| Stockholders' Equity | Note 4. Stockholders’ Equity. Shares of the Company’s common
stock confer upon their holders the right to receive notice to participate and vote in general meetings of shareholders of the
Company, the right to receive dividends, if declared, and the right to receive a distribution of any surplus of assets upon liquidation
of the Company. Shares of the Company’s preferred
stock confer upon their holders the right to receive dividends when paid to holders of common stock of the Company on an as-converted
basis, and the right to receive a distribution of any surplus of assets upon liquidation of the Company before any distribution
or payment shall be made to the holders of any common stock. Changes in Shares of Preferred Stock
During the First Quarter of 2018 On January 4, 2018, the Company, Emerald
Israel, Alpha Capital Ansalt and Chi Squared Inc. (collectively, the “Preferred Shareholders”), entered into an agreement
pursuant to which the Preferred Shareholders agreed to cancel their shares of Series A Preferred Convertible Stock in return for
the receipt of up to $250,000 of proceeds from the liquidation of Emerald Israel, to the extent that such liquidation yields net
positive proceeds (“Excess Net Assets”). As such, as of June 30, 2018, there were no shares of Series A Preferred Convertible
Stock outstanding. Management’s best estimate of the potential value of the Excess Net Assets at the date of the cancellation
of the shares of Series A Preferred Convertible Stock was $150,000 and therefore, the Company recorded a charge to Additional Paid-in
Capital in the Statement of Changes in Stockholders’ Deficit with a corresponding credit to liabilities. Management’s
best estimate of the potential value of the Excess Net Assets as of June 30, 2018, was nil. Accordingly, the Company recorded a
finance income of $150,000 in its Condensed Consolidated Statements of Operations and Comprehensive Loss a result of the reversal
of the relating liability. Issuances of Shares of Common Stock
During the Six Months ended June 30, 2018 Between January 2018 and April 2018,
the Company received the aggregate amount of $1,940,950 from certain “accredited investors” in consideration for the
issuance of 27,697,855 units (the “Units”) at an offering price of $0.07 per Unit, with each Unit consisting of (the
“$0.07 Unit Offering”): (i) one share of the Company’s common stock (the “Shares”); (ii) one common
stock purchase warrant exercisable for a period of twelve months to purchase one additional Share at an exercise price of $0.14per
share (“Class F Warrant”); and (iii) one (1) common stock purchase warrant exercisable for a period of twelve months
to purchase one additional Share at an exercise price of $0.28 per share (“Class G Warrant”). The offer and sale of
the Units, without registration under the Securities Act of 1933, as amended (the “Act”), was made in reliance upon
the exemption provided by Section 4(2) of the Act and/or Regulation S and Regulation D promulgated thereunder. On February 8, 2018, the Company issued
571,429 units to two accredited investors in respect of $80,000 which was received in August 2017 (the “August 2017 Financing”).
Each Unit comprised (i) one share of the Company’s common stock; (ii) one Class A warrant exercisable into one shares of
the Company’s common stock at a price of $0.14 per share within 12 months for the issuance date; and (iii) one Class B warrant
exercisable into one share of the Company’s common stock at a price of $0.14 per share within 24 months for the issuance
date. On March 12, 2018, the Company issued
a total of 3,629,999 restricted shares of its common stock to certain consultants in connection with services rendered during the
first quarter of 2018, which shares were valued at $892,300, based on the closing share price on the day prior to each of the issuances.
The above-mentioned amount was recorded as a charge to the Company’s Statement of Comprehensive Loss, with a corresponding
credit to Additional Paid in Capital in the Company’s Condensed Consolidated Statement of Changes in Stockholders’
Deficit. On March 20, 2018, the Company issued
a total of 62,500 restricted shares of its common stock in consideration for the exercise of a stock option at an exercise price
of $0.01 per share, which options were granted in connection with services rendered in October 2016. The Company recorded the proceeds
on the exercise of the stock option in Additional Paid-in Capital in its Condensed Consolidated Statement of Changes in Stockholders’
Deficit. On April 20, 2018, the Company issued
a total of 700,000 restricted shares of its common stock to certain consultants in connection with services rendered during the
second quarter of 2018, which shares were valued at $112,000, based on the closing share price on the day prior to each of the
issuances. The above-mentioned amount was recorded as a charge to the Company’s Statement of Comprehensive Loss, with a corresponding
credit to Additional Paid in Capital in the Company’s Statement of Changes in Stockholders’ Equity. As described in Note 3. Notes Payable,
the Company issued a total of 8,521,800 shares of its common stock in respect of the conversion of $3,000 of the Notes and $73,000
and $9,218 of the January 2018 Convertible Notes. Warrants As described in Note 3. Notes Payable,
the Company’s 6,334,626 Class A warrants and 5,400,478 Class B warrants were cancelled during the first quarter of 2018,
in connection with the change in terms of the convertible notes. As described above in this Note 4. Stockholders’
Equity, the Company issued 27,697,855 Class F and 27,697,855, Class G warrants in respect of the $0.07 Unit Offering. On January 26, 2018, the Company signed
a consulting agreement with Maz Partners, pursuant to which they are to provide investment and corporate finance advice to the
Company in consideration for 200,000 Class H warrants. Each Class H warrant is exercisable into one share of the Company’s
common stock at an exercise price of $0.14 per share and the warrants expire on January 2020. The period of the agreement is two
years the effective date. The fair value of the Class H Warrants at the issuance date was $39,845 and was charged to General and
administration expenses in the Statement of Comprehensive Loss with a corresponding credit to Additional Paid-in Capital in the
Statement of Changes in Stockholders’ Deficit. As described above in this Note 4. Stockholders’
Equity, on February 8, 2018, the Company issued 571,429 Class B warrants and 571,429 Class B warrants in respect of the August
2017 Financing. The following table summarizes information
of outstanding warrants issued to investors and consultants in exchange for their services as of June 30, 2018:
Warrants Warrant Term Exercise Price Exercisable
Investors – Class A Warrants 571,429 August 2019 $ 0.14 571,429
Investors – Class B Warrants 571,429 August 2019 $ 0.14 571,429
Alimi Ahmed - Class E Warrants 900,000 (1 ) $ 0.0001 900,000
Investors – Class F Warrants 27,692,855 January 2019 -April 2019 $ 0.14 27,697,855
Investors – Class G Warrants 27,692,855 January 2019 -April 2019 $ 0.28 27,697,855
Investors - Class H Warrants 200,000 January 2020 $ 0.14 200,000 (1) During 2015, a total of 2,700,000
Class E Warrants were issued by the Company to Lior Wayn pursuant to the terms of the Share Exchange Agreement and were exercisable
in three equal tranches of 900,000 Shares each (the “Tranches”) at an exercise price of $0.0001 per share of the Company’s
common stock, subject to and within 45 days of the Company achieving the milestones defined in the Share Exchange Agreement. On
December 16, 2016, the Company terminated Lior Wayn’s employment agreements with the Company and Emerald Israel, and removed
him as an executive officer and director. During 2017, Mr. Wayn transferred, sold and assigned his 5,212,878 shares of the Company’s
common stock and 900,000 Class E Warrants that were fully-vested to an entity controlled by Mr. Alimi Ahmed, then a member of the
Company’s Board of Directors. Effective as of December 31, 2016, the remaining 1,800,000 Class E Warrants that had been issued
to Mr. Wayn were canceled. Employee
Stock Options A summary of the Company’s activity
related to issuances of options to the Company’s employees, executives, directors and consultants and related information
for the six months ended June 30, 2018 and the fiscal year ended December 31, 2017 is as follows:
For the six month period ended June 30, 2018
For the year ended December 31, 2017
Amount of options Weighted average exercise price Aggregate intrinsic value Amount of options Weighted average exercise price Aggregate intrinsic value
$ $ $ $
Outstanding at beginning of year 62,500 0.01 4,193,397 0.11
Granted
Exercised (62,500 ) 0.01 - -
Cancelled - - (4,130,397 ) (0.11 )
Outstanding at the end of period - - 62,500 0.01
Vested and expected-to-vest at end of period - - - 62,500 0.01 - The aggregate intrinsic value in the
table above represents the total intrinsic value (the difference between the fair market value of the Company’s shares of
common stock on June 30, 2018 and December 31, 2017, respectively, and the exercise price, multiplied by the number of in-the-money
stock options on those dates) that would have been received by the stock option holders had all stock option holders exercised
their stock options on those dates. The stock options outstanding
as of June 30, 2018, and December 31, 2017, have been separated into exercise prices, as follows:
Exercise price Stock options outstanding as of Weighted average remaining contractual life – years as of Stock options exercisable as of
June 30, 2018 December 31, 2017 June 30, 2018 December 31, 2017 June 30, 2018 December 31, 2017
0.01 - 62,500 - 8.25 - 62,500
0.01 - 62,500 - 8.25 - 62,500 Compensation expense recorded by the
Company in respect of its stock-based employee compensation awards in accordance with ASC 718-10 was nil for each of the three-
and six-month periods ended June 30, 2018 (and for three- and six-month periods ended June 30, 2017, was $58,650 and $117,301,
respectively). |
