Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Jul. 31, 2015 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2015 | |
Entity Registrant Name | Integrity Applications, Inc. | |
Entity Central Index Key | 1,506,983 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,512,867 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash and cash equivalents | $ 3,516,073 | $ 5,827,560 |
Accounts receivable, net | 26,591 | 23,250 |
Inventories | 138,039 | 83,653 |
Other current assets | 135,127 | 113,842 |
Total current assets | 3,815,830 | 6,048,305 |
Property and Equipment, Net | 127,040 | 122,491 |
Funds in Respect of Employee Rights Upon Retirement | 207,827 | 177,470 |
Total assets | 4,150,697 | 6,348,266 |
Current Liabilities | ||
Accounts payable | 255,182 | 104,711 |
Other current liabilities | $ 538,210 | 440,764 |
Long-term loans from Stockholders, current portion | 454,532 | |
Total current liabilities | $ 793,392 | 1,000,007 |
Long-Term Liabilities | ||
Long-term loans from Stockholders | 166,640 | 163,459 |
Liability for employee rights upon retirement | 217,409 | 210,700 |
Warrants with down-round protection | 392,874 | 2,057,618 |
Total long-term liabilities | 776,923 | 2,431,777 |
Total liabilities | $ 1,570,315 | $ 3,431,784 |
Commitments and Contingent Liabilities | ||
Temporary Equity | ||
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock"): 10,000,000 shares of Preferred Stock authorized as of June 30, 2015 and December 31, 2014 | $ 7,121,100 | $ 7,748,685 |
Stockholders' Deficit | ||
Common Stock of $ 0.001 par value ("Common Stock"): 40,000,000 shares authorized as of June 30, 2015 and December 31, 2014; 5,512,867 and 5,323,058 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively | 5,513 | 5,324 |
Additional paid in capital | 21,852,610 | 18,182,866 |
Accumulated other comprehensive income | 122,390 | 66,670 |
Accumulated deficit | (26,521,231) | (23,087,063) |
Total stockholders' deficit | (4,540,718) | (4,832,203) |
Total liabilities, temporary equity and stockholders' deficit | 4,150,697 | 6,348,266 |
Series A Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock"): 10,000,000 shares of Preferred Stock authorized as of June 30, 2015 and December 31, 2014 | 259,383 | 4,356,657 |
Series B Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock"): 10,000,000 shares of Preferred Stock authorized as of June 30, 2015 and December 31, 2014 | $ 6,861,717 | $ 3,392,028 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
Temporary Equity | ||
Common Stock, par value per share | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 40,000,000 | 40,000,000 |
Common Stock, shares issued | 5,512,867 | 5,323,058 |
Common Stock, shares outstanding | 5,512,867 | 5,323,058 |
Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock, par value per share | $ 0.001 | $ 0.001 |
Convertible Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Series A Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock, shares issued | 441 | 7,407 |
Convertible Preferred Stock, shares outstanding | 441 | 7,407 |
Series B Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock, shares issued | 15,366 | 8,500 |
Convertible Preferred Stock, shares outstanding | 15,366 | 8,500 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | ||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) [Abstract] | |||||
Revenues | $ 67,342 | $ 143,167 | |||
Research and development expenses | 557,980 | $ 454,789 | 1,036,305 | $ 905,873 | |
Selling, marketing and general and administrative expenses | 605,565 | 427,537 | 1,083,762 | 863,639 | |
Total operating expenses | 1,163,545 | 882,326 | 2,120,067 | 1,769,512 | |
Operating loss | 1,096,203 | 882,326 | 1,976,900 | 1,769,512 | |
Financing (income) expenses, net | 570,603 | (6,144,254) | 1,224,437 | (6,294,521) | |
Income (loss) for the period | (1,666,806) | 5,261,928 | (3,201,337) | 4,525,009 | |
Other comprehensive income (loss): | |||||
Foreign currency translation adjustment | 97,383 | (16,905) | 55,720 | (16,033) | |
Comprehensive income (loss) for the period | $ (1,569,423) | $ 5,245,023 | $ (3,145,617) | $ 4,508,976 | |
Income (loss) per share (Basic) | $ (0.33) | $ 0.79 | $ (0.64) | $ 0.66 | |
Income (loss) per share (Diluted) | $ (0.33) | $ 0.78 | $ (0.64) | $ 0.65 | |
Common shares used in computing Basic income (loss) per share | 5,441,253 | 5,304,072 | 5,382,682 | 5,303,529 | |
Common shares used in computing Diluted income (loss) per share | [1] | 5,441,253 | 5,336,019 | 5,382,682 | 5,361,570 |
[1] | In applying the treasury method, the average market price of Common Stock was based on management's estimate (see Note 2D, above). |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT - 6 months ended Jun. 30, 2015 - USD ($) | Total | Common Stock [Member] | Additional paid in capital [Member] | Accumulated other comprehensive income (loss) [Member] | Accumulated Deficit [Member] |
Balance at Dec. 31, 2014 | $ (4,832,203) | $ 5,324 | $ 18,182,866 | $ 66,670 | $ (23,087,063) |
Balance, shares at Dec. 31, 2014 | 5,323,058 | 5,323,058 | |||
Loss for the period of six months | $ (3,201,337) | $ (3,201,337) | |||
Other comprehensive income | 55,720 | $ 55,720 | |||
Issuance of Series B-1 and Series B-2 Warrants | 3,413,174 | $ 3,413,174 | |||
Conversion of Series A Preferred Stock into Common Stock | $ 58,817 | $ 17 | 58,800 | ||
Conversion of Series A Preferred Stock into Common Stock, shares | 17,242 | ||||
Stock dividend to certain Common Stock holders | $ 92 | (92) | |||
Stock dividend to certain Common Stock holders, shares | 92,136 | ||||
Stock Issued During Period, Value, Stock Dividend | $ 80 | $ 185,715 | |||
Stock dividend on Series B Preferred Stock | $ (185,795) | ||||
Stock dividend on Preferred Stock | 80,431 | ||||
Cash dividend on Series A Preferred Stock | $ (47,036) | $ (47,036) | |||
Stock-based compensation | 12,147 | $ 12,147 | |||
Stock-based compensation, shares | |||||
Balance at Jun. 30, 2015 | $ (4,540,718) | $ 5,513 | $ 21,852,610 | $ 122,390 | $ (26,521,231) |
Balance, shares at Jun. 30, 2015 | 5,512,867 | 5,512,867 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash flows from operating activities: | ||
Income (loss) for the period | $ (3,201,337) | $ 4,525,009 |
Adjustments to reconcile income (loss) for the period to net cash used in operating activities: | ||
Depreciation | 18,359 | 16,610 |
Stock-based compensation | 12,147 | 19,854 |
Change in the fair value of Warrants with down-round protection | (91,309) | (6,293,705) |
Linkage difference on principal of loans from stockholders | (1,872) | $ (1,315) |
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants | 1,270,971 | |
Changes in assets and liabilities: | ||
Increase in accounts receivable | (3,149) | |
Increase in inventory | (51,036) | |
Increase in other current assets | (17,474) | $ (24,756) |
Increase in accounts payable | 145,388 | 118,346 |
Increase in other current liabilities | 83,030 | 83,862 |
Net cash used in operating activities | (1,836,282) | $ (1,556,095) |
Cash flows from investing activities: | ||
Increase in funds in respect of employee rights upon retirement | (24,279) | |
Purchase of property and equipment | (18,892) | $ (47,919) |
Net cash used in investment activities | (43,171) | (47,919) |
Cash flows from financing activities | ||
Cash dividend on Series A Preferred Stock | (47,036) | $ (185,263) |
Repayment of loan from stockholders | (439,939) | |
Net cash used in financing activities | (486,975) | $ (185,263) |
Effect of exchange rate changes on cash and cash equivalents | 54,941 | (6,898) |
Decrease in cash and cash equivalents | (2,311,487) | (1,796,175) |
Cash and cash equivalents at beginning of the period | 5,827,560 | 2,385,911 |
Cash and cash equivalents at end of the period | $ 3,516,073 | $ 589,736 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - 6 months ended Jun. 30, 2015 - USD ($) | Total |
Series A Preferred Stock [Member] | |
Conversion of Stock [Line Items] | |
Number of units converted | 100 |
Series B Preferred Stock [Member] | |
Conversion of Stock [Line Items] | |
Stock dividend | $ 185,795 |
Conversion of Preferred Stock into Common Stock [Member] | |
Conversion of Stock [Line Items] | |
Stock issued upon conversion | 17,242 |
Amount of stock converted | $ 58,817 |
Exchange One [Member] | |
Conversion of Stock [Line Items] | |
Number of units converted | 1,427,432 |
Non-cash charge included in finance expenses | $ 1,270,971 |
Exchange One [Member] | Series B-1 Warrant [Member] | |
Conversion of Stock [Line Items] | |
Stock issued upon conversion | 1,189,503 |
Amount allocated | $ 1,816,759 |
Exchange One [Member] | Series B-2 Warrant [Member] | |
Conversion of Stock [Line Items] | |
Stock issued upon conversion | 1,189,503 |
Amount allocated | $ 1,596,415 |
Exchange One [Member] | Series A Warrant [Member] | |
Conversion of Stock [Line Items] | |
Amount of stock converted | $ 1,573,435 |
Exchange One [Member] | Series A Preferred Stock [Member] | |
Conversion of Stock [Line Items] | |
Number of units converted | 6,866 |
Amount of stock converted | $ 4,038,457 |
Exchange One [Member] | Series B Preferred Stock [Member] | |
Conversion of Stock [Line Items] | |
Stock issued upon conversion | 6,866 |
Amount allocated | $ 3,469,689 |
GENERAL
GENERAL | 6 Months Ended |
Jun. 30, 2015 | |
GENERAL [Abstract] | |
GENERAL | NOTE 1 GENERAL A. Integrity Applications, Inc. (the "Company") was incorporated on May 18, 2010 under the laws of the State of Delaware. B. Going concern uncertainty Since its incorporation, the Company did not conduct any material operations other than those carried out by Integrity Israel. 26,521,231 4,540,718 and negative operating cash flows. 1.0 5.3 During the period between August and December of 2014, the Company raised funds in an aggregate amount of approximately $ 7.3 5.5 0.001 5.80 five 5.80 five 10.00 Until such time as the Group generates sufficient revenue to fund its operations (if ever), the Group plans to finance its operations through the sale of equity or equity-linked securities and/or debt securities and, to the extent available, short term and long term loans. There can be no assurance that the Group will succeed in obtaining the necessary financing to continue its operations. C. Risk factors The Group has a limited operating history and faces a number of risks, including uncertainties regarding continuation of the development process, demand and market acceptance of the Group's products, the effects of technological changes, competition and the development of products by competitors. D. Use of estimates in the preparation of financial statements The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these condensed consolidated interim financial statements, the most significant estimates and assumptions relate to (i) the fair value estimate of the Warrants with down-round protection, (ii) the fair value measurement of the Series B Units and the estimate of the loss arising from the partial extinguishment of the Series A Units with Series B Units, and (iii) the going concern assumptions |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2015 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of presentation T he accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (fiscal 2014). The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC) related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company's financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature. The results for the six and three month periods ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or for any future period. Principles of Consolidation The consolidated financial statements include the accounts of the Company and the wholly- owned subsidiary. All significant intercompany balances have been eliminated in consolidation. B. Warrants with down-round protection The Company has determined its derivative warrant liability with respect to the Series A Warrants to be a Level 3 fair value measurement and has used the Binomial pricing model to calculate its fair value. Because the warrants contain a price protection feature, the probability that the exercise price of the warrants would decrease as the stock price decreased was incorporated into the valuation calculations. June 30, 2015 Dividend yield (%) - Expected volatility (%) (*) 105.14 Risk free interest rate (%) 1.01 Expected term of options (years) (**) 2.70 Exercise price (US dollars) 5.80 Share price (US dollars) (***) 2.31 Fair value (US dollars) 1.00 (*) Due to the low trading volume of the Company's Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company. ( **) Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110. (***) The Common Stock price, per share, reflects the Company's management's estimation of the fair value per share of Common Stock as of June 30, 2015. In reaching its estimation, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units. C. Recently issued accounting pronouncements 1. Accounting Standard Update 2014-09, Revenue from Contracts with Customers In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. An entity should apply the amendments in this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures. For a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period (the first quarter of fiscal year 2017 for the Company). However, during July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year and to permit limited early adoption. A final accounting standard that will reflect the revised date was not finalized as of the date of issuance of these interim financial statements. The Company is in the process of assessing the impact, if any, of ASU 2014-09 on its consolidated financial statements. 2. Accounting Standards Update 2014-15, Presentation of Financial StatementsGoing Concern In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial StatementsGoing Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). ASU 2014-15 provides guidance on management's responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 also provides guidance related to the required disclosures as a result of management's evaluation. The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is in the process of assessing the impact, if any, of ASU 2014-15 on its consolidated financial statements or related disclosures. 3. Accounting Standard Update 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity In November 2014, the FASB issued Accounting Standard Update 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity ("ASU 2014-16"). The amendments in ASU 2014-16 clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weigh those terms and features. The assessment of the substance of the relevant terms and features should incorporate a consideration of the characteristics of the terms and features themselves; the circumstances under which the hybrid financial instrument was issued or acquired; and the potential outcomes of the hybrid financial instrument, as well as the likelihood of those potential outcomes. The amendments in ASU 2014-16 apply to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share. The amendments in ASU 2014-16 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (fiscal 2016 for the Company). Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The effects of initially adopting the amendments in ASU 2014-16 should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods. The Company is in the process of assessing the impact, if any, of ASU 2014-16 on its consolidated financial statements. |
EVENTS DURING THE REPORTED PERI
EVENTS DURING THE REPORTED PERIOD | 6 Months Ended |
Jun. 30, 2015 | |
EVENTS DURING THE REPORTED PERIOD [Abstract] | |
EVENTS DURING THE REPORTED PERIOD | NOTE 3 EVENTS DURING THE REPORTED PERIOD A. As more fully described in Note 10.D and Note 19 to the Company's annual report on Form 10-K for the year ended December 31, 2014, from June of 2011 Integrity Israel, Avner Gal, David Malka, Zvi Cohen, Ilana Freger and Alexander Reykhman, on the one hand, and Y.H. Dimri Holdings ("Dimri"), on the other hand, which was a shareholder of Integrity Israel prior to the reorganization and merger ( described in Note 1 to the Company's annual report on Form 10-K for the year ended December 31, 2014), were involved in arbitration proceedings resulting from certain claims asserted by Dimri following such reorganization. On March 11, 2015, the arbitrator issued a binding arbitration decision (the Arbitration Decision) which documents the parties' negotiated settlement of such arbitration proceedings. 440,652 1,767,674 439,939 4.018 316,100 81,870 3.861 Annual Report on Form 10-K for the fiscal year ended December 31 . As of June 30, 2015 such amount was fully paid. Following the completion of the abovementioned transfers and payments, the Arbitration Decision released Integrity Israel, the Company and the other defendants in the arbitration from any legal claim by Yigal Dimri, the principal shareholder of Dimri, and any other companies under his control in respect of the subject matter of the arbitration, including the shareholder loan granted under and any claim of anti-dilution rights under the Investment Agreement, and similarly released Mr. Dimri and all companies under his control from any legal claim by Integrity Israel, the Company and the other defendants in the arbitration in respect of the subject matter of the arbitration. B. As more fully described in Note 11 to the Company's annual report on Form 10-K for the year ended December 31, 2014, on March 13, 2013, the Company entered into a Securities Purchase Agreement (Purchase Agreement) with certain accredited investors (the Series A Unit Purchasers) pursuant to which the Company issued to the Series A Unit Purchasers an aggregate of 6,300 During August and December of 2014, the Company issued to certain accredited investors 8,500 As of June 30, 2015, approximately 6,866 Unit A holders have elected pursuant to the most favored nation provision in the Purchase Agreement to amend the terms of their Series A Units to match the terms of the Series B Units. Accordingly, the Company has exchange 6,866 share of Series A Preferred Stock into 6,866 shares of Series B Stock and 1,427,432 1,189,503 Series B-1 Warrants and 1,189,503 . Due to the differences in the contractual terms of each of the financial instruments exchanged management determined that the exchange constitutes an extinguishment of the exiting instruments and an issuance of new financial instruments. As a result of the exchange elections, the Company recorded during the six months period ended June 30, 2015 a non-cash loss on extinguishment of Series A Preferred Stock and Series A Warrants in the amount of $ 1,270,971 resulting from the differences between the fair market value estimate of the new Series B Units less the net book value of the exchanged Series A Preferred Stock and less the fair value of the exchanged Warrants with down-round protection (See Note 2B above). |
INVENTORIES
INVENTORIES | 6 Months Ended |
Jun. 30, 2015 | |
INVENTORIES [Abstract] | |
INVENTORIES | NOTE 4 INVENTORIES US dollars June 30, December 31, 2015 2014 (unaudited) (audited) Raw materials 81,984 55,557 Work in progress 45,596 16,459 Finished products 10,459 11,637 138,039 83,653 |
FINANCING (INCOME) EXPENSES, NE
FINANCING (INCOME) EXPENSES, NET | 6 Months Ended |
Jun. 30, 2015 | |
FINANCING (INCOME) EXPENSES, NET [Abstract] | |
FINANCING (INCOME) EXPENSES, NET | NOTE 5 FINANCING (INCOME) EXPENSES, NET US dollars US Dollars Six month period ended June 30, Three month period ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Israeli CPI linkage difference on principal of loans from stockholders (1,872 ) (1,315 ) 1,808 3,402 Exchange rate differences 38,269 (3,724 ) 90,872 (1,757 ) Change in fair value of Warrants with down round protection (91,309 ) (6,293,705 ) (25,539 ) (6,147,835 ) Interest expenses on credit from banks and other 8,378 4,223 5,788 1,936 Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants 1,270,971 - 497,674 - 1,224,437 (6,294,521 ) 570,603 (6,144,254 ) |
INCOME (LOSS) PER SHARE
INCOME (LOSS) PER SHARE | 6 Months Ended |
Jun. 30, 2015 | |
INCOME (LOSS) PER SHARE [Abstract] | |
INCOME (LOSS) PER SHARE | NOTE 6 Basic income (loss) per share is computed by dividing net income (loss) for the period after consideration of the effect of dividend on preferred stock by the weighted average number of shares outstanding during the period. The income (loss) and the weighted average number of shares used in computing basic and diluted income (loss) per share for the six and three month periods ended June 30, 2015 and 2014 are as follows: US dollars US dollars Six month period ended June 30, Three month period ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Income (loss) for the period (3,201,337 ) 4,525,009 (1,666,806 ) 5,261,928 Cash dividend on Series A Preferred Stock (47,036 ) (185,263 ) (26,522 ) (92,589 ) Stock dividend on Series B Preferred Stock (185,795 ) - (102,558 ) - Income attributable to participating securities (Preferred Stock) - (842,475 ) - (1,003,097 ) Income (loss) for the period attributable to common stockholders (3,434,168 ) 3,497,271 (1,795,886 ) 4,166,242 Number of shares Number of shares Six month period ended June 30, Three month period ended June 30, 2015 2014 2015 2014 Number of shares: Common shares used in computing basic income (loss) per share 5,382,682 5,303,529 5,441,253 5,304,072 Common shares used in computing diluted income (loss) per share (*) 5,382,682 5,361,570 5,441,253 5,336,019 Total weighted average number of common shares related to outstanding convertible Preferred Stock, options and warrants excluded from the calculations of diluted income (loss) per share (**) 9,367,247 3,324,535 9,537,309 3,369,743 (*) In applying the treasury method, the average market price of Common Stock was based on management's estimate (see Note 2D, above). (**) The Company excludes from the calculation of diluted income (loss) per share, shares that will be issued upon the exercise of options and warrants with exercise prices, that are greater than the estimated average market value of the Company's Common Stock and shares issuable upon conversion of Preferred Stock because their effect would be anti-dilutive. Outstanding shares that will be issued upon conversion or exercise, as applicable, of all convertible Preferred Stock, stock options and warrants, have been excluded from the calculation of the diluted net loss per share for all the reported periods for which net loss was reported because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was anti-dilutive. |
SUMMARY OF SIGNIFICANT ACCOUN14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy) | 6 Months Ended |
Jun. 30, 2015 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Basis of presentation | A. Basis of presentation T he accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (fiscal 2014). The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC) related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company's financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature. The results for the six and three month periods ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or for any future period. Principles of Consolidation The consolidated financial statements include the accounts of the Company and the wholly- owned subsidiary. All significant intercompany balances have been eliminated in consolidation. |
Warrants with Down-Round Protection | B. Warrants with down-round protection The Company has determined its derivative warrant liability with respect to the Series A Warrants to be a Level 3 fair value measurement and has used the Binomial pricing model to calculate its fair value. Because the warrants contain a price protection feature, the probability that the exercise price of the warrants would decrease as the stock price decreased was incorporated into the valuation calculations. June 30, 2015 Dividend yield (%) - Expected volatility (%) (*) 105.14 Risk free interest rate (%) 1.01 Expected term of options (years) (**) 2.70 Exercise price (US dollars) 5.80 Share price (US dollars) (***) 2.31 Fair value (US dollars) 1.00 (*) Due to the low trading volume of the Company's Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company. ( **) Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110. (***) The Common Stock price, per share, reflects the Company's management's estimation of the fair value per share of Common Stock as of June 30, 2015. In reaching its estimation, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units. |
Recently issued accounting pronouncements | C. Recently issued accounting pronouncements 1. Accounting Standard Update 2014-09, Revenue from Contracts with Customers In May 2014, the FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. An entity should apply the amendments in this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures. For a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period (the first quarter of fiscal year 2017 for the Company). However, during July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year and to permit limited early adoption. A final accounting standard that will reflect the revised date was not finalized as of the date of issuance of these interim financial statements. The Company is in the process of assessing the impact, if any, of ASU 2014-09 on its consolidated financial statements. 2. Accounting Standards Update 2014-15, Presentation of Financial StatementsGoing Concern In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial StatementsGoing Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). ASU 2014-15 provides guidance on management's responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 also provides guidance related to the required disclosures as a result of management's evaluation. The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is in the process of assessing the impact, if any, of ASU 2014-15 on its consolidated financial statements or related disclosures. 3. Accounting Standard Update 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity In November 2014, the FASB issued Accounting Standard Update 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity ("ASU 2014-16"). The amendments in ASU 2014-16 clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weigh those terms and features. The assessment of the substance of the relevant terms and features should incorporate a consideration of the characteristics of the terms and features themselves; the circumstances under which the hybrid financial instrument was issued or acquired; and the potential outcomes of the hybrid financial instrument, as well as the likelihood of those potential outcomes. The amendments in ASU 2014-16 apply to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share. The amendments in ASU 2014-16 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 (fiscal 2016 for the Company). Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The effects of initially adopting the amendments in ASU 2014-16 should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods. The Company is in the process of assessing the impact, if any, of ASU 2014-16 on its consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Schedule of Fair Value Assumptions Used | June 30, 2015 Dividend yield (%) - Expected volatility (%) (*) 105.14 Risk free interest rate (%) 1.01 Expected term of options (years) (**) 2.70 Exercise price (US dollars) 5.80 Share price (US dollars) (***) 2.31 Fair value (US dollars) 1.00 (*) Due to the low trading volume of the Company's Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company. ( **) Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110. (***) The Common Stock price, per share, reflects the Company's management's estimation of the fair value per share of Common Stock as of June 30, 2015. In reaching its estimation, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
INVENTORIES [Abstract] | |
Schedule of Inventory | US dollars June 30, December 31, 2015 2014 (unaudited) (audited) Raw materials 81,984 55,557 Work in progress 45,596 16,459 Finished products 10,459 11,637 138,039 83,653 |
FINANCING (INCOME) EXPENSES, 17
FINANCING (INCOME) EXPENSES, NET (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
FINANCING (INCOME) EXPENSES, NET [Abstract] | |
Schedule of Financing (Income) Expenses, Net | US dollars US Dollars Six month period ended June 30, Three month period ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Israeli CPI linkage difference on principal of loans from stockholders (1,872 ) (1,315 ) 1,808 3,402 Exchange rate differences 38,269 (3,724 ) 90,872 (1,757 ) Change in fair value of Warrants with down round protection (91,309 ) (6,293,705 ) (25,539 ) (6,147,835 ) Interest expenses on credit from banks and other 8,378 4,223 5,788 1,936 Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants 1,270,971 - 497,674 - 1,224,437 (6,294,521 ) 570,603 (6,144,254 ) |
INCOME (LOSS) PER SHARE (Tables
INCOME (LOSS) PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
INCOME (LOSS) PER SHARE [Abstract] | |
Schedule of Income (Loss) and Weighted Average Number of Shares | US dollars US dollars Six month period ended June 30, Three month period ended June 30, 2015 2014 2015 2014 (unaudited) (unaudited) Income (loss) for the period (3,201,337 ) 4,525,009 (1,666,806 ) 5,261,928 Cash dividend on Series A Preferred Stock (47,036 ) (185,263 ) (26,522 ) (92,589 ) Stock dividend on Series B Preferred Stock (185,795 ) - (102,558 ) - Income attributable to participating securities (Preferred Stock) - (842,475 ) - (1,003,097 ) Income (loss) for the period attributable to common stockholders (3,434,168 ) 3,497,271 (1,795,886 ) 4,166,242 Number of shares Number of shares Six month period ended June 30, Three month period ended June 30, 2015 2014 2015 2014 Number of shares: Common shares used in computing basic income (loss) per share 5,382,682 5,303,529 5,441,253 5,304,072 Common shares used in computing diluted income (loss) per share (*) 5,382,682 5,361,570 5,441,253 5,336,019 Total weighted average number of common shares related to outstanding convertible Preferred Stock, options and warrants excluded from the calculations of diluted income (loss) per share (**) 9,367,247 3,324,535 9,537,309 3,369,743 |
GENERAL (Details)
GENERAL (Details) - USD ($) | 5 Months Ended | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2012 | |
GENERAL [Abstract] | ||||
Accumulated deficit | $ 23,087,063 | $ 26,521,231 | ||
Stockholders' deficit | 4,832,203 | $ 4,540,718 | ||
Proceeds from issuance of Common Stock, net of cash issuance expenses | $ 1,000,000 | |||
Proceeds from convertible preferred stock and warrants | $ 7,300,000 | $ 5,300,000 | ||
Series B-1 Warrant [Member] | ||||
Class of Stock [Line Items] | ||||
Warrant term | 5 years | |||
Warrant exercise price | $ 5.80 | |||
Series B-2 Warrant [Member] | ||||
Class of Stock [Line Items] | ||||
Warrant term | 5 years | |||
Warrant exercise price | $ 10 | |||
Series B Preferred Stock [Member] | ||||
Class of Stock [Line Items] | ||||
Dividend rate | 5.50% | |||
Par value per share | $ 0.001 | |||
Conversion price | $ 5.80 |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Jun. 30, 2015 - $ / shares | Total | |
Common Stock [Member] | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Share price | [1] | $ 2.31 |
Warrant [Member] | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Dividend yield | ||
Expected volatility | [2] | 105.14% |
Risk free interest rate | 1.01% | |
Expected term of options | [3] | 2 years 8 months 12 days |
Exercise price | $ 5.80 | |
Fair value | $ 1 | |
[1] | The Common Stock price, per share, reflects the Company's management's estimation of the fair value per share of Common Stock as of June 30, 2015. In reaching its estimation, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units. | |
[2] | Due to the low trading volume of the Company's Common Stock, the expected volatility was based on the historical volatility of the share price of other public companies that operate in the same industry sector as the Company. | |
[3] | Due to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110. |
EVENTS DURING THE REPORTED PE21
EVENTS DURING THE REPORTED PERIOD (Details) | Mar. 13, 2013shares | Dec. 31, 2014shares | Jun. 30, 2015USD ($)shares | Apr. 30, 2015USD ($)₪ / $ | Apr. 30, 2015ILS (₪)₪ / $ | Mar. 23, 2015USD ($)₪ / $ | Mar. 23, 2015ILS (₪)₪ / $ | Mar. 18, 2015shares |
Temporary Equity [Line Items] | ||||||||
Number of units sold | 6,300 | 8,500 | ||||||
Series A Preferred Stock [Member] | ||||||||
Temporary Equity [Line Items] | ||||||||
Number of units converted | 100 | |||||||
Exchange One [Member] | ||||||||
Temporary Equity [Line Items] | ||||||||
Number of units converted | 1,427,432 | |||||||
Non-cash charge included in finance expenses | $ | $ 1,270,971 | |||||||
Exchange One [Member] | Series A Preferred Stock [Member] | ||||||||
Temporary Equity [Line Items] | ||||||||
Number of units converted | 6,866 | |||||||
Exchange One [Member] | Series B Preferred Stock [Member] | ||||||||
Temporary Equity [Line Items] | ||||||||
Stock issued upon conversion | 6,866 | |||||||
Arbitration Proceedings with Shareholder [Member] | ||||||||
Temporary Equity [Line Items] | ||||||||
Number of shares of the Company's outstanding Common Stock transferred | 440,652 | |||||||
Amount paid as repayment in full of the outstanding principal amount under the Investment Agreement | $ 439,939 | ₪ 1,767,674 | ||||||
Exchange rate | ₪ / $ | 3.861 | 3.861 | 4.018 | 4.018 | ||||
Partial reimbursement of attorney's fees required to pay | $ 81,870 | ₪ 316,100 | ||||||
Series B-1 Warrant [Member] | Exchange One [Member] | ||||||||
Temporary Equity [Line Items] | ||||||||
Stock issued upon conversion | 1,189,503 | |||||||
Series B-2 Warrant [Member] | Exchange One [Member] | ||||||||
Temporary Equity [Line Items] | ||||||||
Stock issued upon conversion | 1,189,503 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
INVENTORIES [Abstract] | ||
Raw materials | $ 81,984 | $ 55,557 |
Work in progress | 45,596 | 16,459 |
Finished products | 10,459 | 11,637 |
Total | $ 138,039 | $ 83,653 |
FINANCING (INCOME) EXPENSES, 23
FINANCING (INCOME) EXPENSES, NET (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
FINANCING (INCOME) EXPENSES, NET [Abstract] | ||||
Israeli CPI linkage difference on principal of loans from stockholders | $ 1,808 | $ 3,402 | $ (1,872) | $ (1,315) |
Exchange rate differences | 90,872 | (1,757) | 38,269 | (3,724) |
Change in fair value of Warrants with down round protection | (25,539) | (6,147,835) | (91,309) | (6,293,705) |
Interest expenses on credit from banks and other | 5,788 | $ 1,936 | 8,378 | $ 4,223 |
Loss on partial extinguishment of Series A Preferred Stock and Series A Warrants | 497,674 | 1,270,971 | ||
Financing expenses, net | $ 570,603 | $ (6,144,254) | $ 1,224,437 | $ (6,294,521) |
INCOME (LOSS) PER SHARE (Detail
INCOME (LOSS) PER SHARE (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | ||
Income (loss) for the period | $ (1,666,806) | $ 5,261,928 | $ (3,201,337) | $ 4,525,009 | |
Income attributable to participating securities (Preferred Stock) | (1,003,097) | (842,475) | |||
Income (loss) for the period attributable to common stockholders | $ (1,795,886) | $ 4,166,242 | $ (3,434,168) | $ 3,497,271 | |
Number of shares: | |||||
Common shares used in computing basic income (loss) per share | 5,441,253 | 5,304,072 | 5,382,682 | 5,303,529 | |
Common shares used in computing diluted income (loss) per share | [1] | 5,441,253 | 5,336,019 | 5,382,682 | 5,361,570 |
Total weighted average number of common shares related to outstanding convertible Preferred Stock, options and warrants excluded from the calculations of diluted income (loss) per share | [2] | 9,537,309 | 3,369,743 | 9,367,247 | 3,324,535 |
Series A Preferred Stock [Member] | |||||
Dividend on Preferred Stock | $ (26,522) | $ (92,589) | $ (47,036) | $ (185,263) | |
Series B Preferred Stock [Member] | |||||
Dividend on Preferred Stock | $ (102,558) | $ (185,795) | |||
[1] | In applying the treasury method, the average market price of Common Stock was based on management's estimate (see Note 2D, above). | ||||
[2] | The Company excludes from the calculation of diluted income (loss) per share, shares that will be issued upon the exercise of options and warrants with exercise prices, that are greater than the estimated average market value of the Company's Common Stock and shares issuable upon conversion of Preferred Stock because their effect would be anti-dilutive. |