On November 15,May 22, 2016, the Registrant had 19,474,46121,278,291 shares of common stock issued and outstanding.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTSBack to Table of Contents

Emerald Medical Applications Corp.
Statements of Operations
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
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		Three months		Three months		Nine months		Nine months
		ended		ended		ended		ended
		September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Revenues	$	-	$	-	$	-	$	-
Expenses:
Research and development expenses		(155,338)		(252,498)		(450,688)		(499,898)
Stock-based compensation		(371,715)		(5,343,088)		(2,766,823)		(5,343,088)
General and administrative expenses		(206,222)		(983,329)		(579,850)		(1,157,720)
Total operating expenses		(733,275)		(6,578,915)		(3,797,361)		(7,000,706)
Loss from operations		(733,275)		(6,578,915)		(3,797,361)		(7,000,706)
Other income (expense):
Change in fair value of derivative		-		20,165		-		20,532
Amortization of debt discount		(160,050)		-		(211,715)		-
Other income (expenses)		186,615		-		215,202		-
Gain/(loss) from foreign currency		31,339		(6,934)		30,299		(16,955)
Loss on settlement of debt		-		(678,027)		-		(678,027)
Financial income (expense)		57,904		(664,796)		33,786		(674,450)
Provision for income taxes		-		-		-		-
Net loss	$	(675,371)	$	(7,234,711)	$	(3,763,575)	$	(7,675,156)
Basic and diluted (net loss per share)	$	(0.03)	$	(0.54)	$	(0.20)	$	(0.81)
Weighted average shares outstanding - basic and diluted		19,795,343		13,413,006		18,659,674		9,451,649
The accompanying notes are an integral part of these financial statements.

 

Emerald Medical Applications Corp.
Statements of Comprehensive Income (Loss)
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
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		Three months		Three months		Nine months		Nine months
		ended		ended		ended		ended
		September 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015
Net loss	$	(675,371)	$	(7,234,711)	$	(3,763,575)	$	(7,675,156)
Foreign currency translation gain (loss)		19,023		(3,297)		23,864		(28,847)
Total comprehensive gain (loss)	$	(656,348)	$	(7,238,008)	$	(3,739,711)	$	(7,704,003)
The accompanying notes are an integral part of these financial statements.

 

Emerald Medical Applications Corp.
Statements of Cash Flows
For the Nine Months Ended September 30, 2016 and 2015
(Unaudited)
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	Nine months			Nine months
	ended			ended
	September 30, 2016			September 30, 2015
Operating Activities:
Net (loss)	$	(3,763,575)		$	(7,675,156)
Depreciation expense		3,392			4,132
Amortization of debt discount		211,715			9,555
Change in fair value of derivative liabilities		-			(367)
Extinguishment of derivative		-			(20,165)
Shares issued for services		2,766,823			617,900
Warrants issued for services		-			5,343,088
Loss on settlement of debt		-			678,027
Decrease (increase) in cash resulting from change in:
Decrease (increase) in other accounts receivable		20,231			(5,094)
Decrease (increase) in accounts payable		(81,012)			131,553
Decrease (increase) in related parties payable		509			11,607
Increase in employees payable		38,021			48,506
Increase in amounts due from related party		-			18,999
Decrease (increase) in accrued expenses		-			-
Decrease (increase) in accrued interest		1,025			5,431
Net cash used in operating activities		(802,867)			(831,984)
Investing Activities:
Cash paid for fixed assets		-			(26,002)
Effect of reverse merger		-			467,380
Net cash provided by investing activities		-			441,378
Financing Activities:
Borrowings on convertible debt		783,049			-
Proceeds from sale of common stock (net of issuance expenses)		-			280,000
Issuance of short-term payable		-			572,071
Net cash provided by financing activities		783,049			852,071
Foreign currency adjustment		(23,864)			(28,847)
Net increase (decrease) in cash		(43,682)			432,618
Cash and cash equivalents - beginning of period		115,449			14,411
Cash and cash equivalents - end of period	$	71,767		$	447,029
Non-cash transactions:
Shares issued for reverse merger	$	-		$	547
Debt settled with stock	$	-		$	91,687
The accompanying notes are an integral part of these financial statements.

Emerald Medical Applications Corp
Notes to Unaudited Interim Financial Statements
September 30, 2016March 31, 2017
(unaudited)
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Note 1. The Company and Significant Accounting Policies.

Organizational Background:

Emerald Medical Applications Corp. ("Corp (the "Registrant"), was incorporated in the Company") (f/k/State of Ohio in 1989 under a predecessor name, Zaxis International Inc. ("Zaxis") was incorporated in Ohio in 1989, it's fiscal year end is December 31st.. On August 25, 1995, The CompanyZaxis merged with a subsidiary of The InFerGene Company, ("InFerGene") and InFerGenea Delaware corporation, which entity changed its name to The CompanyZaxis International Inc. InFerGeneand the Company was reincorporated in Delaware as Zaxis. On December 30, 2014, Zaxis entered into a non-binding Memorandum of Understanding with Emerald Medical Applications Ltd., which was then a private limited liability company incorporated in California in 1984under the laws of the State of Israel ("Emerald").

On March 16, 2015, Zaxis and subsequently changed its domicile in connectionEmerald Ltd executed the Share Exchange Agreement. Pursuant, which closed on July 14, 2015 and was accounted for as a reverse recapitalization. As a result, the historical financial statements of the Registrant were replaced with the merger into historical financial statements of Emerald.

The Company to Delaware in 1985. Operations ceased operations in 2002. In November 2002, the Company and its subsidiaries filed a petition for bankruptcy insubsidiary Emerald, are collectively referred to as the U.S. Bankruptcy Court Northern District of Ohio. On October 13, 2004, the Company emerged from bankruptcy."Company".

On July 14, 2015 the closing of the Share Exchange Agreement was held (the "Closing") and as a result, Emerald Medical Applications Ltd. becameLtd, a wholly-owned subsidiary of the Registrant. Pursuant to the Closing of the Share Exchange Agreement, the Company issued 5,474,545 shares of its common stock, par value $0.0001 (the "Shares" or "Common Stock") to Lior Wayn, Emerald's CEO and the sole holder of Emerald Medical Applications Ltd.'s ordinary Shares, representing 40.58% of the company's 13,489,905 outstanding Shares, in exchange for 100% of Emerald Medical Applications Ltd.'s ordinary Shares.

Subsequently to the Closing Mr. Lior Wayn has been appointedRegistrant effective July 14, 2015, was organized as the Company's CEO, and has been granted considerable influence on the appointment of new directors thereby creating a new management structure for theprivately-owned company replacing the old management. Additionally Mr. Wayn is to receive additional shares in the future contingent on the Company achieving commercial milestone. Thus the new management, headed by Mr. Wayn, is considered to be in control of more than 50% of the company and with the ability to make all management decisions.

Emerald is a company organized under the laws of the State of Israel on February 17, 2010. Emerald is a mobile digital health Startup Companystartup company engaged in the development, sale and service of imaging solutions utilizing its proprietary DermaCompare software that it developed for use in derma imaging and analytics ("DermaCompare"). Emerald believes that its proprietary DermaCompare software represents an advancement in skin cancer screening that should enable physicians to more readily identify and monitor changes in their patients' skin characteristics.

Emerald's DermaCompare solution allows dermatologists and other medical care professionals, using a set of 25 total body photography ("TBP"), to capture sets of skin lesion images with, among other devices, digital cameras, camera-equipped smartphonessmart phones or tablets. These images are then transmitted online and are remotely analyzed by professionals using our DermaCompare software.

Emerald'sOur sales and marketing plan, which has already commenced, is to sell licenses for our DermaCompare imaging software to: NHSs, HMOs, health insurance companies, hospitals and medical clinics through distributers, health care channel partners or directly through independent salespersons and/or web purchase to dermatologists and other physicians (GPs) that we expect to purchase licenses based on the number of potential numbers of patients.

Basis of Presentation and significant Accounting Policies:

The accompanying consolidated financial statements have beeninclude the accounts of the Company or in the first person notations "we," "us" and "our") and its wholly owned subsidiary prepared in conformityaccordance with accounting principles generally accepted in the United States of America and with the instructions to Form 10-Q. The financial statements presented herein have not been audited by an independent registered public accounting firm, but include all material adjustments (consisting of normal recurring adjustments) which contemplate continuationare, in the opinion of management, necessary for a fair statement of the Company as a going concern. The Company hasfinancial condition, results of operations and cash flows for the period.  However, these results are not establishednecessarily indicative of results for any source of revenue to cover its operating costs, and as such, has incurred operating losses since inception. Further, as of September 30, 2016,other interim period or for the cash resources of the Company were insufficient to meet its current business plan, and the Company had negative working capital. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company elected December 31 as itsfull fiscal year end.

Significant Accounting Policies

Use of Estimates

year.  The preparation of financial statements in conformity with generally accepted accounting principles requires managementus to make certain estimates and assumptions thatfor the reporting periods covered by the financial statements.  These estimates and assumptions affect the reported amounts of assets, and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period.expenses.  Actual resultsamounts could differ from thethese estimates.

CashCertain information and Cash Equivalents

Forfootnote disclosures normally included in financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There were no cash equivalents as of September 30, 2016 and December 31, 2015.

Other Receivables

The company treats VAT refunds claimed resulting from excess VAT paid over VAT received as other receivables, amount shown as other receivables as of September 30, 2016 was $ 4,852.

Currency Translation and other Comprehensive Income

Balance sheet items are translated using all current translation method for self-contained foreign operations (where functional currency = foreign currency) whereby assets and liabilities are translated using the exchange rate on the date of the balance sheet. It translates revenues, expenses, and net income using the average exchange rate during the period. The foreign exchange adjustment that results from applying the all-current method appears in other comprehensive income, a separate shareholders' equity account, and does not affect net income each period.

Property and Equipment

New property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

Valuation of Long-Lived Assets

We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

Stock-Based Compensation

Stock-based awards are accounted for using the fair value methodstatements in accordance with ASC 718, Share-Based Payments. Our primary typegenerally accepted accounting principles have been omitted pursuant to the rules of share-based compensation consists of stock options. We use the Black-Scholes option pricing modelSecurities and Exchange Commission ("SEC").  The accompanying consolidated financial statements should be read in valuing options. The inputsconjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the valuation analysis of the options include the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the warrants and the risk free interest rate.

Accounting For Obligations And Instruments Potentially To Be Settled In The Company's Own Stock

We account for obligations and instruments potentially to be settled in the Company's stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company's own stock.

Accounting For Convertible Debt Instruments

We account for convertible debt instruments, which do not meet the definition of a derivative financial instrument per FASB ASC 815, Accounting for Derivative Financial Instruments, in accordance with FASB ASC 470-20, Debt with Conversion and Other Options. This issue addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. Discount on the debt component resulting from allocation of proceeds to the equity component is amortized in the profit and loss statement as finance expense.

Fair Value Measurements

The Company adopted the FASB standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows.

Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company values its derivative instruments related to embedded conversion features and warrants from the issuance of convertible debentures in accordance with the Level 3 guidelines. For the nine-month period ended September 30, 2016 and the twelve-month period ending December 31, 2015, the following table reconciles the beginning and ending balances for financial instruments that are recognized at fair value in these consolidated financial statements. The fair value of embedded conversion features that have floating conversion features and tainted common stock equivalents (warrants and convertible debt) are estimated using a Binomial Lattice model. The key inputs to this valuation model as of December 31, 2015, were: Volatility of 143.9% for the nine-month period ended September 30, 2016 and 132.4% for the twelve-month period ending December 31, 2015, inherent term of instruments equal to the remaining contractual term, quoted closing stock prices on valuation dates, and various settlement scenarios and probability percentages summing to 100%.

Fair Value Measurements at September 30, 2016

Fair Value Measurements at December 31, 2015

Changes in the unobservable input values would likely cause material changes in the fair value of the Company's Level 3 financial instruments. The significant unobservable input used in the fair value measurement is the estimation for probability percentages assigned to future expected settlement possibilities. A significant increase (decrease) in this distribution of percentages would result in a higher (lower) fair value measurement.

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of September 30, 2016 and December 31, 2015:

Fair Value Measurements at September 30, 2016

Fair Value Measurements at December 31, 2015

The fair values of our debts are deemed to approximate book value, and are considered Level 2 inputs as defined by ASC Topic 820-10-35.

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended September 30, 2016 or thefiscal year ended December 31, 2015.2016.

The Company had no other assets or liabilities valued at fair value on a recurring or non-recurring basis as of September 30, 2016 or December 31, 2015.

Earnings per Common Share

We compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing, Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. All per share disclosures retroactively reflect shares outstanding or issuable as though the reverse split had occurred January 1, 2012.

Income Taxes

We have adopted FASB ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset. Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current period and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.

Uncertain Tax Positions

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of FASB ASC 740-10, Accounting for Uncertain Income Tax Positions, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Our federal and state income tax returns are open for fiscal years ending on or after December 31, 2011. We are not under examination by any jurisdiction for any tax year. At September 30, 2016, we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FIN 48.

Recent Accounting Pronouncements

In September, 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805) ("ASU 2015-16"). Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015. The adoption of ASU 2015-016 is not expected to have a material effect on the Company's consolidated financial statements.

In August, 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date ("ASU 2015-14"). The amendment in this ASU defers the effective date of ASU No. 2014-09 for all entities for one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods with that reporting period.

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30) ("ASU 2015-03"), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.

Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of September 30, 2016, the cash resources of the Company were insufficient to meet its current business plan, and the Company had negative working capital. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Note 2. Stockholders' Equity

On January 8, 2015, the shareholders approved a resolution to increase the authorized common shares from 100,000,000 to 490,000,000 shares. All other provisions of the common shares remain unchanged. Also on that date, the Company declared a reverse split of common stock at the ration of 1:4. The stock split was effective January 8, 2015 for holders of record as of that date. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to this split. All per share disclosures retroactively reflect shares outstanding or issuable as though the reverse split had occurred at January 1, 2012.Equity.

Recent Issuances of Common Stock

Between January 15, 2015On July 7, 2016, the Company announced that it was awarded first prize of 500,000 Euros or approximately U$526,000, over 3,500 other competing tech companies in the Publicis Groupe 90 initiative at the inaugural edition of Viva Technology Paris. On February 24, 2017, the Registrant accepted a Reg S Subscription Agreement from Publicis 90 in consideration for the issuance to Publicis 90 of 1,315,563 restricted shares of the Registrant's common stock at a subscription price of $0.40 per share. The issuance was made in reliance upon the exemptions provided in Section 4(2) of the Securities Act of 1933, as amended (the "Act") and Regulation S promulgated by the SEC under the Act.

Warrants

The following table summarizes information of outstanding warrants as of March 15, 2015,31, 2017:

(1) The Class A Warrants were issued in connection with a private placement in reliance upon Regulation S, pursuant to which the CompanyRegistrant sold a total of 2,052,000 units for cash consideration of $780,0005,918,719units at a price of $0.40 per unit (the "Units"), each unitUnit comprised of one share of common stockShare and one Class A warrantWarrant exercisable at $0.80 per share with a term 24 month. The relative fair valuemonths. While all of the stock with embeddedClass A Warrants are exercisable within 60 days, in fact, none of these warrants was $351,433will be exercised for the common stock and $428,567 forforeseeable future, based upon the class A warrants. The warrants were valued using the Black-Scholes model with 153% volatility and discount rates ranging between 0.44% to 0.7%. These units were issued as stock payable and the cash from sale of units was not received for the sale of stock pre-reverse merger.

Between April 1, 2015 and June 29, 2015, the Company sold a total of 1,012,500 units for cash consideration of $405,000 at aexercise price of $0.40 (the "Units"), each unit comprised of one share of common stock and one Class A warrant exercisable at $0.80 per share with a term 24 month.Share.
(2) The relative fair value of the stock with embedded warrants was $158,123 for the common stock and $246,877 for the class A warrants. The warrants were valued using the Black-Scholes model with volatility ranging between163% - 177% and discount rates ranging between 0.54% to 0.71%. These units were issued as stock payable and the cash from sale of units was not received for the sale of stock pre-reverse merger.

Between July 1, 2015 and September 30, 2015, the Company sold a total of 140,000 units for cash consideration of $15,000 at price of $0.107 (the "Units"), each unit comprised of one share of common stock and one Class A warrant exercisable at $0.80 per share with a term 24 month. The relative fair value of the stock with embedded warrants was $4,294 for the common stock and $10,706 for the class A warrants. The warrants were valued using the Black-Scholes model with volatility of 153% and discount rates of 0.61%. These units were issued as stock payable and the cash from sale of units was not received for the sale of stock pre-reverse merger.

Between July 1, 2015 and September 30, 2015, the Company sold a total of 862,500 units for cash consideration of $345,000 at price of $0.40 (the "Units"), each unit comprised of one share of common stock and one Class A warrant exercisable at $0.80 per share with a term 24 month. The relative fair value of the stock with embedded warrants was $118,415 for the common stock and $226,585 for the class A warrants. The warrants were valued using the Black-Scholes model with volatility ranging between 153% - 182% and discount rates ranging between 0.54% to 0.71%. Of these units $65,000 were issued as stock payable and the cash from sale of units was not received for the sale of stock pre-reverse merger and $280,000 cash was received subsequent to Closing of the reverse merger.

On July 16, 2015 and August 6, 2015, the company issue 517,900 shares to one service provider and 100,000 shares to two service providers, respectively, for services valued at a total value of $617,900, arrived at using the stock price on date of grant of $1.00 per Nasdaq.com.

On July 16, 2015, 5 Emerald debt holders in amount of $87,910 converted their debt into 274,719 units at a conversion price of $0.32 per unit, each unit comprised of one share of common stock and one Class A warrant exercisable at $0.80 per share with a term 24 month. The Loss on Settlement of Debt recorded was $678,027.

On July 14, 2015, the Company issued Emerald's CEO and founder, Lior Wayn, 5,474,545 shares as per the share purchase agreement valued at $877,380, valued on the date of grant for the price of common stock.

On July 16, 2015, consultants were issued 2,500,000 Class B Warrants exercisablewere issued to consultants for bona fide services to the Company and are exercise, on a two-year period to acquire one (1) share of Common Stockcashless basis at a price of $0.40 per share; The fair valueShare for a period of these warrants is $2,199,507. The warrants were valued using the Black-Scholes model with volatility of 182% and discount rate of 0.67%.two years.
(3) The Class B warrants are fully vested and were accordingly included in expenses as stock based compensation.

On July 16, 2015 consultantsC Unit Warrants were issued 2,536,247to consultants for bona fide services to the Company, and each Unit is exercisable at a price of $0.40 to purchase one Share of Common Stock and one Class A Warrant which, in turn, is exercisable to purchase one additional Share at a price of $0.80. The Class C Unit Warrants exercisable for a 90 day period, commencing 90expire ninety (90) days after the effective date of this Registration Statement,Statement.
(4) The Class E Warrants were issued by the Registrant to Lior Wayn in connection with the Closing of the Share Exchange Agreement. The Class E Warrants are exercisable to purchase a total of 2,700,000 Shares, in three equal tranches of 900,000 Shares each (the "Tranches") at an exercise price of $0.40$0.0001 per Share, subject to acquire one (1) shareand within 45 days of Commonthe Registrant achieving the milestones defined in the table below (the "Milestones").

Employee Stock Options

A summary of the Company's activity related to options to employees, executives and one (1) Class A Warrant at an exercise price of $0.80. directors and related information is as follows:

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair value of these warrants is $3,143,581. The warrants were valued using the Black-Scholes model with volatility of 182% and discount rate of 0.67%. The Class C warrants are fully vested and were accordingly included in expenses as stock based compensation.

On November 17, 2015, the Company sold 250,000 units for cash consideration of $100,000 at price of $0.40 (the "Units"), each unit comprised of one share of common stock and one Class A warrant exercisable at $0.80 per share with a term 24 month. The relative fairmarket value of the stock with embedded warrants was $41,304 for theCompany's common stock and $58,696 for the class A warrants. The warrants were valued using the Black-Scholes model with volatility ranging between 149% and discount rate of 0.50%. These warrants are fully vestedshares on March 31, 2017 and the fair value and included asexercise price, multiplied by the number of in-the-money stock based compensationoptions on the prior year retained earnings.

Between November 5, 2015 and November 16, 2015, the company issue 268,084 shares to three service providers and for services valued at a total value of $268,084, arrived at usingthose dates) that would have been received by the stock price on date of grant of $1.00 per Nasdaq.com.

On October 1, 2015 the company granted a total of 534,400option holders had all stock option holders exercised their stock options (the "Options") to three company employees. on those dates.

The stock options vest over 5 quarters and are exercisable at prices ranging from $0.01 to $0.40 per Share. The options were valued using the Black-Scholes model with 149% volatility and 0.67% discount rate for a total value of $528,857. Of this amount, $397,547 was expensed as of December 31, 2015 and $42,394outstanding as of March 31, 2016.2017 have been separated into exercise prices, as follows:

(*) Less than $0.01

On January 26, 2016 and March 17, 2016,Compensation expense recorded by the Company issued 125,000 shares to one service providerin respect of its stock-based employee compensation awards in accordance with ASC 718-10 for the three month periods ended March 31, 2017 and 50,000 shares to two service providers, respectively, for services valued at a total value of $251,250, arrived at using the stock price on date of grant of $1.752016, were $58,650 and $0.65, respectively, per Nasdaq.com.$210,490, respectively.

On February 18, 2016, the Company issued 1,195,000 shares to three acting directors, for services valued at a total value of $1,194,403, arrived at using the stock price on date of grant of $1.00 per Nasdaq.com.

On January 26, 2016, consultants that were previously issued 2,500,000 Class B Warrants exercisable for a two-year period to acquire one (1) share of Common Stock at a price of $0.40 per share, exercised the warrants on a cashless basis resulting in 1,928,572 shares issued with no additional related expense booked.

On February 11 and 18, 2016, the Company granted a total of 403,333 stock options (the "Options") to three company employees. The options vest over periods of between 1 and 8 quarters and are exercisable at prices ranging from $0.01 to $0.40 per Share. The options were valued using the Black-Scholes model with 157% volatility and 0.56% discount rate for a total value of $400,914. Of this amount, $329,342 was expensed until Q3 2016 with the remaining balance to be expensed in 2016 and 2017.

On March 24, 2016, a convertible note payable and warrants where was issued to GoldMed Ltd. The warrants and the embedded beneficial conversion feature were valued at $75,000, which resulted in a $75,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On April 11, 2016, a convertible note payable and warrants was issued to Maz Partner. The warrants and the embedded beneficial conversion feature were valued at $80,000, which resulted in a $80,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On May 5, 2016, the Company issued 150,000 shares to one service provider for services valued at a total value of $105,000, arrived at using the stock price on date of grant of $0.7, per Nasdaq.com.

On May 10, 2016, the Company issued 41,667 shares to one service provider for services valued at a total value of $29,584, arrived at using the stock price on date of grant of $0.71, per Nasdaq.com.

On May 18, 2016, the Company issued 150,000 shares to one service provider for services valued at a total value of $102,000, arrived at using the stock price on date of grant of $0.68, per Nasdaq.com.

On June 28, 2016, the Company issued 175,000 shares to three service providers for services valued at a total value of $122,500, arrived at using the stock price on date of grant of $0.7, per Nasdaq.com.

On June 30, 2016, the Company issued 333,333 shares to one service provider for services valued at a total value of $226,666, arrived at using the stock price on date of grant of $0.68, per Nasdaq.com.

On June 6, 2016, a convertible note payable and warrants was issued to Alpha Capital. The warrants and the embedded beneficial conversion feature were valued at $440,000, which resulted in a $400,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On June 30, 2016, a convertible note payable and warrants was issued to Ilan Malka. The warrants and the embedded beneficial conversion feature were valued at $40,000, which resulted in a $40,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On July 7, 2016, a convertible note payable and warrants was issued to Firstfire Global Opportunities Fund LTC. The warrants and the embedded beneficial conversion feature were valued at $100,000, which resulted in a $100,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On July 1, 2016, the Company issued 300,000 shares to one service provider for service valued at a total value of $213,000 arrived at using the stock price on date of grant of $0.71, per Nasdaq.com.

On July 1, 2016, the Company issued 6,767 shares to one service provider for service valued at a total value of $3,587 arrived at using the stock price on date of grant of $0.53, per Nasdaq.com.

On August 4, 2016, the Company issued 31,250 shares to one service provider for service valued at a total value of $15,313, arrived at using the stock price on date of grant of $0.49, per Nasdaq.com.

On September 21, 2016, a convertible note payable was issued to Guy Shallom. The warrants were valued at fair value $47,600.

Note 3. Related Party TransactionsTransactions.

On July 16, 2015 5 Emerald debt holders in amount of $87,910 converted their debt into 274,719 units at a conversion price of $0.32 per unit, each unit comprised of one share of common stock and one Class A warrant exercisable at $0.80 per shareThere were no transactions with a term 24 month. The Loss on Settlement of Debt recorded was $678,027.

On July 14, 2015related parties during the Company issued Emerald's former CEO and founder, Lior Wayn, 5,474,545 shares as per the share purchase agreement valued at $877,380, valued on the date of grant for the price of common stock.

The company's former CEO, Lior Wayn was owed $3,310 and $3,480 payable as ofthree month period ended March 31, 2016 and December2017.

During the three months ended Mach 31, 2015, respectively.

Following Closing of the reverse merger, $490,000 loan from Zaxis International Inc. to Emerald Medical Applications Ltd. was rendered an intercompany loan and as such was written off.

On February 18, 2016, the Company issued 1,195,000 shares to three acting directors, for services valued at a total value of $1,194,403, arrived at using the stock price on date of grant of $1.00 per Nasdaq.com.

Note 4. Employee Payable

For the periods ended September 30, 2016 and December 31, 2015 the Company had $63,633 and $25,612, respectively, in employee payable related to the monthly wages payable to the company's employees.

Note 5. Notes Payable

Convertible Notes Payable

On March 24, 2016, the Company issued a convertible promissory note to GoldMed Ltd. in the amount of $75,000. The Convertible Note is convertible to 187,500 units at $0.40 (the "Units"), each unit comprised of one share of common stock and one Class A warrant exercisable at $0.80 per share with a term 24 months. Since the market price on the date of issuance was higher than the conversion price, a beneficial conversion feature was calculated at $106,339, but only $75,000 was recorded. $37,500 was recorded as amortization expense of for the period ending September 30, 2016, compared to amortization expense of $0 as of December 31, 2015.

On June 20, 2016, a $400,000 convertible note payable due on June 19, 2017, and Class A and Class B warrants exercisable at $0.80 per share with a term of 24 months were issued to Alpha Capital. The note included a beneficial conversion feature which resulted in a $400,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The Company recorded an amortization expense of $100,000 related to this note.

On March 31, 2016, a $80,000 convertible note payable and 200,000 warrants exercisable at $0.80 per share with a term of 24 months was issued to Maz Partner. The note included a beneficial conversion feature which resulted in a $80,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The Company recorded an amortization expense of $40,000 related to this note.

On May 24, 2016, a $40,000 convertible note payable and 100,000 warrants exercisable at $0.80 per share with a term of 24 months was issued to Ilan Malka. The note included a beneficial conversion feature which resulted in a $40,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The Company recorded an amortization expense of $13,333 related to this note.

On July 7, 2016, a $100,000 convertible note payable was issued to Firstfire Global Opportunities Fund LTC. The note included a beneficial conversion feature which resulted in a $100,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The Company recorded an amortization expense of $25,000 related to this note.

On September 21, 2016, the Company issued Class A Warrants to Guy Shallom, which were valued at a fair value of $47,600.

Note 6. Payable - Not Convertible

As of December 31, 2015 the convertible note, that was issued to Axel Springer Plug & Play Accelerator GmbH (see Note 8), is no longer convertible since pursuant to the loan agreement the in the event that prior to December 31,2015 (the "Maturity Date"), the Company shall consummate a financing round led by unaffiliated investors in the amount of at least Euro 200,000, at a Company pre-money valuation on a fully diluted basis of at least Euro 750,000 (a "Qualified Round"), the Holder shall be entitled (but not obligated) to convert the entire loan amount into the most senior class of shares of the Company issued in such Qualified Round, based on a price per share equal to the lower of the price per share reflected by a Company pre-money valuation on a fully diluted basis calculated at the time of conversion equal to Euro 1,500,000; or - price per share which reflects a 20% discount on the lowest price per share issued pursuant to such Qualified Round. If upon the occurrence of such event the note holder elects not to convert upon receiving notice of such event, then the loan becomes non-convertible.

On January 14 and 16, 2015, we issued two promissory notes in the amount of $15,000 each to two different unaffiliated party in consideration for cash transferred to the Company (the "January 2015 Notes"). The January 2015 Notes bears interest at the rate of 1% per annum, are due and payable on January 14 and 16, 2016 and are not convertible to common stock.

One of the notes was repaid in full on March 3, 2015 with interest due waived the by the debtor, and the second note was repaid on April 22, 2015 with interest due waived the by the debtor.

During the second quarter of 2015 an agreement was reached with the holder of $120,979 advance payable note to settle the full amount due for $30,000 and interest due. The settlement with all note holders resulted in $528 loss on debt settlement due to the payment being higher than principal and accrued interest as of that date as well as a charge of $90,979 considered a contribution of capital due to the fact that note holder, IMWT, was a related party.

We concluded that these notes have a stated rate of interest that is different from the rate of interest that is appropriate for this type of debt at the date of the transaction. Accordingly, the company imputed interest at an appropriate rate estimated at 8% as prescribed under FASB ASC 835. The resultant charge of $6,280 for the period ending December 31, 2014 and $4,113 for the period ending March 31, 2016 to interest expense was considered a contribution of capital and was recorded in additional paid in capital.

On November 16, 2014 four individuals loaned amount to company, totaling $87,910 with maturity dates of November 16, 2015 and bearing an interest rate of 8% per annum, these notes were fully converted on July 16, 2015 to Company shares of commons stock and warrants as described in Note 3.

On March 9, 2016, four individuals lent the company a total of $34,547 with maturity dates of November 16, 2016 and bearing an interest rate of 8% per annum. As of September 30, 2016 the loans were fully paid.

Note 7.4. Commitments and ContingenciesContingencies.

The Company received grants to fund research and development grantsprojects from the State of Israel according to guidelines and procedures of the Office of the Chief Scientist of the Ministry of Industry and Trade. According to the agreement, the Company is obligated to pay royalties on the sale of products developed with the participation of the Chief Scientist. The royalty rate is 3.5% of sales and the total royalties will not exceed the amount of the grants.grants received. As of September 30,March 31, 2017 and December 31, 2016, the Company had an outstanding contingent liabilitytotal grants received amounted approximately $222 thousands.

The obligation to pay royalties is contingent upon the successful outcome of the Company's research and development projects and the attainment of sales. The Company has no obligation to pay royalties, if sales are not generated, and if the research and development project fails.

Note 5. Convertible Notes.

Convertible notes in the amount of approximately $186 thousands.$155,000 fell due during March 2017 and the remaining balance falls due during June 2017. The Company is currently in discussions to extend these notes and believe that these discussions will be successful.

Note 8. Derivative Liabilities and Convertible Notes - Axel Springer

On July 8, 2014, the Company issued a convertible promissory note to Axel Springer Plug & Play Accelerator GmbH (the "Holder"), in the amounts of $29,719.6. Income Taxes.

The Convertible noteCompany is convertible atsubject to income taxes under the lessor of a market based discountedIsraeli and a fixed rate derived from a fixed market cap. The Holder has the right following the Date of Issuance, and until any time until the convertible Promissory Note is fully paid, to convert any outstanding and unpaid principal portion of the Convertible Promissory Note, and accrued interest, into fully paid and non-assessable shares of Common Stock. The Holder was not issued warrants with the Convertible Promissory Note.U.S. tax laws:

Corporate tax rates

The following shows the changesCompany is subject to Israeli corporate tax rate of 25% in the derivative liability measured on2016, 24% in 2017 and 23% from 2018. The Company is subject to a recurring basis for the three months ended September 30, 2016 and year ended December 31, 2015.

For the periods ended September 30, 2016 and December 31, 2015 the Company has recognized $0 and $2,013, respectively, in accrued interest expense related to the stated interestblended U.S. tax rate on the notes. Interest expense for the periods ended September 30, 2016 and December 31, 2015, respectively, were $7,759 and $30,604,(federal as well as state corporate tax) of which $0 and $0 is from the amortization of debt discount related to this note the note is no longer considered convertible since the lender elected not to convert, and as such the derivative was written off.35%.

As of December 31, 2015, the company has a $0 derivative liability and a $29,719 convertible note payable, net of discount of $0. As of September 30, 2016, the company has $0 derivative liabilityCompany generated net operating losses in Israel of approximately $ 2,775,621, which may be carried forward and $337,971 of convertible notes payable, net of discount of $475,049.

In accordance to ASC #815, Accounting for Derivative Instruments and Hedging Activities, we evaluated the holder's non-detachable conversion right provision and liquidated damages clause, containedoffset against taxable income in the terms governing the Note to determine whether the features qualify asfuture for an embedded derivative instrument at issuance. Such non-detachable conversion right provision and liquidated damages clause did not need to be accounted for as derivative financial instruments. Additionally, since the conversion price of the two notes represented the fair market value of the Company's common stock at the time of issuance, no beneficial conversion feature exists. We believe that the Company's shares of common stock are and have been very thinly traded during the last 3 years and that the fair value of the stock price was deemed not to be a fair value. Management decided that because the Company's ability to continue as a going concern was in question and that it has no revenue sources that the conversion price was a better measure of fair market value. Based on that decision, no beneficial conversion feature was reflected in the financial statements and the $20,165 extinguishment of debt was reflected in the current period earnings and $0 extinguishment of debt was reflected in the current period earnings.

Note 9. Other Receivablesindefinite period.

As of September 30, 2016 and December 31, 2015, the Company had other receivables of $5,567 and $25,797, respectively, which represent VAT refunds claimed resulting from excess VAT paid over VAT received.

Note 10. Accounts Payable and Accrued Liabilities

As of September 30, 2016 and December 31, 2015, the Company had accounts payable and accrued liabilities of $129,420 and $90,705, respectively.

Note 11. Subsequent Events

As of September 9, 2016 (the "Effective Date") and subject to the acceptance of certain appointments and engagements as set forth below, the Board of Directors of Emerald Medical Applications Corp. (the "Registrant") authorized the following executive appointments, changes in positions and resignations: (i) the appointment of Mr. Lior Wayn, the Registrant's CEO, CFO and a director, as president of the Registrant and of its wholly-owned Israeli subsidiary, Emerald Medical Applications Ltd ("Emerald IL").

In connection with Mr. Wayn's appointment as president of the Registrant and of Emerald IL, Mr. Wayn shall cease serving as CEO and CFO of the Registrant and of Emerald IL, as of the Effective Date, but shall remain as a member of the Board of Directors of both entities.

In connection with Mr. Wayn ceasing to serve as CEO and CFO of the Registrant and of Emerald IL, the Registrant: (i) appointed David Ben Naim, who had been appointed as financial controller of the Registrant and Emerald IL on June 15, 2016, as CFO of both entities; and (ii) appointed Mrs. Adi Zamir as CEO of the Registrant and of Emerald IL.

Professor Benad Goldwasser, who was appointed as a director of the Registrant and of Emerald IL on May 5, 2016, submitted his Letter of Resignation from both boards effective August 31, 2016. Professor Goldwasser had no disagreements with the operations, policies or practices of the Registrant or its subsidiary. In connection with the resignation of Professor Goldwasser, the Board of Directors appointed Mr. Chaim Hurvitz as a director.

Effective September 26, 2016, Emerald Medical Applications Corp. (the "Registrant") determined not to re-engage its independent auditor, M&K CPAS, PLLC ("M&K"). The decision to change accountants was recommended and approved by the Registrant's board of directors, following the appointment by the Registrant of a new chief executive officer and chief financial officer.

Effective September 26, 2016, the Registrant engaged Deloitte Brightman Almagor Zohar, with offices at 1 Azrieli Center, P.O.B. 16593 Tel Aviv, 6701101 Israel ("Deloitte Israel") as the Registrant's independent registered public accounting firm for the fiscal year ending December 31, 2016, effective immediately. Such engagement included the reviewCompany generated net operating losses in the U.S. of approximately $ 14,937,342. Net operating losses in the United States are available through 2035. Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the "change in ownership" provisions of the Registrant's financial statementsInternal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.

The Company is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will not be available for the quarterlytax losses to be utilized in the future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts.

Note 7. Subsequent Events.

There were no subsequent events following the period ending September 30, 2016.

On May 18, 2016, Emerald Medical Applications Corp. (the "Registrant") filed a Form 8-K reporting that on May 12, 2016, it had entered into an Equity Purchase Agreementended March 31,2017 and a Registration Rights Agreement with Kodiak Capital Group, LLC, a limited liability company organized underthroughout the lawsdate of the Statefiling of Delaware with offices located in Newport Beach, CA ("Kodiak"). Under the Equity Purchase Agreement (the "EPA"), the Registrant: (i) agreed to issue and sell to Kodiak and Kodiak agreed to purchase up to $1,000,000 of the Registrant's common stock; (ii) issued Kodiak 150,000 restricted shares as a commitment fee; and (iii) executed a Registration Rights Agreement pursuant to which the Registrant has agreed to file a registration statement to register for resale the underlying the EPA and the 150,000 commitment shares.

On October 10, 2016, Emerald Medical Applications Corp. (the "Registrant") served notice on Kodiak that it was: (i) terminating the EPA pursuant to Section 10.5 of that agreement; and (ii) amending the pending registration statement on Form S-1 that had been filed with the SEC on July 27, 2015 for the purpose of removing the shares underlying the EPA commitment as well as the commitment shares.10-Q.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLANRESULTS OF OPERATIONS Back to Table of Contents

Overview

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Plan of Operations

We are a digital health startup company engaged in the development, sale and service of imaging solutions utilizing our proprietary DermaCompare software that we developed for use in derma imaging and analytics (our “DermaCompare”"DermaCompare" or “Product”"Product"). In our development of the DermaCompare technology, we utilized the knowledge learned from advanced military image processing and data analytics to improve the analysis of medical images for the benefit of patients and the medical community. We believe that our proprietary DermaCompare software represents an advancement in skin cancer screening that should enable physicians to more readily identify and monitor changes in their patients’ skin characteristics.

DermaCompare is Emerald’s first application of its technology, which we believe represents an advance in the early detection of skin cancer. DermaCompare is based on automated image analytics software using advanced algorithms for alignment, anchoring, identifying and detecting changes in the shapes, colors and sizes of skin lesions, which could potentially become Melanoma. We apply our DermaCompare technology in image capture, correction and intelligent data extraction in the market for derma imaging products.

Our DermaCompare solution allows dermatologists and other medical care professionals, using a set of 25 total body photography (“TBP”("TBP"), to capture sets of skin lesion images with, among other devices, digital cameras, camera-equipped smart phones or tablets. These images are then transmitted online and are remotely analyzed by professionals using our DermaCompare software.

Our DermaCompare imaging software has 2 main modules:

Our future plans also contemplate the use of wearable computing and imaging devices such as Google glasses or other comparable devices.

Our sales and marketing plan, which has already commenced, is to sell licenses for our DermaCompare imaging software to: NHSs, HMOs, health insurance companies, hospitals and medical clinics through distributers, health care channel partners or directly through independent salespersons and/or web purchase to dermatologists and other physicians (GPs) that we expect to purchase licenses based on the number of potential numbers of patients.

In furtherance of our business plan, which has resulted in us becoming an operating company, Emerald haswe have entered into a series of agreements with unaffiliated third parties for the distribution of its DermaCompare Technology, as follows:

1. On August 12, 2013, Emerald entered into an exclusive distribution with Derma Italy Sri, organized under the laws of the Italy ("Derma Italy"), pursuant to which Derma Italy was granted exclusive distribution rights in Italy;
2. On December 1, 2013, Emerald entered into a distribution agreement with S. Bokhorst - Creatiekracht, organized under the laws of the Netherlands, pursuant to which S. Bokhorst was granted exclusive distribution in the Netherlands;
3. On February 6, 2014, Emerald entered into a distribution agreement with Medical Edge Pty Ltd, organized under the laws of Australia ("Medical Edge"), pursuant to which Medical Edge was granted exclusive distribution rights in the markets of Australia, New Zealand and Oceania;
4. On January 14, 2015, Emerald entered into a Project Agreement with Realize S.A. and Ubitech, entities engaged in IT related to medical technology in Greece, and MEDISP and MPUoP, academic and research institutes in Greece (collectively, the "Greek Partners"). Emerald and the Greek Partners anticipate imminent grants from the Office of Chief Scientist of the State of Israel and the General Secretariat for Research and Technology of Greece, respectively, the proceeds of which will be used for development of enhanced smartphone applications for diagnosis of early stage Melanoma.

During the nine-monthsthree months ended September 30,March 31, 2017 and the year ended December 31, 2016, we raised $783,054 through the issuance of convertible notes and we may be expected to require up to an additional $1.5 million in capital during the next 12 months to fully implement our business plan and fund our operations.

Utilizing capital raised, Emerald completed the development of a commercial model of its DermaCompare Product and has commenced marketing efforts. Emerald is continuing to negotiate additional distribution agreements for territories including North America, Latin America, Southern Africa, Israel and elsewhere in Europe, among other countries and regions. Emerald fully expects to significantly increase the level of its business activities during the 4th quarter of 2015 and expects to generate significant revenues from its DermaCompare Technology commencing in or before the first half of fiscal 2016. Emerald is continuing to work on development of the "next generation" DermaCompare Technology, with enhanced features.

During the nine months ended September 30, 2016, we raised $783,054$1,516,187 through the issuance of equity and debt and we may be expected to require up to an additional $1.5 million in capital during the next 12 months to fully implement our business plan and fund our operations. 

Results of Operations during the three months ended September 30, 2016March 31, 2017 as compared to the three months ended September 30, 2015March 31, 2016

We have not generated any revenues during the three months ended September 30,March 31, 2017 and 2016. During the three month period ended March 31, 2017 and 2016 we incurred $557,887 and 2015.$1,900,230, respectively, in net losses.

Our research and development expenses decreasedincreased to $155,338$178,887 for the three months ended September 30, 2016March 31, 2017 as compared to $252,498$103,348 during the same period in the prior year. The decreaseincrease was due to more focusedcontinued research and development expenses related to our DermaCare product. of Emerald Medical Applications Ltd.

Our general and administrative expenses decreased to $206,222$158,165 for the three months ended September 30,March 31, 2016 as compared to $983,329$1,799,520 during the same period in the prior year. The significant decrease was due to decreasedincreased expenses relating to our new business activities. Our stock-basedthe merger between the Company and Emerald Medical Applications Ltd. as well as share based compensation that were incurred during the three months ended September 30, 2016 decreasedMarch 31, 2016.

Interest expense increased to $371,715$220,835 for the three months ended March 31, 2017 as compared income of to $5,343,088$2,638 during the same period in the prior year.year due to increased loans and convertible notes.

DuringDepreciation expense increased to $3,488 for the three-month periodthree months ended September 30, 2016 and 2015, we incurred a loss from operations of $733,275 and $6,578,915, respectively.

The change in fair value of derivative was $0 during the three-month period ended September 30, 2016March 31, 2017 as compared to a change of $20,165$2,509 during the same period in the prior year. We incurred debt amortization expense of $160,050year due to additional fixed assets purchased during the three-month period ended September 30, 2016 as compared to no such expenses during the same period in the prior year. Other income during the three months ended September 30, 2016 was $186,615 as compared to no other income or expenses during the period ended September 30, 2015. We recorded a gain of $31,338 related to foreign currency fluctuations during the three-month period ended September 30, 2016 as compared to a loss of $6,934 during the same period in the prior year. We had no loss or gain on debt settlements during the three months ended September 30, 2016 as compared to a loss of $678,027 on a debt settlement during the three months ended September 30, 2015.

Our total financial income during the three months ended September 30, 2016 were $57,904 as compared to a financial expense of $664,796 during the three months ended September 30, 2015.

We incurred a net loss of $675,371 during the three months ended September 30, 2016 as compared to a net loss of $7,234,711 during the same period in the prior year.

Results of Operations during the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015

We have not generated any revenues during the nine months ended September 30, 2016 and 2015.

Our research and development expenses decreased to $450,688 during the nine months ended September 30, 2016 as compared to $499,898 during the same period in the prior year. Our stock-based compensation during the nine months ended September 30, 2016 decreased to $2,766,823 as compared to $5,343,088 during the same period in the prior year. Our general and administrative expenses increased to $579,850 during the nine months ended September 30, 2016 as compared to $1,157,720 during the same period in the prior year.

During the nine-month period ended September 30, 2016 and 2015, we incurred a loss from operations of $3,797,361 and $7,000,706, respectively.

The change in fair value of derivative was $0 during the nine-month period ended September 30, 2016 as compared to a change of $20,165 during the same period in the prior year. We incurred debt amortization expense of $211,715 during the nine-month period ended September 30, 2016 as compared to no such expenses during the same period in the prior year. Other income during the nine months ended September 30, 2016 was $215,202 as compared to no other income or expenses during the nine-month period ended September 30, 2015. We recorded a gain of $30,299 related to foreign currency fluctuations during the nine-month period ended September 30, 2016 as compared to a loss of $16,955 during the same period in the prior year. We had no loss or gain on debt settlements during the nine months ended September 30, 2016 as compared to a loss of $678,027 on a debt settlement during the three months ended September 30, 2015.

Our total financial income during the nine months ended September 30, 2016 were $33,786 as compared to a financial expense of $664,450 during the nine months ended September 30, 2015.

During the nine-month period ended September 30, 2016 and 2015, we incurred $3,763,575 and $7,675,156, respectively, in net losses.

Liquidity and Capital Resources

Our balance sheet as of September 30, 2016March 31, 2017 reflects current assets of $77,334$134,512 consisting of cash of 71,767$122,992 and other receivables of $5,567.$11,520. As of December 31, 2015,2016, we had current assets of $141,246$13,842 consisting of cash of $115,449,$4,486, and other receivables of $25,797.$9,356. We had fixed assets, net of accumulated depreciation of $17,728,$29,169, as of September 30, 2016March 31, 2017 and $21,120$31,803 as of December 31, 2015.

We had total assets of $95,062 as of September 30, 2016 and total assets of $162,366 as of December 31, 2015.2016.

As of September 30, 2016,March 31, 2017, we had total current liabilities of $507,723$1,049,950 consisting of $129,420$225,094 in accounts payable and accrued liabilities, $63,633 employee payable, $3,989 employee$82,645 in accounts payable to related party, $20,310parties, $69,935employee payable, $47,468 accrued interest payable, and $290,391$593,338 in convertible notenotes payable and $31,470 in short term notes payable.

We had negative working capital of $430,389$873,651 as of September 30, 2016March 31, 2017 compared to negative working capital $147,529$900,627 at December 31, 2015.

2016. Our total liabilities as of September 30, 2016March 31, 2017 were $507,723$1,049,950 compared to $288,775$958,197 at December 31, 2015.2016.

During the period ended September 30, 2016,March 31, 2017, we had negative cash flow from operations of $802,867,$406,160, which was the result of a net loss of $3,763,575 offset by depreciation expense of $3,391, expenses of $211,715 related to debt amortization, non-cash compensation expenses of $2,766,823, a decrease in other receivables of $20,231, an increase in related parties payable of $509, an increase in employees payable of $38,021, an$557,887, increase in accrued interest of $1,025 and a$14,700, $3,488 depreciation expense, $58,650 shares issued for services, $183,750 for amortization of debt discount, offset by $2,166 decrease in other receivables, $33,699 decrease in accounts payable of $81,012.and accrued liabilities, $31,406 decrease in employee payable, and $41,590 decrease in amounts due from related party.

During the periodthree months ended September 30, 2015,March 31, 2017, we had negative cash flow from operationsinvesting activities of $831,984,$1,547, which was the result of a net loss of $7,675,156, $20,532 gain due to extinguishment of derivative, $11,607an increase in related parties payable, $5,094 increase in other receivables offset by $5,343,088 warrants issued for services, $617,900 shares issued for services, $678,027 loss on settlementrestricted cash of debt, $131,553 increase in accounts payable, $48,506 increase in employees payable, $18,999 increase in amounts due from related party$693 and $5,431 increase in accrued interest.

During the nine months ended September 30, 2016, we had no investing activities as compared to investing activities related to acquiringacquisition of fixed assets valued in the amount of $26,002 and charges of $467,380 related to the effect of our reverse merger transaction during the nine months ended September 30, 2015.$854.

During the period ended September 30, 2016,March 31, 2017, we raised $783,049had positive cash flow from financing activities of $526,213 which was the result of $526,213 proceeds from issuance of equity.

There are no limitations in the Company's certificate of incorporation on the Company's ability to borrow funds or raise funds through the issuance of $783,049 in convertible notes.

During the period ended September 30, 2015, we raised $852,071 from financing activities through $280,000 in proceeds from sale ofrestricted common stock (netto effect a business combination. The Company's limited resources and lack of having cash-generating business operations may make it difficult to borrow funds or raise capital. The Company's limitations to borrow funds or raise funds through the issuance expense)of restricted capital stock required to effect or facilitate a business combination may have a material adverse effect on the Company's financial condition and $572,071 fromfuture prospects, including the issuancesability to complete a business combination. To the extent that debt financing ultimately proves to be available, any borrowing will subject us to various risks traditionally associated with indebtedness, including the risks of short-term payables.interest rate fluctuations and insufficiency of cash flow to pay principal and interest, including debt of an acquired business.

The Company has only limited capital. Additional financing is necessary for the Company to continue as a going concern. Our independent auditors have unqualified audit opinion for the period ended September 30, 2016March 31, 2017 with an explanatory paragraph on going concern.

In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon continued operations of the Company. Management believes that actions presently being taken to obtain additional equity financing will provide the opportunity to continue as a going concern.