|
|
|
124,063
|
|
Shares Subscription Received
|
|
414,000
|
|
|
-
|
|
Additional Paid-in Capital
|
|
13,042,422
|
|
|
12,340,094
|
|
Accumulated Other Comprehensive Loss
|
|
(14,019
|
)
|
|
80,946
|
|
Deficit
|
|
(16,265,714
|
)
|
|
(15,255,866
|
)
|
Deficit Attributable to Shareholders of
the Company
|
|
(2,696,070
|
)
|
|
(2,710,763
|
)
|
Non-Controlling
Interests
|
|
(198,966
|
)
|
|
(90,029
|
)
|
Total Deficit
|
|
(2,895,036
|
)
|
|
(2,800,792
|
)
|
Total
Liabilities and Deficit
|
|
305,341
|
|
|
238,312
|
|
The accompanying notes are an integral part of these condensed
interim consolidated financial statements.
Online Disruptive Technologies, Inc.
Consolidated
Statements of Operations and Comprehensive Loss
(U.S. Dollars)
(Unaudited)
|
|
Three months
|
|
|
Three months
|
|
|
Six months
|
|
|
Six months
|
|
|
|
ended June 30,
|
|
|
ended June 30,
|
|
|
ended June
|
|
|
ended June
|
|
|
|
2019
|
|
|
2018
|
|
|
30, 2019
|
|
|
30, 2018
|
|
General and Administrative Expenses
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Accounting Fees
|
|
7,500
|
|
|
7,500
|
|
|
15,000
|
|
|
15,000
|
|
Audit & Tax Fees
|
|
30,182
|
|
|
57,882
|
|
|
40,633
|
|
|
72,446
|
|
Bank Fees
|
|
302
|
|
|
229
|
|
|
412
|
|
|
365
|
|
Consulting Fees
|
|
91,816
|
|
|
91,651
|
|
|
183,517
|
|
|
203,803
|
|
Lease Expense (note 12)
|
|
4,090
|
|
|
-
|
|
|
17,464
|
|
|
-
|
|
Filing and Transfer Agent Fees
|
|
7,077
|
|
|
3,776
|
|
|
8,626
|
|
|
3,866
|
|
Insurance Expense
|
|
2,479
|
|
|
1,297
|
|
|
8,320
|
|
|
14,514
|
|
Marketing Expense
|
|
3,321
|
|
|
-
|
|
|
4,419
|
|
|
-
|
|
Legal Fees
|
|
3,776
|
|
|
6,379
|
|
|
8,740
|
|
|
10,044
|
|
Office and Miscellaneous Expense
|
|
1,452
|
|
|
960
|
|
|
6,144
|
|
|
4,914
|
|
Payroll Expense
|
|
9,020
|
|
|
9,078
|
|
|
17,936
|
|
|
18,460
|
|
Research and Development Expense (Note 2l, 5)
|
|
402,507
|
|
|
1,137,940
|
|
|
787,253
|
|
|
1,404,762
|
|
Travel Expenses
|
|
7,821
|
|
|
3,668
|
|
|
10,271
|
|
|
7,335
|
|
|
|
571,343
|
|
|
1,320,360
|
|
|
1,108,735
|
|
|
1,755,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Liability Expense (Note
3)
|
|
1,168
|
|
|
-
|
|
|
2,343
|
|
|
-
|
|
Fair Value through Profit and Loss on Loan
|
|
-
|
|
|
(17,924
|
)
|
|
-
|
|
|
17,054
|
|
Interest Accretion
|
|
-
|
|
|
25,817
|
|
|
-
|
|
|
148,562
|
|
Interest Expense
|
|
67,439
|
|
|
46
|
|
|
68,769
|
|
|
102
|
|
Foreign Currency (Gain) Loss
|
|
(29,045
|
)
|
|
63,419
|
|
|
(68,212
|
)
|
|
65,943
|
|
Net Loss for the period
|
|
(610,905
|
)
|
|
(1,391,718
|
)
|
|
(1,111,635
|
)
|
|
(1,987,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency Translation Adjustments
|
|
(49,987
|
)
|
|
56,525
|
|
|
(94,965
|
)
|
|
56,525
|
|
Comprehensive Loss for the period
|
|
(660,892
|
)
|
|
(1,335,193
|
)
|
|
(1,206,600
|
)
|
|
(1,930,645
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stockholders
|
|
(558,717
|
)
|
|
(1,228,515
|
)
|
|
(1,009,848
|
)
|
|
(1,785,324
|
)
|
Non-Controlling Interests
|
|
(52,188
|
)
|
|
(163,203
|
)
|
|
(101,787
|
)
|
|
(201,846
|
)
|
|
|
(610,905
|
)
|
|
(1,391,718
|
)
|
|
(1,111,635
|
)
|
|
(1,987,170
|
)
|
Net Comprehensive Loss Attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stockholders
|
|
(604,464
|
)
|
|
(1,177,733
|
)
|
|
(1,096,117
|
)
|
|
(1,734,542
|
)
|
Non-Controlling Interests
|
|
(56,428
|
)
|
|
(157,460
|
)
|
|
(110,483
|
)
|
|
(196,103
|
)
|
|
|
(660,892
|
)
|
|
(1,335,193
|
)
|
|
(1,206,600
|
)
|
|
(1,930,645
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Net Loss per Common Share
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares
Outstanding Basic and Diluted
|
|
127,072,475
|
|
|
119,615,259
|
|
|
125,855,343
|
|
|
119,388,085
|
|
The accompanying notes are an integral part of the Condensed
Interim Consolidated Financial Statement
Online Disruptive Technologies, Inc.
Condensed
Interim Consolidated Statements of Cash Flows
(U.S.
Dollars)
(Unaudited)
|
|
Six months
|
|
|
Six months
|
|
|
|
ended June
|
|
|
ended June 30,
|
|
|
|
30, 2019
|
|
|
2018
|
|
Cash flow from Operating Activities
|
|
$
|
|
|
$
|
|
Net loss for the period
|
|
(1,111,635
|
)
|
|
(1,987,170
|
)
|
Adjustment for items not involving
cash:
|
|
|
|
|
|
|
Lease expense
|
|
19,807
|
|
|
-
|
|
Stock-based compensation
|
|
387,617
|
|
|
953,148
|
|
Foreign exchange (gain) loss
|
|
(68,212
|
)
|
|
65,942
|
|
Fair value through profit and loss on loan
|
|
-
|
|
|
17,278
|
|
Depreciation Fixed assets
|
|
8,453
|
|
|
11,169
|
|
Interest accrued
|
|
68,769
|
|
|
148,562
|
|
Changes in non-cash working capital
items:
|
|
|
|
|
|
|
(Increase) Decrease in VAT receivable
|
|
(1,423
|
)
|
|
7,385
|
|
Decrease in prepaid expense
|
|
10,085
|
|
|
1,487
|
|
(Decrease) Increase in accounts payable and accrued
liabilities
|
|
(19,576
|
)
|
|
173,714
|
|
Net cash used in operating activities
|
|
(706,115
|
)
|
|
(608,485
|
)
|
Cash flow from financing activities
|
|
|
|
|
|
|
Common shares issued, net of issuance costs
|
|
310,740
|
|
|
4,812
|
|
Share subscription received (note 10)
|
|
414,000
|
|
|
3,333
|
|
Convertible loan issued
|
|
-
|
|
|
537,000
|
|
Term loan repayment
|
|
(10,000
|
)
|
|
-
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
714,740
|
|
|
545,145
|
|
Cash flow from investing activities
|
|
-
|
|
|
-
|
|
Cash utilized in purchase of assets
|
|
-
|
|
|
(625
|
)
|
Net cash used in investing activities
|
|
-
|
|
|
(625
|
)
|
|
|
|
|
|
|
|
Effects of exchange rate changes on cash
and cash equivalents
|
|
(5,099
|
)
|
|
5,730
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, cash
equivalents, and restricted cash
|
|
3,526
|
|
|
(58,235
|
)
|
Cash, cash equivalents, and restricted cash, beginning
of period
|
|
149,430
|
|
|
232,247
|
|
Cash, cash equivalents, and restricted cash, end of
period
|
|
152,956
|
|
|
174,012
|
|
Supplementary Information
|
|
|
|
|
|
|
Interest Paid
|
|
-
|
|
|
-
|
|
Income Taxes Paid
|
|
-
|
|
|
-
|
|
The accompanying notes are an integral part of these condensed
interim consolidated financial statements.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 1 - Nature of Operations and Going Concern
Online Disruptive Technologies, Inc. (ODT or the Company)
was incorporated on November 16, 2009 in the State of Nevada, U.S.A. The Company
was in the business of operating websites with advertising revenue platforms.
However, as described below, the Company changed its primary business focus to
the development and commercialization of a biotechnology platform. The Company
has limited operations that has had no revenues from inception to date. The
Company has a December 31 year-end.
Effective March 24, 2010, the Company acquired 100% of the
issued and outstanding shares of RelationshipScoreboard.com Entertainment Inc.
(RS or RelationshipScoreboard.com), a company incorporated on November 16,
2009 in the state of Nevada, U.S.A. in exchange for 16,000,000 shares of the
Companys common stock. Upon the completion of the acquisition, the former sole
shareholder of RS held 89% of the Companys issued and outstanding common stock.
As a result, the transaction was accounted for as a reverse takeover transaction
(RTO) for accounting purpose, as RS was deemed to be the acquirer, and these
condensed interim consolidated financial statements are a continuation of the
financial statements of RS. On January 28, 2013, RelationshipScoreboard.com was
closed and dissolved. The Company sold the website assets for $10 to an arms
length individual and wrote off all supplier payables in the amount of $430.
On April 23, 2012, the Company established an Israeli
subsidiary named Savicell Diagnostic Ltd. (Savicell) with the intention of
exploring business ventures in the biotechnology sector. On July 25, 2012,
Savicell entered into a definitive licensing agreement with a division of the
Tel Aviv University for the purpose of developing and commercializing a new
technology relative to the early detection of various forms of disease. With the
consummation of this transaction, the Company is now entirely focused on its
biotechnology efforts.
These condensed interim consolidated financial statements have
been prepared with the ongoing assumption that the Company will be able to
realize its assets and discharge its liabilities in the normal course of
business. The Company has a working capital deficit balance of $320,696 as at
June 30, 2019 (working capital deficiency balance December 2018 $247,678) and
an accumulated deficit of $16,265,714. Furthermore, additional future losses are
anticipated which raise substantial doubt about the Companys ability to
continue as a going concern. These condensed interim consolidated financial
statements do not include any adjustments to the amounts and classification of
assets and liabilities that might be necessary should the Company be unable to
continue as a going concern.
The operations of the Company have primarily been funded by the
sale of common shares and loans received. Continued operations of the Company
are dependent on the Companys ability to complete equity financings or to
generate profitable operations in the future. Managements plan in this regard
is to secure additional funds through future equity financings. Such financings
may not be available or may not be available on reasonable terms to the Company.
Failure to obtain the ongoing support of its equity financings and creditors may
make the going concern basis of accounting inappropriate, in which case the
Companys assets and liabilities would need to be recognized at their
liquidation values. These condensed interim consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
recorded assets amounts and classification of liabilities that might arise from
this uncertainty.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 2 - Significant Accounting Policies
a) Basis of
Presentation
These condensed interim consolidated financial statements
have been prepared for interim financial reporting in conformity with generally
accepted accounting principles in the United States of America (US GAAP), and
are expressed in United States dollars, unless otherwise noted. All adjustments
considered necessary for a fair presentation of financial position, results of
operations and cash flows for the six months ended June 30, 2019 have been
included.
b) Principles of
Consolidation
These condensed interim consolidated financial statements
include the accounts of the Company and its 87.87% (December 31, 2018 87.81%)
interest in Savicell. All significant intercompany accounts and transactions
have been eliminated upon consolidation.
c) Use of
Estimates
The preparation of condensed interim consolidated financial
statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant areas requiring the use of management estimates
include assumptions and estimates relating to share-based payments, valuation
allowances for deferred tax assets and assessment of lease.
d) Foreign
Currency Translation
The Companys functional currency is the U.S.
dollar. The Companys subsidiarys functional currency is the New Israeli Shekel
(NIS). Transactions in other currencies are recorded in U.S. dollars at the
rates of exchange prevailing when the transactions occur. Monetary assets and
liabilities denominated in other currencies are translated into U.S. dollars at
rates of exchange in effect at the balance sheet dates. Exchange gains and
losses are recorded in the statements of operations.
Results of operations are translated into the Companys
presentation currency, U.S. dollars, at an appropriate average rate of exchange
during the year. Net assets and liabilities are translated to U.S. dollars for
presentation purposes at rates of exchange in effect at the end of the period.
Gains or losses arising on translation are recognized in other comprehensive
income (loss) as foreign currency translation adjustments.
e) Cash and Cash
Equivalents
Cash and cash equivalents consist entirely of readily
available cash balances. There were no cash equivalents as of June 30, 2019 and
December 31, 2018.
f) Restricted
cash
Restricted cash mainly consists of cash reserve and security
deposits required for rental office.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 2 - Significant Accounting Policies (Continued)
g)
Stock-based Compensation
The Company accounts for its stock-based
compensation awards in accordance with ASC Topic 718, CompensationStock
Compensation (ASC 718). ASC 718 requires all stock-based payments to employees
and non-employees including grants of stock options, to be recognized as expense
in the statements of operations based on their grant date fair values. The
Company estimates the grant date fair value of each option award using the
Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing
model requires management to make assumptions with respect to the expected term
of the option, the expected volatility of the common stock consistent with the
expected life of the option, risk-free interest rates and expected dividend
yields of the common stock.
h) Stock for
Services
The Company periodically issues common stock, warrants and
common stock options to consultants for various services. Costs of these
transactions are measured at the fair value of the service received or the fair
value of the equity instruments issued, whichever is more reliably measurable.
The value of the common stock is measured at the earlier of (i) the date at
which a firm commitment for performance by the counterparty to earn the equity
instruments is reached or (ii) the date at which the counterpartys performance
is complete.
i) Income
Taxes
Income taxes are accounted for under the liability method of
accounting for income taxes. Under the liability method, deferred tax
liabilities and assets are recognized for the estimated future tax consequences
attributable to differences between the amounts reported in the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted income tax rates expected to apply when the asset is realized or the
liability is settled. The effect of a change in income tax rates on deferred tax
liabilities and assets is recognized in income in the period in which the change
occurs. Deferred tax assets are recognized to the extent that they are
considered more likely than not to be realized.
Per FASB ASC 740 Income taxes under the liability method, it
is the Companys policy to provide for uncertain tax positions and the related
interest and penalties based upon managements assessment of whether a tax
benefit is more likely than not to be sustained upon examination by tax
authorities. At June 30, 2019, the Company believes it has appropriately
accounted for any unrecognized tax benefits. To the extent the Company prevails
in matters for which a liability for an unrecognized benefit is established or
is required to pay amounts in excess of the liability, the Companys effective
tax rate in a given financial statement period may be affected. Interest and
penalties associated with the Companys tax positions are recorded as Interest
Expense.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 2 - Significant Accounting Policies (Continued)
j) Comprehensive
Income (Loss)
The Company accounts for comprehensive income under the
provisions of ASC Topic 220-10, Comprehensive Income - Overall, which
establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. The Company is disclosing this information
on its Statements of Operations and Comprehensive Loss.
k) Earnings (Loss)
Per Share
Basic loss per share is computed on the basis of the weighted
average number of common shares outstanding during each period.
Diluted loss per share is computed on the basis of the weighted
average number of common shares and dilutive securities outstanding. Stock
options are considered to be common stock equivalents and were not included in
the net loss per share calculation for the three and six months ended June 30,
2019 and 2018 because the inclusion of such underlying shares would have had an
anti-dilutive effect.
l) Financial
Instruments and Fair Value of Financial Instruments
Fair Value of
Financial Instruments the Company adopted SFAS ASC 820-10-50, Fair Value
Measurements. This guidance defines fair value, establishes a three-level
valuation hierarchy for disclosures of fair value measurement and enhances
disclosure requirements for fair value measures. The three levels are defined as
follows:
|
•
|
Level 1 inputs to the valuation methodology are quoted
prices (unadjusted) for identical assets or liabilities in active markets.
|
|
|
|
|
•
|
Level 2 inputs to the valuation methodology include
quoted prices for similar assets and liabilities in active markets, and
inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial instrument.
|
|
|
|
|
•
|
Level 3 inputs to valuation methodology are unobservable
and significant to the fair measurement.
|
As at June 30, 2019, the fair value of cash and cash
equivalents was measured using Level 1 inputs, and the fair value of convertible
debentures was measured using Level 2 inputs.
The Companys financial instruments are cash and cash
equivalents, restricted cash, accounts payable, accrued liabilities, promissory
note, convertible debentures and convertible loans. The recorded values of our
financial instruments approximate their current fair values because of their
nature and respective maturity dates or durations.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 2 - Significant Accounting Policies (Continued)
m) Research and
Development Expenses
In the quarter ended June 30, 2019, all research
and development costs are charged to expense as incurred. The majority of these
costs are in-house expenses related to consulting fees, materials, salaries of
employees working on the R&D projects, rent and legal expenses related to
patents. A breakdown of the R&D costs is as follows:
|
|
|
Six months
|
|
|
Six months
|
|
|
Three months
|
|
|
Three months
|
|
|
|
|
ended June 30,
|
|
|
ended June 30,
|
|
|
ended June 30,
|
|
|
ended June 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Research and Development
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
|
23,809
|
|
|
14,900
|
|
|
20,110
|
|
|
5,441
|
|
|
Legal fees
|
|
13,835
|
|
|
8,306
|
|
|
9,133
|
|
|
7,590
|
|
|
Office and Miscellaneous Expense
|
|
4,175
|
|
|
6,947
|
|
|
2,718
|
|
|
1,743
|
|
|
Payroll expense
|
|
312,915
|
|
|
387,638
|
|
|
147,682
|
|
|
233,540
|
|
|
R&D materials and supplies
|
|
42,865
|
|
|
16,326
|
|
|
34,521
|
|
|
1,863
|
|
|
Rent
|
|
2,037
|
|
|
17,497
|
|
|
612
|
|
|
8,638
|
|
|
Share-based compensation
|
|
387,617
|
|
|
953,148
|
|
|
187,731
|
|
|
879,125
|
|
|
Total
|
|
787,253
|
|
|
1,404,762
|
|
|
402,507
|
|
|
1,137,940
|
|
Savicells financing commitment related to the License and
Research Funding Agreement (as defined in Note 4 below) entered into with Ramot
at Tel Aviv University was completely fulfilled by December 31, 2015.
n) Fixed
Assets
The depreciation rates applicable to each category of fixed assets
are as follows:
Class of Properties
|
Depreciation Rate
|
Furniture and Fixtures
|
15-year; straight-line basis
|
Computer Equipment
|
3 to 4-year; straight-line basis
|
Lab Equipment
|
3 to 15-year; straight-line
basis
|
o) Convertible
Debentures
Convertible debentures, for which the embedded conversion
feature does not qualify for derivative treatment, is evaluated to determine if
the effective or actual rate of conversion per the terms of the convertible note
agreement is below market value. In these instances, the Company accounts for
the value of the beneficial conversion feature as a debt discount, which is then
accreted to interest expense over the life of the related debt using the
effective interest method.
p) Convertible
Loans
Convertible loans are accounted for in accordance with ASC 470-20.
The Company has determined that the embedded conversion options in the
convertible loans are not required to be separately accounted for as a
derivative under GAAP.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 2 - Significant Accounting Policies (Continued)
q) Modifications
to Debt
The Company evaluates any modifications to its debt in accordance
with the applicable guidance in ASC 470-50, Debt-Modifications and
Extinguishments. If the debt instruments are substantially modified, the
modification is accounted for in the same manner as a debt extinguishment (i.e.,
a major modification) and the fees paid are recognized as expense at the time of
the modification. Otherwise, such fees are deferred and amortized as an
adjustment of interest expense over the remaining term of the modified debt
instrument using the interest method.
r) Recently
Adopted Accounting Pronouncements
In July 2017, the FASB issued ASU
2017-11Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity
(Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for
Certain Financial Instruments with Down Round Features; (Part II) Replacement of
the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of
Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
Interests with a Scope Exception (ASU 2017-11). ASU 2017-11 allows companies
to exclude a down round feature when determining whether a financial instrument
(or embedded conversion feature) is considered indexed to the entitys own
stock. As a result, financial instruments (or embedded conversion features) with
down round features may no longer be required to be accounted for as derivative
liabilities. A company will recognize the value of a down round feature only
when it is triggered, and the strike price has been adjusted downward. For
equity-classified freestanding financial instruments, an entity will treat the
value of the effect of the down round as a dividend and a reduction of income
available to Common Stock holders in computing basic earnings per share. For
convertible instruments with embedded conversion features containing down round
provisions, entities will recognize the value of the down round as a beneficial
conversion discount to be amortized to earnings. ASU 2017-11 is effective for
fiscal years beginning after December 15, 2018, and interim periods within those
fiscal years. Early adoption is permitted. The Company has early adopted the
methodologies prescribed by this ASU for the year ended December 31, 2018 and
there is no material impact on the Companys condensed interim consolidated
financial statements.
In July 2018, the FASB issued ASU 2018-10, Codification
Improvements to Topic 842, Leases. For entities that early adopted Topic 842,
the amendments are effective upon issuance of ASU 2018-10, and the transition
requirements are the same as those in Topic 842. For entities that have not
adopted Topic 842, the effective date and transition requirements will be the
same as the effective date and transition requirements in Topic 842. ASU 2018-10
will be effective for use for fiscal years beginning after December 15, 2018.
The Company has adopted the methodologies prescribed by this ASU on January 1,
2019 and there is no material impact on the Companys condensed interim
consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting. These amendments expand the scope of Topic 718, CompensationStock
Compensation (which currently only includes share-based payments to employees)
to include share-based payments issued to nonemployees for goods or services.
Consequently, the accounting for share-based payments to nonemployees and
employees will be substantially aligned. The ASU supersedes Subtopic 505-50,
EquityEquity-Based Payments to Non-Employees. This standard is effective for
fiscal years beginning after December 15, 2018, including interim periods within
that fiscal year.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 2 - Significant Accounting Policies (Continued)
r) Recently
Adopted Accounting Pronouncements (continued)
The Company has adopted the methodologies prescribed by this
ASU on January 1, 2019 and there is no material impact on the Companys
condensed interim consolidated financial statements.
In February 2016, the Financial Accounting Standards Board
(FASB) issued ASC 842 which requires lessees to recognize a right-of-use
(ROU) asset and lease liability on the balance sheet for virtually all leases.
From a lessee perspective, ASC 842 retains a dual model requiring leases to be
classified as either operating or finance leases for the income statement.
Operating leases will result in straight-line expense, and financing leases will
have a front-loaded expense pattern with an interest expense component. On
January 1, 2019, the Company adopted ASC 842 and all related amendments using
the prospective transition approach. The comparative information has not been
restated and continues to be reported under the accounting standards in effect
for those periods. Adoption of the new standard resulted in the recording of
lease ROU assets and lease liabilities of approximately $90,146 as of January 1,
2019. In accordance with ASC 842, the Company determines if an arrangement is a
lease at inception based on whether there is an identified asset, whether the
Company has the right to obtain substantially all of the economic benefits from
the use of the asset and whether the Company has the right to direct the use of
the asset. Currently, the Company only has operating leases and does not have
any financing leases. Operating lease ROU assets and operating lease liabilities
are recognized based on the present value of the future minimum lease payments
over the lease term. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term. See note 3, Leases, for further
disclosures and detail regarding our operating leases.
s) Recently Issued
Accounting Pronouncements Not Yet Adopted
In August 2018, the FASB issued ASU 2018-13, Fair Value
Measurement (Topic 820): Disclosure FrameworkChanges to the Disclosure
Requirements for Fair Value Measurement. For all entities, amendments are
effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019. The amendments on changes in unrealized gains
and losses, the range and weighted average of significant unobservable inputs
used to develop Level 3 fair value measurements, and the narrative description
of measurement uncertainty should be applied prospectively for only the most
recent interim or annual period presented in the initial fiscal year of
adoption. All other amendments should be applied retrospectively to all periods
presented upon their effective date. Early adoption is permitted. An entity is
permitted to early adopt any removed or modified disclosures upon issuance of
ASU No. 2018-13 and delay adoption of the additional disclosures until their
effective date. The Company is currently evaluating the potential impact this
guidance will have on the condensed interim consolidated financial statements,
if any.
Note 3 Adoption of ASC 842, Leases
On January 1, 2019, the Company adopted ASC 842 using the
prospective transition approach, which applies the provisions of the new
guidance at the effective date without adjusting the comparative periods
presented. The adoption of the lease standard did not result in a
cumulative-effect adjustment to opening equity. Results for reporting periods
beginning after January 1, 2019 are presented under ASC 842 while prior period
amounts are not adjusted and continue to be reported in accordance with the
Companys historic accounting under ASC 840, Leases, (ASC 840).
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 3 - Adoption of ASC 842, Leases (Continued)
The Company leases office space. For leases with terms greater
than 12 months, the Company records the related right-of-use (ROU) asset and
lease obligation at the present value of lease payments over the term. Leases
may include fixed rental escalation clauses, renewal options and / or
termination options that are factored into the determination of lease payments
when appropriate. The Companys leases do not usually provide a readily
determinable implicit rate; therefore, an estimate of the Companys incremental
borrowing rate is used to discount the lease payments based on information
available at the lease commencement date. The discount rate used was 5%.
Operating lease costs during the six months ended June 30, 2019
were $28,076.
The adoption of ASC 842 resulted in the recognition of ROU
assets and lease liabilities of approximately $90,146 as of January 1, 2019. As
at June 30, 2019, ROU Asset is $76,964, current portion and long term portion of
these lease liabilities are $57,181 and $25,769 respectively. The standard did
not materially impact the Companys condensed interim consolidated statement of
operations or its condensed interim consolidated statement of cash flows for the
six months ended June 30, 2019. See below for the Companys updated lease policy
and the required disclosures under ASC 842. The Company is a lessee in a rental
lease that has expiry dates within the next 2 years.
|
|
Right-of-use Asset
|
|
|
Lease Liability
|
|
|
|
$
|
|
|
$
|
|
Balance, December 31, 2018
|
|
-
|
|
|
-
|
|
Adoption of ASC 842
|
|
90,146
|
|
|
103,917
|
|
Lease expense
|
|
(17,464
|
)
|
|
-
|
|
Lease liability expense
|
|
-
|
|
|
2,343
|
|
Lease payments
|
|
-
|
|
|
(28,157
|
)
|
Effect of foreign
exchange rate changes
|
|
4,282
|
|
|
4,847
|
|
|
|
76,964
|
|
|
82,950
|
|
Current
|
|
-
|
|
|
57,181
|
|
Non-current
|
|
-
|
|
|
25,769
|
|
The Company is a lessee in two leases that have expiry dates
ranging between two (2) and three (3) years. The table below summarizes the
remaining expected lease payments under our operating leases as of June 30,
2019.
Future Lease Payments
|
|
June 30,
|
|
|
|
2019
|
|
2019
|
$
|
28,157
|
|
2020
|
|
45,312
|
|
2021
|
|
11,653
|
|
Less: imputed
interest
|
|
(2,172
|
)
|
|
|
|
|
Present value of
operating lease liabilities
|
$
|
82,950
|
|
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 3 - Adoption of ASC 842, Leases (Continued)
Update to Lease Policy
Accounting and reporting guidance for leases requires that
leases be evaluated and classified as either operating or finance leases by the
lessee and as either operating, sales-type or direct financing leases by the
lessor. The Companys operating leases are included in ROU assets, lease
liabilities-current portion and lease liability-less current portion in the
accompanying consolidated balance sheets. ROU assets represent the Companys
right to use an underlying asset for the lease term, and lease liabilities
represent the obligation to make lease payments arising from the lease.
Note 4 Fixed Assets
As of June 30, 2019, the fixed assets balance on the
consolidated financial statement consist of the following:
|
|
Furniture and
|
|
|
Computer
|
|
|
|
|
|
|
|
Cost:
|
|
Fixtures
|
|
|
Equipment
|
|
|
Lab Equipment
|
|
|
Total
|
|
December 31, 2017
|
$
|
3,871
|
|
$
|
29,325
|
|
$
|
49,191
|
|
$
|
82,387
|
|
Additions
|
|
-
|
|
|
9,933
|
|
|
10,897
|
|
|
20,830
|
|
Exchange difference
|
|
(286
|
)
|
|
(2,580
|
)
|
|
(4,089
|
)
|
|
(6,955
|
)
|
December 31, 2018
|
$
|
3,585
|
|
$
|
36,678
|
|
$
|
55,999
|
|
$
|
96,262
|
|
Additions
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Exchange difference
|
|
183
|
|
|
1872
|
|
|
2,858
|
|
|
4,913
|
|
June 30, 2019
|
$
|
3,768
|
|
$
|
38,550
|
|
$
|
58,857
|
|
$
|
101,175
|
|
|
|
Furniture and
|
|
|
Computer
|
|
|
Lab
|
|
|
|
|
Amortization:
|
|
Fixtures
|
|
|
Equipment
|
|
|
Equipment
|
|
|
Total
|
|
December 31, 2017
|
$
|
887
|
|
$
|
19,497
|
|
$
|
14,868
|
|
$
|
35,252
|
|
Additions
|
|
137
|
|
|
6,692
|
|
|
12,311
|
|
|
19,140
|
|
Exchange difference
|
|
(65
|
)
|
|
(1,440
|
)
|
|
(1,899
|
)
|
|
(3,404
|
)
|
December 31, 2018
|
$
|
959
|
|
$
|
24,749
|
|
$
|
25,280
|
|
$
|
50,988
|
|
Additions
|
|
120
|
|
|
2,198
|
|
|
6,135
|
|
|
8,453
|
|
Exchange difference
|
|
2,271
|
|
|
202
|
|
|
207
|
|
|
2,680
|
|
June 30, 2019
|
$
|
3,350
|
|
$
|
27,149
|
|
$
|
31,622
|
|
$
|
62,121
|
|
|
|
Furniture and
|
|
|
Computer
|
|
|
Lab
|
|
|
|
|
Net Book Value:
|
|
Fixtures
|
|
|
Equipment
|
|
|
Equipment
|
|
|
Total
|
|
December 31, 2018
|
$
|
2,626
|
|
$
|
11,929
|
|
$
|
30,719
|
|
$
|
45,274
|
|
June 30, 2019
|
$
|
418
|
|
$
|
11,401
|
|
$
|
27,235
|
|
$
|
39,054
|
|
The Company recorded depreciation in R&D materials and
supplies in Research and Development expenses as disclosed in Note 2 (l).
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 5 License and Research Funding Agreement
On July 25, 2012, the Companys subsidiary Savicell entered
into a License and Research Funding Agreement (R&D Agreement) with Ramot
at Tel Aviv University (Ramot) pursuant to which:
-
In the course of research performed at Tel-Aviv University ("TAU"),
Prof. Fernando Patolsky has developed technology relating to early detection
of diseases by measuring metabolic activity in the immune system;
-
Savicell wishes to fund further research at TAU relating to such
technology; and
-
Savicell wishes to obtain a license from Ramot with respect to such
technology and the results of such further funded research in order to develop
and commercialize products in the diagnostics space, and Ramot wishes to grant
the Company such license, all in accordance with the terms and conditions of
this R&D Agreement.
Pursuant to the above noted R&D Agreement, Savicell funded
research expenditures amounting to a total of $1,600,000 (paid in prior years).
-
$81,000 within 5 business days of the R&D Agreement (paid)
-
Before October 2012; $359,500 plus VAT as applicable (paid)
-
Before January 3, 2013; $359,500 plus VAT as applicable (paid)
-
Before April 3, 2013; $400,000 plus VAT as applicable (paid)
The payments originally due on April 3, 2013 and July 3, 2013
were postponed by the parties until such time as the funds were actually
required in furtherance of the joint research and development initiatives. As of
December 31, 2015, Savicells entire financing commitment has been met and no
more expenditures are mandated by the R&D Agreement on behalf of Ramot.
Savicell is continuing the clinical research within its own laboratory situated
in Haifa, Israel.
In addition, during fiscal year 2013, Savicell agreed to issue
to Ramot warrants (the Warrants) to purchase a number of ordinary shares of
Savicell which shall together comprise 15% of issued shares of Savicell on an
as-converted, fully diluted basis (equivalent to 1,765 Warrant Shares of
Savicell). The Warrants shall be exercisable at an exercise price equal to the
par value of the Warrant Shares, at any time and from time to time before
Savicell completes a deemed liquidity event or the first underwritten offering
of the Savicell's ordinary shares to the general public. The fair value of the
Warrant Shares has been estimated at $1,698.97 per Warrant Share which is
equivalent to the price at which Savicell has issued shares to third parties,
for a total of $2,998,682 which has been included in research and development
costs. As the exercise price inherent in the warrant certificate to purchase
1,765 common shares of Savicell is at nominal value, the warrant
certificate is valued at the price of the subsequent equity issuance by Savicell
($1,698.97 per share) and the related common shares are considered to be issued
and outstanding.
Upon successful development and commercialization of the
technology, and in recognition of the rights and licenses granted to Savicell
pursuant to this R&D Agreement, Savicell will be subject to (a) royalties
based on the worldwide sales related to the technology; and (b) minimum annual
royalties with respect to any calendar year following the first commercial sales
as follows. The minimum annual royalties are subject to increases for each
successive year.
During the three and six months ended June 30, 2019, Savicell
incurred research and development costs of $402,507 and $787,253 respectively
(June 30, 2018 $1,137,940 and $1,404,762) which were included in the
consolidated statements of operations and comprehensive loss.
Online Disruptive Technologies, Inc.
Notes to the Condensed Interim Consolidated Financial Statements
June 30, 2019
(Unaudited)
Note 6 – Related Party Transactions
The Company completed the following related party transactions:
During the three and six months ended June 30, 2019, the Company incurred consulting fees and salaries of $128,102 and $255,608 (June 30, 2018 - $124,703 and $265,488) payable to its directors and officers.
As at June 30, 2019, there was $148,148 (December 31, 2018 – $94,045) payable to current officers and directors of the Company.
As at June 30, 2019, included in convertible debentures are amounts of $2,061,388 (December 31, 2018 - $2,061,388) that was entered into with two directors, one consultant, and one key management personnel of the Company (Note 8).
Note 7 – Promissory Note
During the year ended December 31, 2018, the Company issued a promissory note to the spouse of a consultant and former director of the Company for $50,000. The note bears interest at the rate of 10% per annum with an initial maturity date of the
earlier of February 28, 2019 or the closing by the Company of an equity financing of at least $250,000. Interest incurred during the three and six months ended June 30, 2019 is $1,364 and $2,568 (June 30, 2018 $nil and $nil).
During the six months ended the Company has repaid $10,000. The remaining balance is due on demand and the parties have agreed to allow for ultimate repayment beyond the originally contemplated maturity date.
Note 8 – Convertible Debentures
On April 15, 2015, the Company entered into debt conversion option agreements with two directors, one consultant and one employee of the Company pursuant to which the Company collectively settled debts in the aggregate amount of $852,418.
Pursuant to the agreements, these individuals may convert a portion or all of the debt amounts into common shares of the Company at a price per share of $0.055 over a seven year term.
On December 31, 2015, the Company entered into debt conversion option agreements with two directors, one consultant and one employee of the Company pursuant to which the Company collectively settled debts in the aggregate amount of $188,085 with
an unsecured and non-interest bearing convertible debenture. Pursuant to the agreements, these individuals may convert a portion or all of the debt amounts into common shares of the Company at a price per share of $0.20 over a seven year term.
On December 31, 2016, the Company entered into debt conversion option agreements with two directors, one consultant and one employee of the Company pursuant to which the Company collectively settled debts in the aggregate amount of $172,895 with
an unsecured and non-interest bearing convertible debenture. Pursuant to the agreements, these individuals may convert a portion or all of the debt amounts into common shares of the Company at a price per share of $0.20 over a seven-year term.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 8 Convertible Debentures (continued)
On December 31, 2018, the Company entered into debt conversion
option agreements with two directors, one consultant and one employee of the
Company pursuant to which the Company collectively settled debts in the
aggregate amount of $843,266 with an unsecured and non- interest bearing
convertible debenture. Pursuant to the agreements, these individuals may convert
a portion or all of the debt amounts into common shares of the Company at a
price per share of $0.20 over a ten-year term.
The Company evaluated these convertible debentures for
derivatives and determined that they do not qualify for derivative treatment.
The Company then evaluated the debenture for beneficial conversion features and
determined that the convertible debenture issued on April 15, 2015 does contain
beneficial conversion features.
The aggregate intrinsic value of the beneficial conversion
features was determined to be $852,418. This amount was recorded as a debt
discount on April 15, 2015 that is being amortized over the life of the
debenture at effective interest rate of 71%. The total debt discount
amortization of $852,418 was fully recognised as of December 31, 2018.
  |
|
December 31, 2018
|
|
|
Additions
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Giora Davidovits
|
$
|
860,293
|
|
$
|
-
|
|
$
|
860,293
|
|
Eyal Davidovits
|
|
402,861
|
|
|
-
|
|
|
402,861
|
|
Irit Arbel
|
|
355,746
|
|
|
-
|
|
|
355,746
|
|
Robbie Manis
|
|
437,763
|
|
|
-
|
|
|
437,763
|
|
Total
|
$
|
2,056,663
|
|
$
|
-
|
|
$
|
2,056,663
|
|
|
|
December 31, 2018
|
|
|
Additions
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures
|
$
|
2,056,663
|
|
$
|
-
|
|
$
|
2,056,663
|
|
Convertible discount
|
|
(852,418
|
)
|
|
-
|
|
|
(852,418
|
)
|
Net convertible debentures
|
|
1,204,245
|
|
|
-
|
|
|
1,204,245
|
|
Interest accretion
|
|
852,418
|
|
|
-
|
|
|
852,418
|
|
Exchange difference
|
|
4,725
|
|
|
-
|
|
|
4,725
|
|
Balance
|
$
|
2,061,388
|
|
$
|
-
|
|
$
|
2,061,388
|
|
Note 9 Convertible Loan
On March 8, 2018, the Company issued one convertible loan in
the face amount of $350,000 to two current shareholders. The convertible loan
matures after two years and bears interest at a rate of 10% per annum. The
convertible loan may be converted into common shares of the Company at the
earlier of fifteen days after the maturity date and the date the Company raises
gross proceeds of $5,000,000 through private placements or files a registration
statement with the Securities and Exchange Commission in the United States. The
conversion price is $0.20 per share or such lesser price that the Company may
issue additional shares to third parties, and, on conversion or repayment of the
convertible loan, the Company will issue warrants in a number that is equal to
the amount of the loan divided by the conversion price, exercisable at the
funding price. In addition, the Company will reset the prior investment price
issuable to each Lender for the amount equal to the lower of the prior
investment made by such lenders and the amount invested by such lenders under
this loan agreement. Such lower amount is referred to as Covered Investment.
The incremental number of common shares to be issued to the lenders by the Company is the Covered Investment divided by the reduced share price less the number of common shares previously issued by the
Company in respect of the Covered Investment
Online Disruptive Technologies, Inc.
Notes to the Condensed Interim Consolidated Financial Statements
June 30, 2019
(Unaudited)
Note 9 – Convertible Loan (continued).
During the year ended December 31, 2018, the Company issued four convertible loans in the aggregate amount of $187,000 to four individual lenders. The debentures are interest bearing at a rate of 10% per annum and have a term to maturity of two
years. The loans are convertible into common shares of the Company at the lower of $0.20 per share and the price of a future financing initiative. Moreover, warrants will be granted to the lenders upon the earlier of repayment of the loans or
conversion thereof, in a number that is equal to the amount of the convertible loans divided by the conversion price, exercisable at the funding price.
The Company evaluated these convertible loans for derivatives and determined that they do not qualify for derivative treatment. Interest will be accrued and be due and payable upon the maturity date of the loan. The accrued interest will also be
converted into common shares of the company. Interest incurred during the three and six months ended June 30, 2019 is $nil and $66,201 (three and six months ended June 30, 2018: $nil).
Note 10 – Equity
Common Shares
On April 17, 2018, stock options previously granted by the Company were exercised, resulting in the issuance of 481,179 common shares at $0.01 per share for total proceeds of $4,812.
On June 20, 2018, the Company issued 117,660 shares at $0.20 per share for an aggregate amount of $23,532 in exchange for consulting services rendered during the year ended December 31, 2018.
On August 24, 2018, the Company issued 16,665 common shares at $0.20 per share for total proceeds of $3,333 for stock options that were exercised during the year ended December 31, 2018.
On August 27, 2018, stock options previously granted by the Company to a consultant were exercised resulting in the issuance of 800,000 common shares at $0.01 per share. The Company will receive consulting services from this consultant in 2019
in lieu of receiving cash proceeds from this issuance.
On September 7, 2018, the Company issued an aggregate of 2,300,000 units at a price of $0.20 per unit for gross proceeds of $460,000. Each unit is comprised of one common share of the Company and one non-transferable common share purchase
warrant with each warrant being exercisable into one additional share at an exercise price of $0.20 per warrant share for a period of two years after the closing of the financing.
On December 18, 2018, the Company issued 78,625 shares at $0.20 per share for an aggregate amount of $15,725 in respect of future consulting services to be rendered up from January 1, 2019 to December 31, 2019.
On December 19, 2018, the Company issued an aggregate of 605,585 units at a price of $0.20 per unit. The total proceeds consist of $95,000 which was previously recorded as a share subscription received on the balance sheet with the remaining
gross proceed of $26,117 received in 2018. Each unit comprises one share and one non-transferable common stock share purchase warrant. Each warrant entitles the holder to acquire one additional share of common stock at a price of $0.20 per share until December 19, 2020. On
December 19, 2018, the Company issued an aggregate of 500,000 units at a price
of $0.20 per unit for total proceeds of $100,000. Each unit comprises one share
and one non-transferable common stock share purchase warrant. Each warrant
entitles the holder to acquire of $0.20 per share until December 19, 2020.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 10 Equity (continued)
Common Shares (continued)
On March 4, 2019, the Company issued an aggregate of 1,252,000
common shares at a price of $0.20 per share for gross proceeds of $250,400.
On March 4, 2019, the Company issued 50,000 shares at $0.20 per
share for an aggregate amount of $10,000, for proceeds received in previous
year.
On March 4, 2019, an employee exercised 500,000 options and
accordingly received 500,000 common shares at an exercise price of $0.01 per
share for aggregate consideration of $5,000.
On April 12, 2019, the Company issued an aggregate of 618,985
unit at a price of $0.20 per share for gross proceeds of $123,797. Each unit is
comprised of one common share and non-transferable common share purchase warrant
with each warrant being exercisable into one additional share at an exercise
price of $0.20 per warrant share for a period of two years after the closing of
the financing.
On April 12, 2019, one shareholder of Savicell exercised their
right to convert their shareholding in Savicell into common shares of the
Company. Accordingly, the Company issued 756,480 common shares at $0.16 per
share which equals to 80% of the share pricing of the financing completed on
April 19, 2015. Total book value of the issued common shares is $6,392.
As at June 30, 2019, the Company has $414,000 share
subscription received but not issue shares yet and 127,240,587 common shares
(December 31, 2018 124,063,122) issued and outstanding.
Warrants
A summary of warrants as at June 30, 2019 and December 31, 2018
is as follows:
|
|
|
|
|
Warrant Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of warrant
|
|
|
Exercise Price
|
|
Balance, December 31, 2018
|
|
5,186,835
|
|
$
|
0.20
|
|
Granted
|
|
1,920,985
|
|
|
0.20
|
|
Expired
|
|
(1,693,750
|
)
|
|
0.20
|
|
Balance, June 30, 2019
|
|
5,414,070
|
|
$
|
0.20
|
|
|
|
Warrant Outstanding
|
|
|
|
|
|
Weighted Average
|
|
Number of warrant
|
Exercise Price
|
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 10 Equity (Continued)
Warrants (continued)
Number Outstanding
|
Weighted Average
|
Expiry Date
|
Weighted Average
|
|
Exercise Price
|
|
Remaining Life
|
2,300,000
|
$0.20
|
September 7, 2020
|
1.19
|
87,500
|
$0.20
|
September 17, 2021
|
2.22
|
1,105,585
|
$0.20
|
December 19, 2020
|
1.47
|
618,985
|
$0.20
|
April 12, 2021
|
1.79
|
1,302,000
|
$0.20
|
March 4, 2021
|
1.68
|
5,414,070
|
$0.20
|
|
1.45
|
Preferred Shares
The Company has authorized 20,000,000 preferred shares at a par
value of $0.001 per share. No preferred shares have been issued by the Company
and accordingly none are outstanding.
Stock Options
In August 2015 the Company granted a total of 1,730,000 stock
options to four advisors of the Company. The stock options are exercisable at an
exercise price of $0.20 per share and may be exercised for six-seven years. One
third of the options will vest at end of each completed year for which the
consultant provides the services. The options were valued based on the Black
Scholes model. For the six months ended June 30, 2019, the Company recorded
stock based compensation of nil (2018: $9,382) for such options.
On November 22, 2015 the Company granted a total of 50,000
stock options to an employee. The stock options are exercisable at an exercise
price of $0.20 per share and may be exercised for seven years. One third of the
options will vest at the grant date of each of November 22, 2016, November 22,
2017 and November 22, 2018 that the employee remains an employee of the Company
or its subsidiaries. The options were valued based on the Black Scholes model.
For the six months ended June 30, 2019, the Company recorded stock based
compensation of nil (2018: $3,392) for such options.
On December 1, 2015 the Company granted a total of 125,000
stock options to an employee. The stock options are exercisable at an exercise
price of $0.20 per share and may be exercised for seven years. One third of the
options will vest at the grant date of each of December 1, 2016, December 1,
2017 and December 1, 2018 that the employee remains an employee of the Company
or its subsidiaries. The options were valued based on the Black Scholes model.
For the six months ended June 30, 2019, the Company recorded stock based
compensation of nil (2018: $1,987) for such options.
On December 6, 2015 the Company granted a total of 100,000
stock options to an employee. The stock options are exercisable at an exercise
price of $0.20 per share and may be exercised for seven years. One third of the
options will vest at the grant date of each of December 6, 2016, December 6,
2017 and December 6, 2018 that the employee remains an employee of the Company
or its subsidiaries. The options were valued based on the Black Scholes model.
For the six months ended June 30, 2019 the Company recorded stock based compensation of nil (2018: $1,658) for such options.
Online Disruptive Technologies, Inc.
Notes to the Condensed Interim Consolidated Financial Statements
June 30, 2019
(Unaudited)
Note 10 – Equity (Continued)
Stock Options (continued)
On February 15, 2016 the Company granted a total of 50,000 stock options to an employee. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. One third of the options will vest on each
of the first, second and third anniversaries of the date of grant provided the employee remains an employee of the Company or its subsidiaries. The options were valued based on the Black Scholes model. During the six months ended June 30, 2018,
16,665 options were exercised at $0.20 per share resulting in total proceeds of $3,333. The remainder options 33,335 were cancelled and no stock based compensation was recorded for the six months ended June 30, 2019.
On March 7, 2016 the Company granted a total of 75,000 stock options to two employees. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. One third of the options will vest on each of
the first, second and third anniversaries of the date of grant provided the employee remains an employee of the Company or its subsidiaries. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019, the
Company recorded stock based compensation of $163 (2018: $843) for such options.
On May 5, 2016 the Company granted a total of 150,000 stock options to an consultant. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for ten years. One third of the options will vest on each of the
first, second and third anniversaries of the date of grant provided the employee remains an employee of the Company or its subsidiaries. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019 the Company
recorded stock based compensation of $636 (2018: $2,086) for such options.
On June 6, 2016 the Company granted a total of 800,000 stock options to a consultant. The stock options are exercisable at the exercise price of $0.20 per share and may be exercised for five years. 480,000 of the options so granted will vest as
to one quarter of such options at the end of each completed year that the consultant provides the services. The remaining 320,000 options will be fully vested when the consultant has completed the provision of a minimum of 600 blood samples of lung
cancer and control patients during the 4 years following June 6, 2016. One twelfth of these options will vest upon each 50 blood samples having been delivered by the consultant to the Company. The options were valued based on the Black
Scholes model. For the six months ended June 30, 2019, 626,667 option vested and the Company recorded stock based compensation of $6,599 (2018: $12,434) for such options.
On November 1, 2016, the Company granted a total of 360,000 stock options to an employee. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. One half of the options will vest
immediately and one-half shall vest on the on the first anniversary date of grant provided the grantee remains a board member of the Company or its subsidiaries. The options were valued based on the Black Scholes model. For the six months ended June
30, 2019, the Company recorded stock based compensation of nil (2018: nil).
On May 31, 2017, the Company granted a total of 875,000 stock options to six employees. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. One third of the options will vest on each of
the first, second and third anniversaries of the date of grant provided the employee remains an employee of the Company or its subsidiaries. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of $15,314 (2018: $47,930) for such options.
Online Disruptive Technologies, Inc.
Notes to the Condensed Interim Consolidated Financial Statements
June 30, 2019
(Unaudited)
Note 10 – Equity (Continued)
Stock Options (continued)
On July 2, 2017, the Company granted a total of 150,000 stock options to an employee. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. One third of the options will vest on each of
the first, second and third anniversaries of the grant date provided the provided the employee remains an employee of the Company or its subsidiaries. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019,
the Company recorded stock based compensation of $2,832 (2018: $9,144) for such options.
On July 12, 2017, the Company granted a total of 260,000 stock options to an employee. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for ten years. 50,000 options vested on grant date. Off the
remaining 210,000, one third of the options will vest on each of the first, second and third anniversaries of the grant date provided the employee remains a consultant of the Company or its subsidiaries. The options were valued based on the Black
Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of $4,172 (2018: $12,314) for such options.
On February 13, 2018, the Company granted a total of 231,250 stock options to a consultant. The stock options vest immediately and are exercisable at an exercise price of $0.20 per share and may be exercised over five years. The options were
valued based on the Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of nil (2018: $26,317) for such options.
On June 22, 2018, the Company granted a total of 4,100,000 stock options to a group of employees. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. One third of the options will vest
on each of the first, second and third anniversaries of the date of grant, namely June 22, 2019, June 22, 2020 and June 22, 2021 provided the employees remains an employee of the Company or its subsidiaries. The options were valued based on the
Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of $168,720 (2018: $182,608) for such options.
On June 22, 2018, the Company granted a total of 1,500,000 stock options to an employee. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. One quarter of the options will vest
immediately. The remaining 1,125,000 options will vest in equal amounts on each of June 22, 2019, June 22, 2020 and June 22, 2021 provided the employee remains an employee of the Company or its subsidiaries. The options were valued based on the
Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of $46,096 (2018; $102,090) for such options.
On June 22, 2018, the Company granted a total of 200,000 stock options to a consultant. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. One third of the options will vest on each of
June 22, 2019, June 22, 2020 and June 22, 2021. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of $7,758 (2018: $8,432) for such options.
Online Disruptive Technologies, Inc.
Notes to the Condensed Interim Consolidated Financial Statements
June 30, 2019
(Unaudited)
Note 10 – Equity (Continued)
Stock Options (continued)
On June 22, 2018, the Company granted a total of 4,000,000 stock options to a consultant. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. One quarter of the options vest on the date
of grant, and a further quarter will vest on each of June 22, 2019, June 22, 2020 and June 22, 2021. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of
$116,359 (2018: $265,751) for such options.
On June 22, 2018, the Company granted a total of 4,600,000 stock options to a group of employees, consultants and directors. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for seven years. The
options vest immediately on grant date. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of nil (2018: $640,432) for such options.
On July 18, 2018, the Company granted a total of 360,000 stock options to a consultant. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for ten years. 150,000 of the options vest on the date of
grant, and one third of the options will vest at the end of each year of service as at July 18, 2019, 2020 and 2021. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based
compensation of $10,106 (2018: $34,548) for such options.
On September 12, 2018, the Company granted a total of 150,000 stock options to a consultant. The stock options are exercisable at an exercise price of $0.20 per share and may be exercised for ten years. 30,000 of the options vest on the date of
grant, and 40,000 of the options will vest at the end of each year of service as at September 12, 2019, 2020 and 2021. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based
compensation of $5,965 (2018: $8,709) for such options.
On September 14, 2018, the Company granted a total of 105,000 stock options to a consultant. The stock options are exercisable at an exercise price of $0.20 per share and expired on April 25, 2023. 15,000 options vested at the end of each 7
months of services. The options were valued based on the Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of $2,901 (2018: $2,072) for such options.
On November 22, 2018, the Company granted a total of 250,000 stock options to a consultant. The stock options vest immediately and are exercisable at an exercise price of $0.20 per share and may be exercised over seven years. The options were
valued based on the Black Scholes model. For the six months ended June 30, 2019, the Company recorded stock based compensation of nil (2018: $212,893) for such options.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 10 Equity (Continued)
Stock Options (continued)
The fair value of each option grant is calculated using the
following assumptions:
|
2019
|
2018
|
Expected life year
|
5-10
|
5-10
|
Interest rate
|
1.53% - 2.86%
|
1.53% - 2.86%
|
Volatility
|
55.54% - 77.08%
|
65.68% - 94.22%
|
Dividend yield
|
--%
|
--%
|
Forfeiture rate
|
--%
|
--%
|
Weighted average fair value of options
granted
|
$0.13
|
$0.13
|
|
|
|
Number of Options
|
|
|
Weighted
|
|
|
Expire date
|
|
|
|
|
|
|
|
Average Exercise
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
|
|
|
Balance, December 31,
2016
|
|
17,345,896
|
|
$
|
0.05
|
|
|
|
|
|
Granted, on May 31, 2017
|
|
875,000
|
|
|
0.20
|
|
|
May 31, 2024
|
|
|
Expired, July 1, 2017
|
|
(75,000
|
)
|
|
0.20
|
|
|
|
|
|
Granted, on July 2, 2017
|
|
150,000
|
|
|
0.20
|
|
|
July 2, 2024
|
|
|
Granted, on July
12th, 2017
|
|
260,000
|
|
|
0.200
|
|
|
July 12, 2027
|
|
|
Exercised, on September 25, 2017
|
|
(150,000
|
)
|
|
0.01
|
|
|
|
|
|
Balance, December 31,
2017
|
|
18,405,896
|
|
$
|
0.04
|
|
|
|
|
|
Granted, on February 13, 2018
|
|
231,250
|
|
|
0.20
|
|
|
February 13, 2023
|
|
|
Exercised, on January
28, 2018
|
|
(16,665
|
)
|
|
0.20
|
|
|
|
|
|
Cancelled, on January 28 2018
|
|
(33,335
|
)
|
|
0.20
|
|
|
|
|
|
Exercised, on March 20,
2018
|
|
(481,179
|
)
|
|
0.001
|
|
|
|
|
|
Granted, on June 22, 2018
|
|
14,400,000
|
|
|
0.20
|
|
|
June 22, 2025
|
|
|
Granted, on July 18,
2018
|
|
360,000
|
|
|
0.20
|
|
|
July 18, 2028
|
|
|
Exercised, on August 14, 2018
|
|
(800,000
|
)
|
|
0.01
|
|
|
|
|
|
Granted, on September
12, 2018
|
|
150,000
|
|
|
0.20
|
|
|
September 12, 2028
|
|
|
Granted, on September 14, 2018
|
|
105,000
|
|
|
0.20
|
|
|
April 25, 2023
|
|
|
Expired, on September
28, 2018
|
|
(25,000
|
)
|
|
0.20
|
|
|
|
|
|
Granted, on November 22, 2018
|
|
250,000
|
|
|
0.20
|
|
|
November 22, 2025
|
|
|
Balance, December 31,
2018
|
|
32,545,967
|
|
$
|
0.13
|
|
|
|
|
|
Exercised on March 04, 2019
|
|
(500,000
|
)
|
|
0.20
|
|
|
|
|
|
Balance, June 30, 2019
|
|
32,045,967
|
|
$
|
0.13
|
|
|
|
|
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 10 Equity (Continued)
Stock Options (continued)
|
|
|
|
|
Outstanding June 30, 2019
|
|
|
Exercisable as at June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
Exercise
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
Life
(years)
|
|
|
Options
|
|
|
Price
|
|
|
Life
(years)
|
|
|
$
|
0.01
|
|
|
9,750,000
|
|
$
|
0.01
|
|
|
3.18
|
|
|
9,750,000
|
|
$
|
0.01
|
|
|
3.18
|
|
|
|
0.01
|
|
|
1,924,717
|
|
|
0.01
|
|
|
1.37
|
|
|
1,924,717
|
|
|
0.01
|
|
|
1.37
|
|
|
|
0.20
|
|
|
150,000
|
|
|
0.20
|
|
|
0.82
|
|
|
150,000
|
|
|
0.20
|
|
|
0.82
|
|
|
|
0.20
|
|
|
120,000
|
|
|
0.20
|
|
|
2.16
|
|
|
120,000
|
|
|
0.20
|
|
|
2.16
|
|
|
|
0.20
|
|
|
1,610,000
|
|
|
0.20
|
|
|
3.11
|
|
|
1,610,000
|
|
|
0.20
|
|
|
3.11
|
|
|
|
0.20
|
|
|
75,000
|
|
|
0.20
|
|
|
3.18
|
|
|
75,000
|
|
|
0.20
|
|
|
3.18
|
|
|
|
0.20
|
|
|
50,000
|
|
|
0.20
|
|
|
3.40
|
|
|
50,000
|
|
|
0.20
|
|
|
3.40
|
|
|
|
0.20
|
|
|
100,000
|
|
|
0.20
|
|
|
3.44
|
|
|
100,000
|
|
|
0.20
|
|
|
3.44
|
|
|
|
0.20
|
|
|
125,000
|
|
|
0.20
|
|
|
3.42
|
|
|
125,000
|
|
|
0.20
|
|
|
3.42
|
|
|
|
0.20
|
|
|
75,000
|
|
|
0.20
|
|
|
3.69
|
|
|
75,000
|
|
|
0.20
|
|
|
3.69
|
|
|
|
0.20
|
|
|
150,000
|
|
|
0.20
|
|
|
6.85
|
|
|
150,000
|
|
|
0.20
|
|
|
6.85
|
|
|
|
0.20
|
|
|
800,000
|
|
|
0.20
|
|
|
1.94
|
|
|
626,667
|
|
|
0.20
|
|
|
1.94
|
|
|
|
0.20
|
|
|
360,000
|
|
|
0.20
|
|
|
4.34
|
|
|
360,000
|
|
|
0.20
|
|
|
4.34
|
|
|
|
0.20
|
|
|
850,000
|
|
|
0.20
|
|
|
4.92
|
|
|
570,834
|
|
|
0.20
|
|
|
4.92
|
|
|
|
0.20
|
|
|
150,000
|
|
|
0.20
|
|
|
5.01
|
|
|
50,000
|
|
|
0.20
|
|
|
5.01
|
|
|
|
0.20
|
|
|
260,000
|
|
|
0.20
|
|
|
8.04
|
|
|
120,000
|
|
|
0.20
|
|
|
8.04
|
|
|
|
0.20
|
|
|
231,250
|
|
|
0.20
|
|
|
3.63
|
|
|
231,250
|
|
|
0.20
|
|
|
3.63
|
|
|
|
0.20
|
|
|
4,100,000
|
|
|
0.20
|
|
|
5.98
|
|
|
1,366,667
|
|
|
0.20
|
|
|
5.98
|
|
|
|
0.20
|
|
|
1,500,000
|
|
|
0.20
|
|
|
5.99
|
|
|
750,000
|
|
|
0.20
|
|
|
5.99
|
|
|
|
0.20
|
|
|
200,000
|
|
|
0.20
|
|
|
5.99
|
|
|
66,667
|
|
|
0.20
|
|
|
5.99
|
|
|
|
0.20
|
|
|
4,000,000
|
|
|
0.20
|
|
|
5.99
|
|
|
2,000,000
|
|
|
0.20
|
|
|
5.99
|
|
|
|
0.20
|
|
|
4,600,000
|
|
|
0.20
|
|
|
5.99
|
|
|
4,600,000
|
|
|
0.20
|
|
|
5.99
|
|
|
|
0.20
|
|
|
360,000
|
|
|
0.20
|
|
|
9.06
|
|
|
150,000
|
|
|
0.20
|
|
|
9.06
|
|
|
|
0.20
|
|
|
105,000
|
|
|
0.20
|
|
|
3.82
|
|
|
15,000
|
|
|
0.20
|
|
|
3.82
|
|
|
|
0.20
|
|
|
150,000
|
|
|
0.20
|
|
|
9.21
|
|
|
30,000
|
|
|
0.20
|
|
|
9.21
|
|
|
|
0.20
|
|
|
250,000
|
|
|
0.20
|
|
|
6.40
|
|
|
250,000
|
|
|
0.20
|
|
|
6.40
|
|
|
|
|
|
|
32,045,967
|
|
$
|
0.13
|
|
|
4.53
|
|
|
25,316,802
|
|
$
|
0.10
|
|
|
2.82
|
|
Online Disruptive Technologies, Inc.
Notes to the Condensed Interim Consolidated Financial Statements
June 30, 2019
(Unaudited)
Note 10 – Equity (Continued)
Non-Controlling Interests
The Company’s subsidiary, Savicell, granted a third party a warrant certificate to purchase 1,765 common shares of Savicell that initially represented 15% of the underlying common equity of Savicell. In the course of its initial equity
issuances up to October 30, 2012 (the “Initial Closing”), Savicell issued a total of 592 ordinary shares at $1,698.97 per share to the non-related third party representing approximately 4.79% of the fully diluted common equity of
Savicell for aggregate proceeds of $1,005,795. The Savicell investors are entitled to convert their Savicell shares into common shares of ODT (1:10,625) at a price equal to 80% of the per share pricing of the first completed ODT financing of
over $500,000 conducted after July 1, 2012 (the “Financing Price”) provided that for purposes of such conversion, the deemed maximum Financing Price shall be the per share price of the common shares of ODT based on (a) an aggregate
ODT equity valuation of $30,000,000; and (b) the number of common shares of ODT outstanding at the time of the financing. Savicell continued its equity issuances following the Initial Closing.
As at December 31, 2012, Savicell had issued a total of 684 shares at $1,698.97 per share representing approximately 5.11% of the fully diluted common equity of Savicell for aggregate proceeds of $1,162,192.
During the year ended December 31, 2013, Savicell issued a total of 760 shares at $1,700 per share representing approximately 5.68% of the fully diluted common equity of Savicell for aggregate proceeds of $1,292,000.
During the year ended December 31, 2014, Savicell issued a total of 183 shares at $1,699 per share representing approximately 1.37% of the fully diluted common equity of Savicell for aggregate proceeds of $310,977.
During the year ended December 31, 2015, Savicell issued a total of 417 shares at $1,700 per share to third parties for aggregate proceeds of $709,087. As at December 31, 2015, Savicell also issued 516 shares at $1,700 to ODT, which of
$532,084 has not been received as at December 31, 2015. In addition, Savicell investors exchanged 588 Savicell shares for 6,248,672 of ODT common shares with ODT receiving the Savicell shares so exchanged.
During the year ended December 31, 2016, Savicell investors exchanged 1,132 Savicell shares for 12,026,654 of ODT common shares with ODT receiving the Savicell shares so exchanged. As at December 31, 2016, Savicell received $1,786,656 from ODT
and issued 1,051 shares to ODT in return.
During the year ended December 31, 2017, Savicell investors exchanged 27 Savicell shares for 288,830 of ODT common shares with ODT receiving the Savicell shares so exchanged. Savicell issued 387 shares to settle inter-company debts with ODT.
During the year ended December 31, 2018, Savicell issued 1,467 shares to settle inter-company debts with ODT. The Company, the Warrant holder and the Savicell investors held underlying interests in the equity of Savicell of 87.81%, 10.43% and 1.76%,
respectively (December 31, 2017 - 86.65%, 11.42% and 1.93%).
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 10 Equity (Continued)
Non-Controlling Interests (continued)
During the six months ended June 30, 2019, Savicell investors
exchanged 89 Savicell shares for 756,480 of ODT Common Shares with ODT receiving
the Savicell shares so exchanged.
As at June 30, 2019, The Company, the Warrant holder and the
Savicell investors held underlying interests in the equity of Savicell of
87.87%, 10.37% and 1.76%, respectively (December 31, 2018 87.81%, 10.43% and
1.76%).
Savicells Common Shares
|
|
|
Number
|
|
|
Amount in NIS
|
|
|
|
|
of
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017
|
|
15,450
|
|
|
6,264,821
|
|
|
Shares issued to
settle inter-company debts
|
|
1,467
|
|
|
2,494,219
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
16,917
|
|
|
8,759,040
|
|
|
Shares issued to settle inter-company debts
|
|
89
|
|
|
151,296
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
|
17,006
|
|
|
8,910,336
|
|
As the exercise price inherent in the warrant certificate to
purchase 1,765 common shares of Savicell is at nominal value, the warrant
certificate is valued at the price of the subsequent equity issuance by Savicell
($1,698.97 per share) and the related common shares are considered to be issued
and outstanding.
Note 11 Loss per Share
We present both basic and diluted income per share on the face
of our consolidated statements of operations. Basic and diluted income per share
are calculated as follows:
|
|
June 30, 2019
|
|
|
December 31,
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,111,635
|
)
|
$
|
(3,587,653
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
125,855,343
|
|
|
120,542,611
|
|
Net loss per common share:
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.02
|
)
|
$
|
(0.03
|
)
|
Certain stock options whose terms and conditions are described
in Note 10, Stock Options could potentially dilute basic and dilute loss per
share in the future, but were not included in the computation of diluted loss
per share because to do so would have been anti-dilutive. Those anti-dilutive
options are as follows.
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 11 Loss per Share (continued)
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Anti-dilutive options
|
|
2,218,196
|
|
|
22,570,970
|
|
Note 12 Commitments and Guarantees
The Company was not a guarantor to any parties as at June 30,
2019.
1.
|
On September 11, 2012, ODT signed an employment agreement
with Giora Davidovits, its chief executive officer and President, which
agreement entailed an effective date of September 1, 2012. In return for
acting as its chief executive officer, the Company will provide Mr.
Davidovits an annual salary of $250,000 together with other benefits and
the potential for additional bonuses as declared from time to time by the
Companys board of directors. The agreement is effective until August 31,
2022 unless terminated early in accordance with the termination provisions
contained within the employment agreement and subject to agreed severance
amounts. In connection with the execution of the employment agreement, the
Company issued to Giora Davidovits options to purchase 3,750,000 common
shares at a price per share of $0.01. The options are exercisable for 10
years. Mr. Davidovits is eligible for subsequent option grants at the
discretion of the board of directors.
|
|
|
2.
|
On October 30, 2012, ODT and Savicell signed an
employment agreement with Eyal Davidovits, its chief operating officer,
which agreement entailed an effective date of September 1, 2012. In return
for acting as its chief operating officer, the Company will provide Mr.
Davidovits an annual salary of $120,180 (NIS 432,000), together with other
fringe benefits including those related to the use of an automobile,
health insurance, contributions to government run retirement programs and
the potential for additional bonuses as declared from time to time by the
Companys board of directors. The agreement is effective until August 31,
2022 unless terminated early in accordance with the termination provisions
contained within the employment agreement and subject to agreed severance
amounts. In connection with the execution of the employment agreement, the
Company issued to Eyal Davidovits options to purchase 2,750,000 common
shares at a price per share of $0.01. The options are exercisable for 10
years. Mr. Davidovits is eligible for subsequent option grants at the
discretion of the board of directors.
|
|
|
3.
|
On July 20, 2015, the Company signed an operating lease
agreement to lease offices for a period ending July 31, 2018 with an
option to renew the lease for an additional period of 2 years. On August
3, 2018, the lease was renewed for an additional two years. The monthly
lease expense is $3,372 (NIS 12,121). On July 1, 2018, the Company signed
an operating lease agreement for additional office space for a period
ending May 31, 2019 with an option to renew the lease for an additional
period of 2 years. The monthly lease expense is $1,959 (NIS 7,032). Future
minimum lease commitment under the operating lease agreement is
approximately $73,863 (NIS 265,168). The Company pledged a bank deposit
which is used as a bank guarantee at an amount of $21,875 (NIS 78,531) to
secure its payments under the lease agreement.
|
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 12 Commitments and Guarantees (continued)
The minimum future payments for the above commitments are as
follows:
|
|
|
Consulting fee and
|
|
|
|
|
|
|
|
|
Year
|
|
Salaries
|
|
|
Office rent
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
277,635
|
|
|
28,157
|
|
|
305,792
|
|
|
2020
|
|
370,180
|
|
|
45,312
|
|
|
415,492
|
|
|
2021
|
|
370,180
|
|
|
11,653
|
|
|
381,833
|
|
|
2022
|
|
246,787
|
|
|
-
|
|
|
246,787
|
|
|
2023
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Total
|
$
|
1,264,782
|
|
$
|
85,122
|
|
$
|
1,349,904
|
|
Note 13 Geographic Information
The Companys head office is located in the United States
(US). The operations of the Company are primarily in two geographic areas: the
US and Israel. A summary of geographical information for the Companys
long-lived assets are as follows:
Period ended
June 30, 2019
|
|
US
|
|
|
Israel
|
|
|
Total
|
|
Long-lived assets
|
$
|
-
|
|
$
|
39,054
|
|
$
|
39,054
|
|
Year ended
December 31, 2018
|
|
US
|
|
|
Israel
|
|
|
Total
|
|
Long-lived assets
|
$
|
-
|
|
$
|
45,274
|
|
$
|
45,274
|
|
Note 14 Subsequent Events
1.
|
On July 30, 2019, the Company entered into a Finder’s Fee Agreement in which the Company shall issue 35,000 finder’s warrants to purchase 35,000 common shares of the Company. These warrants will each be exercisable into one share at US$0.20.
|
|
|
2.
|
In two separate transactions in July, 2019, the Company entered into a Finder’s Fee Agreement pursuant to which the Company issued a total of 120,000 finder’s warrants to purchase 120,000 common shares of the Company. These warrants will each be exercisable into common shares at US$0.20 per share.
|
|
|
3.
|
On July 19, 2019, the Company granted a total of 125,000 stock options to a consultant. The stock options are exercisable at an exercise price of $0.20 per share until July 19, 2026. 65,000 options vested immediately upon issuance and the balance of 60,000 will vest after 6 completed months of consulting service.
|
|
|
4.
|
On August 1, 2019, the Company granted a total of 525,000 stock options to two employees. The stock options are exercisable at an exercise price of $0.20 per share until August 1, 2026 subject to vesting provisions. One third of the options will vest on each of August 1, 2020, August 1, 2021 and August 1, 2022 provided the employee remains an employee of the Company or its subsidiaries.
|
Online Disruptive Technologies, Inc.
Notes to the
Condensed Interim Consolidated Financial Statements
June 30,
2019
(Unaudited)
Note 14 Subsequent Events (continued)
5.
|
On September 19, 2019, the Company granted a total of 600,000 stock options to two consultants. The stock options are exercisable at an exercise price of $0.20 per share until September 19, 2024. One-third of the options vest immediately upon issuance and a further one-third vests on each of the first two anniversary dates of the grant.
|
|
|
6.
|
On October 25th, the Company raised capital investments totalling $1,012,000 which represent a total share issuance of 5,060,0000 units at an issuance price of $0.20 each. Each unit comprises one common share and one non-transferable common stock share purchase warrant. Each warrant entitles the holder to acquire one additional share of common stock at a price of $0.20 per share for two years.
|
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This quarterly report on Form 10-Q contains forward-looking
statements. Forward-looking statements are projections in respect of future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as may, should, expects,
plans, anticipates, believes, estimates, predicts, potential or
continue or the negative of these terms or other comparable terminology.
Forward-looking statements made in this Form 10-Q include statements about:
|
|
our anticipation that future
broad clinical trial studies encompassing larger populations of cancer
patients with varying cancers should reveal the full potential of the
existing developed strategy;
|
|
|
our beliefs regarding the future
of our competitors;
|
|
|
our belief that there is a large
unmet need in cancer diagnostics exists in early diagnosis; accurate
diagnosis;
|
|
|
our belief that there is a need
in this segment for an easier blood-based test that will increase
compliance and minimize discomfort;
|
|
|
our expectation that the demand
for our products will eventually increase;
|
|
|
our expectation that we will be
able to raise capital when we need it; and
|
|
|
our expectation that there is a
new market for screening tests.
|
These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors and the risks set out below, any of which may
cause our or our industrys actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks include, by way of example and not in
limitation:
|
|
general economic and business
conditions;
|
|
|
our ability to identify
attractive products and negotiate their acquisition or licensing;
|
|
|
volatility in prices for our
products;
|
|
|
risks inherent in the
pharmaceutical industry;
|
|
|
competition for, among other
things, capital, pharmaceutical products and skilled personnel; and
|
|
|
other factors discussed under the
section entitled Risk Factors.
|
While these forward-looking statements and any assumptions upon
which they are based are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein. Except as required by applicable
law, including the securities laws of the United States, we do not intend to
update any of the forward-looking statements to conform these statements to
actual results.
As used in this interim report on Form 10-Q and unless
otherwise indicated, the terms we, us and our refer to Online Disruptive
Technologies Inc. and our subsidiary, Savicell Diagnostic Ltd., an Israeli
corporation (the Subsidiary or Savicell). Unless otherwise
specified, all dollar amounts are expressed in United States dollars.
3
Corporate Overview
We were incorporated in the State of Nevada on November 16,
2009 under the name Online Disruptive Technologies, Inc. with authorized
capital of 500,000,000 shares of common stock with a par value of $0.001 per
share and 20,000,000 shares of preferred stock with a par value of $0.001 per
share. On March 24, 2010, we entered into a share purchase agreement with
Benjamin Cherniak, whereby we acquired all of the issued and outstanding shares
of RelationshipScoreboard.com Entertainment, Inc. in consideration for the
issuance of 16,000,000 of our common shares. RSE was incorporated in the State
of Nevada on November 16, 2009. There were no related party interests in the
acquisition of RelationshipScoreboard.com Entertainment, Inc.
Pursuant to a license agreement and research funding agreement
(the License Agreement) dated July 24, 2012 and entered into on July
25, 2012 executed by our Subsidiary and Ramot at Tel Aviv University Ltd.
(Ramot), a private company incorporated in the State of Israel and
having a place of business at 5 Shenker Street, Herzliah, Israel, our Subsidiary
was granted a license to certain patented technology relating to the early
detection of diseases by measuring metabolic activity in the immune system (the
Technology). The products (the Products) means any instrument,
device, process, method, product, component, or system that contain or is based
on, in whole or in part, the Technology.
As consideration for the worldwide exclusive license of the
Products, our Subsidiary will pay, issue and fund the following to Ramot:
|
(a)
|
a royalty (the Royalty) on worldwide net sales
of the Products by our company and its affiliates or
sublicensee;
|
|
|
|
|
(b)
|
a minimum annual royalty, credited against the
Royalty;
|
|
|
|
|
(c)
|
percentages of all payments received in connection with a
sublicense;
|
|
|
|
|
(d)
|
issue warrants to purchase, for nominal consideration,
the number of common shares of the Subsidiary such that Ramot holds a
minority interest in the Subsidiary; and
|
|
|
|
|
(e)
|
fund research expenditures for the research of the
Technology.
|
After the entry into of the License Agreement, we are focused
on the development of Savicell.
Our Current Business
Savicell
Savicell is a Liquid ImmunoBiopsyTM company that
targets early, non-invasive (blood test) detection of multiple diseases with a
patented immunometabolism platform. In addition, it may be used to track/predict
treatment effectiveness, including immunotherapy. This exciting field of
immunometabolism is emerging in pharmaceutical development, given that a
normal metabolic state of the immune system is linked to its ability to combat
infectious disease and cancer. There are growing publications linking the
spectrum of immune system metabolic states as a basis for categorizing human
disease. Savicell is at the forefront of developing diagnostics in this new
space. This is an important differentiator in the multi-billion liquid biopsy
market as it gives Savicell a very strong capability for early stage detection
where other liquid biopsy technologies have difficulties.
Initially, Savicell is focused on the multibillion-dollar
cancer diagnosis market. Savicell deploys Well-Shield technology, a Liquid
ImmunoBiopsy diagnostic platform. In contrast to existing technologies that
evaluate secretions of cancer cells, Well-Shields ImmunoBiopsy platform
receives data directly from the immune system. Importantly, Well-Shield is
different in that it is a functional test measuring the metabolic activation profile of the immune system as an
indicator of disease status. As an immune system metabolic test, it is
inherently suited for early detection.
4
The technology has now received intellectual property
protection with a patent approved in the United States, China, Japan and Europe.
Furthermore, the patent process is ongoing in several other countries.
Metabolic changes in the immune system modulate cell fate and
function, influencing immune response outcomes. Savicell technology measures the
energy changes of the immune system, which are disease-specific, and identifies
the ailment.
Immune cells are the first to recognize and respond to the
formation of cancer cells. When naïve lymphocytes detect cancer antigen, they
undergo various differentiation processes aimed at initiating the immune
response and bringing it to an optimal level of activity.
One of the most important recent discoveries is that immune
system cells alter their energy generation in order to obtain an effector
function. The metabolic change is called a metabolic shift, and its key purpose
is command and control of the effector function, which produces and secretes
cytokines and chemokines.
The immune system is composed of several groups each with a
number of subgroups. Each group and subgroup has a specific energy generation
profile. Example of groups are naïve cells, effector cells, regulator cells, and
memory cells. The metabolic changes of the immune system cells are direct
indicators of the performance of the immune system.
Immune cells use various processes to generate energy. These
include oxidative phosphorylation, glycolysis, and the breakdown of proteins and
nitrogenous bases. The energy generation produces changes in extracellular
acidification. Lactic acid is generated in glycolysis, carbon dioxide from
oxidative phosphorylation, and ammonia from the breakdown of proteins and
nitrogenous bases. Acidification is measured in "open" versus "closed"
(air-sealed) wells to track the accumulations of soluble versus volatile
metabolic products (lactic acid versus carbon dioxide and ammonia). Savicell's
tests measure these acidification (pH) changes.
Our technology exposes the immune system cells to stimulants
that have been characterized specifically for the method. The process of acid
production described above and the monitoring of the pH level in the cell
environment allows early detection of disease. This is because the metabolic
profiles of immune cells in sick people are different from those of the healthy.
Immune cells of sick people have already been activated
(metabolic shift) in vivo against cancer proteins. As a result, acidification
rates are different compared to the immune cells of healthy individuals that
have not been exposed in vivo to cancer proteins. To measure extracellular
acidification Savicell adds a pH-sensitive impermeable fluorescence probe along
with the cells and stimulants to the microwell plate, which is monitored over
time. Various stimulants are chosen to increase the pH signal and to more
specifically characterize the disease.
Savicell ImmunoBiopsy platform uses three types of
stimulants:
1. General stimulants that activate all immune system cells in
a non-specific mode, and are used as positive controls for testing. Examples are
para-methoxyamphetamine (PMA), lipopolysaccharides (LPS), and concanavalinA
(ConA).
2. Metabolic stimulants used as substrates, whose consumption
increases in activated cells, especially those undergoing increased glycolysis.
Examples are glucose and L-glutamine.
3. Cancer-specific stimulants, including those by cancer type
(e.g. lung). These enhance separation by specific cancer type as well as
distinguishing cancer from healthy and other diseases. Examples are human epidermal growth factor receptor 2 (HER2) and New York
esophageal squamous cell carcinoma 1 (NY-ESO-1).
5
The Savicell vision is to develop and commercialize a line of
patient-friendly blood tests that enable early diagnosis, staging, and
monitoring, thereby saving lives and ensuring appropriate treatment. Cancer is
our initial focus.
The need for early diagnosis
Cancer cases are increasing, with more than 20 million new
cases predicted in 2025, compared to 12 million in 2008. Early detection is very
important because it can improve outcomes. Typically, more treatment options are
available when cancer is diagnosed early, and survival improves. In the United
States, the five-year survival rate improves by at least four times with early
diagnosis and before cancer has spread. Unfortunately, to date, the majority of
cancer patients are diagnosed at later stages.
While surgical biopsies are the norm, they are invasive and
expensive. The need for simpler and more efficient processes for cancer
detection has incentivized some 38 companies in the United States to work on
creating liquid biopsies. In a 2015 report, investment bank Piper Jaffray valued
the potential market for liquid biopsies at $29 billion in the United States
alone.
Using technologies based on circulating tumor cells, exosomes,
and circulating tumor nucleic acids, liquid biopsy companies are making progress
in developing products that have advantages versus current technologies.
However, it appears more likely that these types of liquid biopsy technologies
best support late stage cancers, with technical challenges remaining for
early-stage cancers and early cancer screening.
In contrast, the Well-Shield patented ImmunoBiopsy platform is
unique in the Liquid Biopsy market. And we believe that as an immune system
functional test it is inherently better suited for early detection.
6
Product focus
Savicell conducted clinical work for tests specific to breast
and lung cancers in multiple medical centers. We had encouraging early reviews
of our breast cancer and lung cancer analyses albeit on relatively small sample
sizes. Specifically, we distinguished between breast cancer patients and healthy
donors, and lung cancer patients and healthy donors, with high sensitivity and
specificity of greater than 95% in both cancers. In addition, we were able to
show that there is a metabolic profile difference between other breast disease
donors and breast cancer donors and between COPD (chronic obstructive pulmonary
disease) donors and lung cancer donors.Based on this early potential, Savicell
has decided to focus our resources on lung cancer as our lead product.
Savicell's lung cancer clinical study results were published in
Cancer Immunology and
Immunotherapy that validate the promise of Savicells Liquid
ImmunoBiopsy. The published study uses the Savicell Diagnostics, Ltd. platform
to diagnose lung cancer, producing 91% sensitivity and 80% specificity in a
20-fold cross-validation. Diagnosis of Stage 1 lung cancer is as accurate as
later stages.
Novel non-invasive early detection of lung cancer using liquid
immunobiopsy metabolic activity profiles Adir, Y., Tirman, S., Abramovitch, S.
et al. Cancer Immunol Immunother (2018). https://doi.org/10.1007/s00262
-018-2173-5 https://link.springer.com/article/10.1007%2Fs00262 -018-2173-5
Abstract
Lung cancer is the leading cause of cancer death worldwide.
Survival is largely dependent on the stage of diagnosis: the localized disease
has a 5-year survival greater than 55%, whereas, for spread tumors, this rate is
only 4%. Therefore, the early detection of lung cancer is key for improving
prognosis. In this study, we present an innovative, non-invasive, cancer
detection approach based on measurements of the metabolic activity profiles of
immune system cells. For each Liquid ImmunoBiopsy test, a 384 multi-well plate
is loaded with freshly separated PBMCs, and each well contains 1 of the 16
selected stimulants in several increasing concentrations. The extracellular
acidity is measured in both air-open and hermetically-sealed states, using a
commercial fluorescence plate reader, for approximately 1.5 h. Both states
enable the measurement of real-time accumulation of soluble versus volatile
metabolic products, thereby differentiating between oxidative phosphorylation
and aerobic glycolysis. The metabolic activity profiles are analyzed for cancer
diagnosis by machine-learning tools. We present a diagnostic accuracy study,
using a multivariable prediction model to differentiate between lung cancer and
control blood samples. The model was developed and tested using a cohort of 200
subjects (100 lung cancer and 100 control subjects), yielding 91% sensitivity
and 80% specificity in a 20-fold cross-validation. Our results clearly indicate
that the proposed clinical model is suitable for non-invasive early lung cancer
diagnosis, and is indifferent to lung cancer stage and histological type.
7
8
9
Savicell had a poster presentation on clinical results focused
on early stage lung cancer at the European Respiratory Society International
Congress in September 2018. Specifically, 328 subjects of which are 82 are early
stages and 246 are healthy controls. 77% of the cancer patients were Stage1 and
33% were Stage 2. Test results were 92% sensitivity and 76% specificity using
stratified 10-fold cross-validation. Negative predictive value was 0.97 and area
under the ROC curve was 0.93.
Lung cancer
American Cancer Society estimates there will be 222,500 new
cases of lung cancer in the USA in 2017, representing 13.6% of all cancer
diagnoses. Worldwide, there were an estimated 1.8 million new cases of lung
cancer in 2012, accounting for 12.9% of all cancers. Lung cancer is the leading
cancer killer in both men and women in the USA and worldwide. (7) (8)
Less than 20% of lung cancers are diagnosed at an early stage,
with a five-year survival rate (completely resected NSCLC stage 1A) that ranges
from 67 to 89% (4). Unfortunately, the majority of lung cancer cases (57%) are
diagnosed at an advanced stage when five-year survival is as low as 4%. This is
because lung cancer symptoms present themselves at later stages of the
disease.
Cigarette smoke remains the main risk factor for lung cancer,
with 85% to 90% of lung cancer cases in the USA occurring in current or former
smokers. There are about 94 million current and former smokers in the USA. While
clinicians can identify those at risk, they lack effective tools to diagnose
lung cancer early.
With improved low-dose computed tomography (LDCT) technology,
it is possible to detect potential malignant nodules in high-risk populations.
Pulmonary nodules are small, focal, radiographic opacities that may be solitary
or multiple. The management goal of patients with pulmonary nodules is to
distinguish between benign and malignant nodules, speeding diagnosis for
malignant nodules while minimizing unnecessary and invasive testing of those
that are benign. Many pulmonary nodules are detected incidentally in computed
tomography (CT) and chest x-rays examination (not related to the indication for
obtaining the CT or x-rays examination) and in scheduled LDCT screening.
10
The largest USA National Screening Trial (NLST) demonstrated
that screening high-risk subjects decreases mortality. The current standard of
care for diagnosing lung cancer in high-risk patients is LDCT scanning. This
large trial of 53,454 current or former heavy smokers, ages 55 to 74,
demonstrated that screening high-risk subjects using LDCT decreases mortality
from lung cancer by 20%. Based on this study, the United States Preventive
Services Task force (USPSTF) guidelines recommend annual
LDCTs for patients at high risk for lung cancer. However, there are major
limitations to CT screening that create the following two important market
needs:
Broader Screening
Because of cost-benefit ratios (including possible radiation
risks), LDCT was approved only for a heavy- use segment of past and current
smokers. Specifically, Americans aged 55 to 80 years old who have a 30 pack-year
smoking history and currently smoke or have quit within the past 15 years. This
represents about 10 million people or about 11% of the 94 million past and
current smokers in the US. There is still a major unmet need for a safer, cost-
effective liquid biopsy test that can help screen for lung cancer in the broader
past and current smoker population.
Indeterminate Nodules
A total of 96.4% of the positive screening results (NLST) in
the low- dose CT group and 94.5% in the radiography group were false positive
results. The estimated number of pulmonary nodules in the USA ranges from 2
million to 4.9 million annually (1)(2)(3). Using an estimate of 3 million annual
pulmonary nodules, and a false positive rate of 96.4% for LDCT and 94% for
x-ray, would generate up to 2.8 million false positive cases a year. In
addition, 25% of all LDCTs are indeterminate, and require additional follow-up
procedures. A full implementation of LDCT screening in the USA will identify 2.5
million indeterminate nodules and is expected to further increase the number of
false positive cases.
After nodule findings, the follow-up procedures to diagnose
lung cancer are expensive, invasive procedures like biopsy. Bronchoscopy can
have significant complication risks, and follow-up imaging adds to radiation
risks. Millions of false positive cases annually could lead to unnecessary
invasive procedures on many smokers or past smokers who do not actually have
lung cancer, driving higher costs, mortality and morbidity.
There is an important need for a safer liquid biopsy test that
can assist in the diagnosis of indeterminate nodules and significantly reduce
the number of false positive results.
Lung cancer strategy
In the longer term, we plan to develop a screening test for
lung cancer. However, our initial goal is to provide an additional tool for
clinicians, designed to assist in the diagnosis of indeterminate nodules
identified by imaging. The Well-Shield test is intended to help a clinician
decide on invasive and/or non-invasive follow- up. It could help reduce the
majority of the false positive results and reduce the number of unnecessary
invasive procedures by more than 200,000 annually in the US (5)(6). As a result,
Well-Shields test could drive $3.6 billion in annual cost savings in the USA
alone.
Sources Quoted
(1) Luba Frank and Leslie E. Quint Chest CT incidentalomas:
thyroid lesions, enlarged mediastinal lymph nodes, and lung nodules Cancer
Imaging. 2012; 12(1): 4148
(2) MacMahon H, Austin JH, Gamsu G, et al. Guidelines for
management of small pulmonary nodules detected on CT scans: a statement from the
Fleischner Society. Radiology. 2005;237:395400. doi:10.1148/radiol. 2372041887.
[PubMed]
11
(3) Michael K. Gould et al. Recent Trends in the Identification
of Incidental Pulmonary Nodules. Am J Respir Crit Care Med Vol 192, Iss 10, pp
12081214, Nov 15, 2015
(4) Apichat Tantraworasin et al. ISRN Surgery Volume 2013,
Article ID 175304, 7 pages
(5) Moving Beyond the National Lung Screening Trial: Discussing
Strategies for Implementation of Lung Cancer Screening Programs Bernando H.L.
Goulard, The Oncologist. 2013 Aug; 18(8): 941946
(6) Assume 10 million patients screened and sensitivity and
specificity of 92% and 75% respectively. Well-Shield may have higher or lower
sensitivity and specificity.
(7) Cancer Facts & Figures 2015.
(8) World Cancer Report 2014.
Results of Operations
Revenues
We have not earned any revenue from operations since our
inception and further losses are anticipated in the development of our business.
We are currently in the development stage of our business and we can provide no
assurances that we will generate revenue in the foreseeable future.
Expenses
For the three and six months ended June 30, 2019 and 2018, we
incurred the following general and administrative expenses:
|
|
Three months
|
|
|
Three
|
|
|
Six months
|
|
|
Six months
|
|
|
|
ended June
|
|
|
months
|
|
|
ended June
|
|
|
ended June
|
|
|
|
30, 2019
|
|
|
ended June
|
|
|
30, 2019
|
|
|
30, 2018
|
|
|
|
|
|
|
30, 2018
|
|
|
|
|
|
|
|
General and Administrative Expenses
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Accounting Fees
|
|
7,500
|
|
|
7,500
|
|
|
15,000
|
|
|
15,000
|
|
Audit & Tax Fees
|
|
30,182
|
|
|
57,882
|
|
|
40,633
|
|
|
72,446
|
|
Bank Fees
|
|
302
|
|
|
229
|
|
|
412
|
|
|
365
|
|
Consulting Fees
|
|
91,816
|
|
|
91,651
|
|
|
183,517
|
|
|
203,803
|
|
Lease Expense
|
|
4,090
|
|
|
-
|
|
|
17,464
|
|
|
-
|
|
Filing and Transfer Agent Fees
|
|
7,077
|
|
|
3,776
|
|
|
8,626
|
|
|
3,866
|
|
Insurance Expense
|
|
2,479
|
|
|
1,297
|
|
|
8,320
|
|
|
14,514
|
|
Marketing Expense
|
|
3,321
|
|
|
-
|
|
|
4,419
|
|
|
-
|
|
Legal Fees
|
|
3,776
|
|
|
6,379
|
|
|
8,740
|
|
|
10,044
|
|
Office and Miscellaneous Expense
|
|
1,452
|
|
|
960
|
|
|
6,144
|
|
|
4,914
|
|
Payroll Expense
|
|
9,020
|
|
|
9,078
|
|
|
17,936
|
|
|
18,460
|
|
Research and Development Expense
|
|
402,507
|
|
|
1,137,940
|
|
|
787,253
|
|
|
1,404,762
|
|
Travel Expenses
|
|
7,821
|
|
|
3,668
|
|
|
10,271
|
|
|
7,335
|
|
|
|
571,343
|
|
|
1,320,360
|
|
|
1,108,735
|
|
|
1,755,509
|
|
Three-Month Period Ended June 30, 2019
Our expenses decreased by approximately 56.7% during the three
months ended June 30, 2019 compared to the same period in 2018. This decrease
resulted primarily from (a) a large decrease in research and development expenses that related primarily to a
decrease in share-based compensation payable to employees and consultants
engaged in the ongoing research and development as well as corporate activities;
(b) a reduction in audit and tax fees recognized in the current fiscal quarter
primarily due to timing differences; and (c) a modest reduction in legal fees
due to a slower pace of equity financings that typically require the services of
legal professionals to implement such transactions. Mitigating these expense
reductions were increases in filing and transfer agent fees, recognized lease
expenses, insurance expense and marketing expenses.
12
Six-Month Period Ended June 30, 2019
Our expenses decreased by approximately 36.8% during the six
months ended June 30, 2019 compared to the same period in 2018. The significant
component of this decrease in expense profile related to reduced stock
compensation expense that is included in the overall research and development
expenses. There were significant grants of stock options to employees and
consultants working the R&D area in June of 2018 that led to a material
expense recognition for that fiscal quarter. The corresponding expense
recognition in the 2019 year to date fiscal period has been more moderate.
Liquidity And Capital Resources
Working Capital
|
June 30, 2019
$
|
December 31,
2018
$
|
Total Current Assets
|
189,323
|
193,038
|
Total Current Liabilities
|
510,019
|
440,716
|
Working Capital (Deficiency)
|
(320,696)
|
(247,678)
|
Our operations consumed more cash in the first half of 2019 as
compared to the corresponding 6 months in 2018 as less reliance was placed on
current payables as a means of financing the ongoing operations. However, we
raised more financing dollars between debt and equity issuances in the first 6
months of 2019 compared to 2018. Overall, we saw a decrease in our working
capital position relative to our most recent year end, December 31, 2018 of
about $100,484.
Given that we are incurring significant monthly cash operating
expenses, there is a need to raise additional financing in the short term as
current cash balances are not sufficient to sustain our operations. Efforts are
ongoing to secure additional convertible debt and equity financing and we are
hopeful to realize such transactions imminently.
Recent Financings
On April 12, 2019, we sold 618,985 shares of common stock at a
price of US$0.20 per share for gross proceeds of US$123,797. We issued the
shares of common stock to one U.S. person in reliance upon Rule 506 of
Regulation D of the Securities Act of 1933, as amended, and to two
non-U.S. persons (as that term is defined in Regulation S of the Securities
Act of 1933, as amended) in an offshore transaction in which we relied on
the registration exemption provided for in Regulation S and/or Section 4(2) of
the
Securities Act of 1933, as amended.
On April 12, 2019, pursuant to the Savicell conversion and
participation rights agreement, one investor of Savicell have elected to
exchange 89 shares of Savicell for common shares of the Company. The conversion
resulted in an issuance of 756,480 common shares at a price per share of $0.20.
13
Cash Flows
|
|
|
Six months ended
|
|
|
Six months ended
|
|
|
|
|
June 30, 2019
|
|
|
June, 2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Net Cash (Used in) Operating Activities
|
|
(706,115
|
)
|
|
(608,485
|
)
|
|
Net Cash Provided by Financing Activities
|
|
714,740
|
|
|
545,145
|
|
|
Net Cash (Used in) Investing Activities
|
|
-
|
|
|
-
|
|
Cash (Used in) Operating Activities
The increase in cash used in operating activities compared to
the same period last year is due primarily to reduced reliance on short term
liabilities to finance current operations.
Cash Provided by Financing Activities
The increase in cash provided by financing activities compared
to the same period last year results primarily from the fact that the aggregate
debt and equity financings realized in the first half of 2019 exceeded that
realized in the first half of 2018.
Cash Used in Investing Activities
No funds were used in purchasing capital assets during the
second quarter of 2019.
Plan of Operation
We are an early-stage company. There exists substantial doubt
that we can continue as an on-going business for the next 12 months unless we
obtain additional capital to pay our expenses. This is because we have not
generated any revenues and no material revenues are anticipated until we further
develop our business. There is no assurance we will reach this point.
Our primary objectives for the next twelve-month period are to
further develop the Technology and to advance the Technology and the related
clinical testing. The pace at which we will advance the development of the
Technology will depend, in part, on the quantum of additional financing that we
are able to raise within the balance of 2019. Once such amount becomes known, we
will be in a position to estimate the overall expenditure profile for the
ensuing 12 months.
If we are not able to obtain the additional financing on a
timely basis, if and when it is needed, we may be forced to cease the operation
of our business.
Going Concern
The financial statements accompanying this report have been
prepared on a going concern basis, which implies that our company will continue
to realize its assets and discharge its liabilities and commitments in the
normal course of business. Our company has not generated revenues since
inception and has never paid any dividends and is unlikely to pay dividends or
generate earnings in the immediate or foreseeable future. The continuation of
our company as a going concern is dependent upon the continued financial support
from our shareholders, the ability of our company to obtain necessary equity
financing to achieve our operating objectives, and the attainment of profitable
operations. As at June 30, 2019, our company has accumulated deficit of
$16,265,714 since inception. We do not have sufficient working capital to enable
us to carry out our stated plan of operation for the next 12 months.
Due to the uncertainty of our ability to meet our current
operating expenses and the capital expenses noted in their report on the
financial statements for the year ended December 31, 2018, our independent auditors included an explanatory paragraph regarding concerns
about our ability to continue as a going concern. Our financial statements
contain additional note disclosures describing the circumstances that lead to
this disclosure by our independent auditors.
14
The continuation of our business is dependent upon us raising
additional financial support. The issuance of additional equity securities by us
could result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
Future Financings
We will require additional financing to fund our planned
operations, including further development, clinical testing, regulatory
requirements, and commercializing our existing assets. We currently do not have
committed sources of additional financing and may not be able to obtain
additional financing, particularly, if the volatile conditions in the stock and
financial markets, and more particularly, the market for early development stage
pharmaceutical company stocks persist.
There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to
delay or scale down some or all of our development activities or perhaps even
cease the operation of our business.
Since inception we have funded our operations primarily through
equity and debt financings and we expect that we will continue to fund our
operations through the equity and debt financing. If we raise additional
financing by issuing equity securities, our existing stockholders ownership
will be diluted. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
There is no assurance that we will be able to maintain
operations at a level sufficient for an investor to obtain a return on his, her,
or its investment in our common stock. Further, we may continue to be
unprofitable.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.