Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 15, 2017 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2017 | |
Entity Registrant Name | Integrity Applications, Inc. | |
Entity Central Index Key | 1,506,983 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 6,381,149 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Current Assets | ||
Cash and cash equivalents | $ 1,132,622 | $ 148,836 |
Accounts receivable, net | 130,296 | 92,061 |
Inventories | 1,508,312 | 1,419,604 |
Other current assets | 157,868 | 356,994 |
Total current assets | 2,929,098 | 2,017,495 |
Property and Equipment, Net | 235,230 | 240,452 |
Long-Term Restricted Cash | 39,234 | 35,673 |
Funds in Respect of Employee Rights Upon Retirement | 184,031 | 167,326 |
Total assets | 3,387,593 | 2,460,946 |
Current Liabilities | ||
Accounts payable | 1,789,026 | 1,634,642 |
Other current liabilities | 957,436 | 713,549 |
Total current liabilities | 2,746,462 | 2,348,191 |
Long-Term Liabilities | ||
Long-Term Loans from Stockholders | 178,186 | 162,034 |
Liability for Employee Rights Upon Retirement | 184,030 | 176,719 |
Warrants with down-round protection | 764,545 | 681,970 |
Total long-term liabilities | 1,126,761 | 1,020,723 |
Total liabilities | 3,873,223 | 3,368,914 |
Temporary Equity | ||
Total Temporary Equity | 12,880,447 | 10,041,462 |
Stockholders' Deficit | ||
Common Stock of $ 0.001 par value ("Common Stock"): 40,000,000 shares authorized as of June 30, 2017 and December 31, 2016; 6,381,149 and 6,026,527 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively | 6,384 | 6,028 |
Additional paid in capital | 27,967,185 | 24,586,142 |
Accumulated other comprehensive income | 127,012 | 62,576 |
Accumulated deficit | (41,466,658) | (35,604,176) |
Total stockholders' deficit | (13,366,077) | (10,949,430) |
Total liabilities, temporary equity and stockholders' deficit | 3,387,593 | 2,460,946 |
Series A Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock") | 221,152 | 221,152 |
Series B Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock") | 6,715,844 | 6,715,844 |
Series C Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock of $ 0.001 par value ("Preferred Stock") | $ 5,943,451 | $ 3,104,466 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2017 | Dec. 31, 2016 |
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 | 6,381,149 | 6,026,527 |
Common Stock, shares outstanding | 6,381,149 | 6,026,527 |
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 | 376 | 376 |
Convertible Preferred Stock, shares outstanding | 376 | 376 |
Series B Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock, shares issued | 15,031 | 15,031 |
Convertible Preferred Stock, shares outstanding | 15,031 | 15,031 |
Series C Preferred Stock [Member] | ||
Temporary Equity | ||
Convertible Preferred Stock, shares issued | 11,004 | 5,829 |
Convertible Preferred Stock, shares outstanding | 11,004 | 5,829 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Statement [Abstract] | ||||
Revenues | $ 8,744 | $ 381,731 | $ 104,981 | $ 470,878 |
Research and development expenses | 616,824 | 880,696 | 1,198,363 | 1,531,396 |
Selling and marketing expenses | 361,295 | 349,804 | 598,234 | 614,121 |
General and administrative expenses | 1,678,719 | 734,661 | 3,556,078 | 1,173,188 |
Total operating expenses | 2,656,838 | 1,965,161 | 5,352,675 | 3,318,705 |
Operating loss | 2,648,094 | 1,583,430 | 5,247,694 | 2,847,827 |
Financing income (expenses), net | 90,893 | (5,568) | 160,168 | 32,065 |
Loss for the period | 2,557,201 | 1,588,998 | 5,087,526 | 2,815,762 |
Other comprehensive (income) loss: | ||||
Foreign currency translation loss (income) | (31,697) | 8,063 | (64,436) | 30,039 |
Comprehensive loss for the period | $ 2,525,504 | $ 1,597,061 | $ 5,023,090 | $ 2,845,801 |
Loss per share (Basic and Diluted) | $ (0.48) | $ (0.30) | $ (0.96) | $ (0.54) |
Common shares used in computing loss per share (Basic and Diluted) | 6,205,104 | 5,742,468 | 6,116,366 | 5,716,566 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT - 6 months ended Jun. 30, 2017 - USD ($) | Common Stock [Member] | Additional paid in capital [Member] | Accumulated other comprehensive income [Member] | Accumulated deficit [Member] | Total |
Balance at Dec. 31, 2016 | $ 6,028 | $ 24,586,142 | $ 62,576 | $ (35,604,176) | $ (10,949,430) |
Balance, shares at Dec. 31, 2016 | 6,026,527 | 6,026,527 | |||
Loss for the period of six months | (5,087,526) | $ (5,087,526) | |||
Other comprehensive income | 64,436 | 64,436 | |||
Amounts allocated to Series C-1 and Series C-2 Warrants, net | 1,404,911 | 1,404,911 | |||
Stock dividend on Series C Preferred Stock | $ 117 | 276,457 | (276,574) | ||
Stock dividend on Series C Preferred Stock, shares | 116,354 | ||||
Stock dividend on Series B Preferred Stock | $ 207 | 491,461 | (491,668) | ||
Stock dividend on Series B Preferred Stock, shares | 206,844 | ||||
Cash dividend on Series A Preferred Stock | (6,714) | (6,714) | |||
Stock-based compensation, shares | 32 | ||||
Stock-based compensation | $ 31,424 | 1,208,214 | 1,208,246 | ||
Balance at Jun. 30, 2017 | $ 6,384 | $ 27,967,185 | $ 127,012 | $ (41,466,658) | $ (13,366,077) |
Balance, shares at Jun. 30, 2017 | 6,381,149 | 6,381,149 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Loss for the period | $ (5,087,526) | $ (2,815,762) |
Adjustments to reconcile loss for the period to net cash used in operating activities: | ||
Depreciation | 33,024 | 27,980 |
Stock-based compensation | 1,208,246 | 34,297 |
Remeasurement adjustment of warrants issued to placement agent | 211,077 | |
Change in the fair value of Warrants with down-round protection | (191,075) | (64,212) |
Linkage difference on principal of loans from stockholders | 26 | (639) |
Changes in assets and liabilities: | ||
(Increase) in accounts receivable | (28,615) | (51,053) |
Decrease in inventory | 49,255 | 130,203 |
Decrease in other current assets | 222,952 | 147,697 |
(Decrease) increase in accounts payable | 26,829 | (638,908) |
Increase in other current liabilities | 171,018 | 132,153 |
Decrease in liability for employee rights upon retirement | (10,148) | |
Net cash used in operating activities | (3,606,014) | (2,887,167) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (4,849) | (46,397) |
Net cash used in investing activities | (4,849) | (46,397) |
Cash flows from financing activities | ||
Cash dividend on Series A Preferred Stock | 2,686 | (4,753) |
Proceeds allocated to Series C Preferred Stock, net of cash issuance expenses | 3,022,002 | 2,508,321 |
Proceeds allocated to Series C Warrants, net of cash issuance expenses | 1,495,541 | 1,242,158 |
Net cash provided by financing activities | 4,520,229 | 3,745,726 |
Effect of exchange rate changes on cash and cash equivalents | 74,420 | (15,329) |
Increase in cash and cash equivalents | 983,786 | 796,833 |
Cash and cash equivalents at beginning of the period | 148,836 | 608,701 |
Cash and cash equivalents at end of the period | $ 1,132,622 | $ 1,405,534 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2017 | Jun. 30, 2017 | |
Cash dividend | $ 2,014 | $ 6,714 |
Warrants issued as consideration for placement agent services | 273,650 | |
Amount of direct issuance expense allocated to Series C-1 and Series C-2 Warrants and recorded as a reduction of additional paid in capital | 90,633 | |
Amount of direct issuance expense allocated to Series C Preferred Stock and recorded as a reduction of temporary equity | 183,017 | |
Series B Preferred Stock [Member] | ||
Stock dividend | 491,668 | |
Series C Preferred Stock [Member] | ||
Stock dividend | $ 276,574 | |
Series A Preferred Stock [Member] | ||
Cash dividend | 4,700 | |
Series B and C Preferred Stock [Member] | ||
Stock dividend | $ 406,225 | |
Interest rate | 9.00% |
GENERAL
GENERAL | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GENERAL | NOTE 1 – A. Integrity Applications, Inc. (the “Company”) was incorporated on May 18, 2010 under the laws of the State of Delaware. On July 15, 2010, Integrity Acquisition Corp. Ltd. (hereinafter: “Integrity Acquisition”), a wholly owned Israeli subsidiary of the Company, which was established on May 23, 2010, completed a merger with A.D. Integrity Applications Ltd. (hereinafter: “Integrity Israel”), an Israeli corporation that was previously held by the stockholders of the Company. Pursuant to the merger, all equity holders of Integrity Israel received the same proportional ownership in the Company as they had in Integrity Israel prior to the merger. Following the merger, Integrity Israel remained a wholly-owned subsidiary of the Company. As the merger transaction constituted a structural reorganization, the merger has been accounted for at historical cost in a manner similar to a pooling of interests. Integrity Israel was incorporated in 2001 and commenced its operations in 2002. Integrity Israel, a medical device company, focuses on the design, development and commercialization of non-invasive glucose monitoring devices for use by people with diabetes and pre-diabetes. B. Going concern uncertainty Since its incorporation, the Company did not conduct any material operations other than those carried out by Integrity Israel. The development and commercialization of Integrity Israel’s product is expected to require substantial expenditures. Integrity Israel and the Company (collectively, the “Group”) have not yet generated significant revenues from operations, and therefore they are dependent upon external sources for financing their operations. As of June 30, 2017, the Group has incurred an accumulated deficit of $41,466,658, a stockholder’s deficit of $13,366,077 and negative operating cash flows. Management considered the significance of such conditions in relation to the Group’s ability to meet its current and future obligations and determined that these conditions raise substantial doubt about the Group’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. To fund its operations the Company has raised funds through the issuance of (a) Series A units (the “Series A Units”) consisting of shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and detachable warrants to purchase shares of the Company’s Common Stock (the “Series A Warrants” or “Warrants with down-round protection”) and (b) Series B units (the “Series B Units”), each consisting of (i) one share of the Company’s designated Series B 5.5% Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), convertible into Common Stock at an initial conversion price of $5.80 per share, (ii) a five year warrant to purchase, at an exercise price of $5.80 per share, up to such number of shares of Common Stock issuable upon conversion of such share of Series B Preferred Stock (each a “Series B-1 Warrant”) and (iii) a five year warrant to purchase, at an exercise price of $10.00 per share, up to such number of shares of Common Stock issuable upon conversion of such share of Series B Preferred Stock (each a “Series B-2 Warrant” and, together with the Series B-1 Warrants, collectively, the “Series B Warrants”). Additionally, during the period between April 2016 and June 2017, the Company raised funds in an aggregate amount of approximately $9.47 million (of which amount of approximately $4.52 million was raised during the six-month period ended June 30, 2017) (net of related cash expenses) through the issuance of 11,003.80 units (the “Series C Units”). Each of the Series C Units consists of (a) one share of the Company’s designated Series C 5.5% Convertible Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), convertible into Common Stock at an initial conversion price of $4.50 per share, (b) a five‑year warrant to purchase, at an exercise price of $4.50 per share, up to such number of shares of Common Stock issuable upon conversion of such share of Series C Preferred Stock (each a “Series C-1 Warrant”) and (c) a five-year warrant to purchase, at an exercise price of $7.75 per share, up to such number of shares of Common Stock issuable upon conversion of such share of Series C Preferred Stock (each a “Series C-2 Warrant” and, together with the Series C-1 Warrants, collectively, the “Series C Warrants”), as described in further detail in Note 3. See also Note 8 regarding issuance of additional Series C Units subsequent to the balance sheet date. 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 as a going concern. C. Risk factors As described in Note 1A and Note 1B above, the Group has a limited operating history and faces a number of risks and uncertainties, including risks and 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. Additionally, other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Group’s future results and the availability of necessary financing. In addition, the Group expects to continue incurring significant operating costs and losses in connection with the development of its products and marketing efforts. The Group has not yet generated material revenues from its operations to fund its activities and therefore is dependent on the receipt of additional funding from its stockholders and/ or new investors in order to continue its operations. 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 consolidated financial statements, the most significant estimates and assumptions relate to (i) the fair value estimate of the Warrants with down-round protection, (ii) the allocation of the proceeds and the related issuance costs of the Series C Units, and (iii) the going concern assumptions. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – A. Basis of presentation Accounting Principles The 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, 2016. 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 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 three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 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 its subsidiary. Significant intercompany balances and transactions have been eliminated in consolidation. B. Warrants with down-round protection The Company has determined its derivative warrant liability with respect to the remaining Series A Warrants and warrants issued to Andrew Garrett, Inc., (“AGI”) as part of the Series A Unit offering, the Series B Unit offering and the Series C Unit offering 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 down round protection feature, the probability that the exercise price of the warrants would decrease as the stock price decreased was incorporated into the valuation calculations. The changes in the fair value of the Level 3 liability are as follows (in US dollars): Warrants with down-round Protection 2017 2016 (unaudited) Balance, Beginning of the period 681,970 321,695 Warrants issued as consideration for placement services 273,650 234,008 Amount classified out of stockholders’ deficit and presented as Warrants with down-round protection - 341,662 Change in fair value Warrants with down-round protection (191,075 ) (64,212 ) Balance, End of period 764,545 833,153 The key inputs used in the fair value calculations were as follows: June 30, 2017 2016 Dividend yield (%) - - Expected volatility (%) (*) 56.59 62.16 Risk free interest rate (%) 0.92 0.72-1.11 Expected term of options (years) 0.70-4.98 1.70-5.00 Exercise price (US dollars) 4.50, 7.75 4.50, 7.75 Share price (US dollars) (**) 2.38 2.38 Fair value (US dollars) 0.06-0.76 0.61 (*) 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. (**) 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, 2017 and 2016. In reaching its estimation for such periods, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series C Units (See Note 3). C. Recently issued accounting pronouncements 1. Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards 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 ASU 2014-09 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. During 2016, the FASB issued several Accounting Standards Updates (“ASUs”) that focus on certain implementation issues of the new revenue recognition guidance including Narrow-Scope Improvements, Practical Expedients and technical corrections. In accordance with an amendment to ASU 2014-09, introduced by Accounting Standard 2015-14, “Revenue from contracts with Customers – Deferral of the Effective Date”, for a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period (the first quarter of fiscal year 2018 for the Company). Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company intends to adopt ASU 2014-09 as of January 1, 2018. The Company is in the process of evaluating the impact of ASU 2014-09 on its revenue streams and selling contracts, if any, and on its financial reporting and disclosures. Management is expecting to complete the evaluation of the impact of the accounting and disclosure changes on the business processes, controls and systems during 2017. Since the company did not report significant revenues, management believes that the adoption of ASU 2014-09 will not have a significant impact on its consolidated financial statements. 2. Accounting Standards Update 2015-11, “Simplifying the Measurement of Inventory” Effective January 1, 2017, the Group adopted ASU No. 2015-11, Simplifying the Measurement of Inventory (Topic 330) (“ASU 2015- 11”). ASU 2015-11 outlines that inventory within the scope of its guidance be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and the retail inventory method (RIM) are not impacted by the new guidance. Prior to the issuance of ASU 2015-11, inventory was measured at the lower of cost or market (where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin). The adoption of ASU 2015-11 did not have a significant effect on the consolidated financial statements. 3. Accounting Standard Update (ASU) No. 2017-11, “Earnings Per Share” In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Among others, Part I of ASU 2017-11 simplifies the accounting for certain financial instruments with down round features, which is a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise price based on the price of future equity offerings. Current accounting guidance creates cost and complexity for organizations that issue financial instruments with down round features by requiring, on an ongoing basis, fair value measurement of the entire instrument or conversion option. ASU 2017-11 require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when triggered (i.e., when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity. ASU 2017-11 also addresses navigational concerns within the FASB Accounting Standards Codification related to an indefinite deferral available to private companies. The provisions of the new ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (fiscal 2019 for the Company). Early adoption is permitted for all entities. The Company is evaluating the impact of ASU 2017-11 on its financial statements. Although this process has not been completed, managements believes that its provisions might impact the accounting of the financial instruments issued by the Company that include down-round protection. D. Reclassified Amounts Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications did not have material effect on the reported results of operations, shareholder’s deficit or cash flows. |
RECENT EVENTS
RECENT EVENTS | 6 Months Ended |
Jun. 30, 2017 | |
EVENTS DURING THE REPORTED PERIOD [Abstract] | |
RECENT EVENTS | NOTE 3 – 1. On April 7, 2017, the Board of Directors of the Company (the “Board”) approved an amendment to the 2010 Incentive Compensation Plan of the Company (the “Plan”) to increase the number of shares of the Company’s Common Stock reserved for issuance under the Plan from 1,000,000 shares to 5,625,000 shares. 2. Effective April 7, 2017 (the “Gal Effective Date”), the Company and Integrity Israel entered into a letter agreement with Avner Gal whereby Mr. Gal separated from his employment and directorship at the Company to act as a part time consultant to the Company (the “Gal Agreement”). Pursuant to the terms of the Gal Agreement, and as consideration for Mr. Gal’s separation from employment and services as a consultant, the Company agreed, among other things, to (a) pay Mr. Gal an amount equal to his Salary (as defined in the Gal Employment Agreement) and other financial benefits Mr. Gal was entitled to receive under the Employment Agreement entered into by and between Integrity Israel and Mr. Gal in October 2010 (the “Gal Employment Agreement”), that would have been paid to Mr. Gal during the Notice Period (as defined in the Gal Employment Agreement), in lieu of such prior notice; (b) modify the Adjustment Period, pursuant to section 19 of the Gal Employment Agreement, to 24 Salaries (as defined in the Gal Employment Agreement), including all the benefits mentioned in the Gal Employment Agreement, provided Mr. Gal does not work or provide services to a company in direct competition with the Company; (c) accelerate the vesting of 88,259 outstanding unvested options to purchase Common Stock, at an exercise price per share equal to $6.25, held by Mr. Gal as of the Gal Effective Date (since the original performance conditions were not expected to be satisfied as of the date of the modification of the terms, the fair value of such grant was measured based on the fair value of the modified award at the modification date ; s 3. Effective April 7, 2017, the Company entered into an amendment to the employment agreement (the “Graham Employment Amendment”) with John Graham, whom the Company appointed as Chief Executive Officer on March 20, 2017, to modify the base compensation provision and the equity compensation provision under that certain Employment Agreement, dated March 20, 2017 (the “Graham Effective Date”), by and between the Company and Mr. Graham. 4. Pursuant to the terms of the Graham Employment Amendment, (a) Mr. Graham’s base compensation was modified such that he receives a base salary of $500,000 per year, as well as a one-time payment of $375,000 paid to Mr. Graham upon commencement of Mr. Graham’s employment with the Company which amount was recognized as an expense as of the employment commencement date, and (b) the vesting periods of Mr. Graham’s options to purchase Common Stock were modified whereby (1) 307,754 shares of Common Stock underlying Mr. Graham’s option to purchase Common Stock at an exercise price of $4.50 per share (the “$4.50 Options”) vested immediately, (2) 923,262 of the $4.50 Options vest on the six month anniversary of the Graham Effective Date, and (3) the remaining 442,980 of the $4.50 Options as well as Mr. Graham’s remaining unvested options granted pursuant to the Graham Employment Amendment vest on the two (2) year anniversary of the Graham Effective Date. 5. Effective April 7, 2017, Integrity Israel entered into an amended and restated personal employment agreement (the “Malka Employment Agreement”) with David Malka for his continued service as Vice President of Operations of the Company and Integrity Israel, effective as of March 20, 2017 (the “Malka Effective Date”). Pursuant to the terms of the Malka Employment Agreement, Mr. Malka (a) receives a base monthly salary of NIS 20,000 (approximately $5,508 based on an exchange rate of 3.63 NIS / 1 USD in effect on August 8, 2017), which may increase to NIS 35,000 per month (approximately $9.639 using the same exchange rate) in the event certain performance milestones are met (the “Malka Base Salary”); (b) is eligible to earn an annual performance bonus between 420-864% of the Malka Base Salary, subject to certain performance criteria to be established by the Board within the first ninety (90) days of each fiscal year; (c) is eligible to earn a retention bonus equal to 60% of the aggregate Malka Base Salary earned through the one-year anniversary of the Malka Effective Date, payable thirty days following the one-year anniversary of the Malka Effective Date and provided that Mr. Malka remains employed with Integrity Israel through and on the one-year anniversary of the Malka Effective Date; (d) received a modification to the terms of his option to purchase Common Stock at an exercise price per share equal to $6.25 whereby the unvested portion of such options will accelerate and will be immediately exercisable, effective as of the Malka Effective Date (since the original performance conditions were not expected to be satisfied as of the date of the modification of the terms, the fair value of such grant was measured based on the fair value of the modified award at the modification date); and (e) received certain additional equity awards (pursuant to the Plan) under the terms and conditions as set forth in the Malka Employment Agreement. In addition, the Malka Employment Agreement provides for the payment of certain social benefits and the use of a company car. The Malka Employment Agreement is terminable by Integrity Israel and Mr. Malka on 90 days’ prior written notice (the “Malka Notice Period”), without Cause, or immediately by Integrity Israel for Cause (as defined in the Malka Employment Agreement). Integrity Israel may terminate Mr. Malka’s employment without Cause prior to the expiration of the Malka Notice Period, but will be required to pay Mr. Malka a severance fee equal to the Malka Base Salary plus the financial value of all other benefits Mr. Malka would have been entitled to receive in respect of the portion of the Malka Notice Period which was forfeited. On May 23, 2017, the Board approved the salary increase to NIS 35,000 per month pursuant to the Malka Employment Agreement, notwithstanding the foregoing performance goal requirement, as consideration for Mr. Malka’s continued service as Vice President of Operations of the Company and Integrity Israel. 6. On May 4, 2017, the Board unanimously voted to appoint Angela Strand, a member of the Board, as the interim Chief Strategy Officer of the Company, effective as of May 1, 2017 through September 30, 2017. On May 5, 2017, the Company entered into a letter agreement (the “Strand Employment Agreement”) with Ms. Angela Strand confirming her appointment as interim Chief Strategy Officer of the Company. Pursuant to the terms of the Strand Employment Agreement, Ms. Strand receives aggregate compensation of $150,000 for her service during the term of employment, paid monthly on the schedule mutually agreed upon by the parties. 7. On May 23, 2017, the Board approved the following compensation for all non-employee directors and interim officers serving on the Board: a. an annual cash payment to each non-employee director and interim officer of the Company in the amount of $35,000, payable in four equal quarterly installments of $8,750 each on the last day of each calendar quarter commencing with the fourth quarter of 2017, subject to their continued service as of each such date; b. an additional annual cash payment to each member of a Board committee who is not the Chairperson of that particular committee in the amount of $5,000, payable in four equal quarterly installments of $1,250 each on the last day of each calendar quarter commencing with the second quarter of 2017, subject to their continued service as of each such date; c. an additional annual cash payment to the chairperson of a Board committee in the amount of $12,500, payable in four equal quarterly installments of $3,125 each on the last day of each calendar quarter commencing with the second quarter of 2017, subject to their continued service as of each such date; d. the grant to each non-employee director and each interim officer of the Company of a one-time award of options to purchase up to an aggregate of 14,894 shares of Common Stock, at an exercise price of $4.50, under and pursuant to the Plan, which options vest in 12 equal monthly increments commencing as of June 1, 2017 (subject to their continued service as of each such date) and have a term of 10 years; e. the grant to each non-employee director and each interim officer of the Company of an award of Restricted Stock Units (“RSUs”), to be granted on June 1, 2017 and vesting on June 1, 2018, with a fair value of $45,000 based on the 30-day volume weighted average price of the Company’s Common Stock on June 1, 2017, subject to their continued service on and through such date; and f. an additional annual fair value payment to the vice chairperson of the Board in the amount of $20,000, payable in RSUs under the same vesting terms. 8. On May 23, 2017, the Board appointed Michael Hauck to serve as a director of the Company, effective on that date. The Board further appointed Mr. Hauck to serve as a member of the Nominating and Corporate Governance Committee of the Board as well as on the Compensation Committee of the Board. There are no arrangements or understandings between Mr. Hauck and any other person pursuant to which Mr. Hauck was selected as a director. There are no relationships between Mr. Hauck and the Company that would require disclosure under Item 404(a) of Regulation S-K of the Securities Exchange Act of 1934, as amended. 9. On May 23, 2017, the Board established an Audit Committee of the Board and appointed each of Leslie Seff and Revan Schwartz to serve as members of the committee. Mr. Schwartz will serve as chairperson of the committee. The Board determined that each of the members of the Audit Committee designated above is independent pursuant to the required standards set forth in Rule 10A-3(b) of the Securities Exchange Act of 1934, as amended, based on an evaluation of the relationships between the Company and each of the members. 10. On June 7, 2017, the Board appointed David Podwalski as the Chief Commercial Officer of the Company, effective as of June 26, 2017 (the “Podwalski Effective Date”). On June 7, 2017, the Company entered into an employment agreement (the “CCO Employment Agreement”) with Mr. Podwalski to serve as Chief Commercial Officer of the Company. Under the CCO Employment Agreement, Mr. Podwalski (1) receives a base salary of $240,000 per year (“Base Salary”); (2) receives a sign-on bonus of $25,000, payable on the six month anniversary of the Podwalski Effective Date, subject to his continued employment through and on such payment date; (3) is eligible to receive an annual performance bonus, having a minimum bonus opportunity equal to 20% of his current Base Salary based upon 80% achievement of performance criteria (the “Minimum Performance Goal”), a target bonus opportunity equal to 25% of his current Base Salary based upon 100% achievement of performance criteria, and a maximum bonus opportunity equal to 37.5% of his current Base Salary based upon 150% achievement of performance criteria (the “Maximum Performance Goal”), provided, however, that such performance bonus will be determined using straight-line interpolation of the level of achievement between the Minimum Performance Goal and the Maximum Performance Goal; and (4) receive an initial stock option grant to purchase shares of Common Stock equal to 1% of the total fully diluted shares of Common Stock as of the Effective Date, with an exercise price of $4.50 per share or the fair market value of a share of Common Stock on the grant date, whichever is greater, vesting monthly over a three year period commencing on the Effective Date, subject to his continued employment through and on each such vesting date (the total fair value of the grant as of the Effective Date is approximately $270,000). The CCO Employment Agreement is terminable by the Company on 90 days written notice and by Mr. Podwalski on 30 days written notice. The CCO Employment Agreement is immediately terminable by the Company for Cause (as defined in the CCO Employment Agreement) without the payment of severance. The CCO Employment Agreement contains non-compete obligations applicable during the term of the agreement and for one year thereafter and confidentiality obligations that survive the termination of the agreement indefinitely. Between April 2016 and December 31, 2016, and during the first six months of 2017, the Company received aggregate net proceeds of approximately $4.9 million and $4.5 million, respectively (net of related cash expenses), from the issuance and sale in a private placement transaction, at a price of $1,000 per unit, of 11,003.80 Series C Units. As of June 30, 2017, the shares of Series C Preferred Stock comprising the Series C Units are convertible into an aggregate of 2,445,317 shares of Common Stock, and the Series C Warrants comprising the Series C Units are exercisable for an aggregate of 4,890,634 shares of Common Stock, in each case subject to adjustment in certain circumstances. Pursuant to a placement agent agreement (the “Placement Agent Agreement”) with AGI, at the initial closing of the sale of the Series C Units, the Company paid AGI, as a commission, an amount equal to 6% of the aggregate sales price of the Series C Units, plus 4% of the aggregate sales price as a management fee plus a non-accountable expense allowance equal to 3% of the aggregate sales price of the Series C Units. At the end of the second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth and eleventh closings of the sale of the Series C Units, the Company paid AGI, as a commission, an amount equal to 10% of the aggregate sales price of the Series C Units sold in such closing, plus a non-accountable expense allowance equal to 3% of the aggregate sales price of the Series C Units sold in such closing. In addition, pursuant to the Placement Agent Agreement, the Company is required to issue to AGI: (a) 5-year warrants to purchase up to 489,064 shares of Common Stock at an exercise price of $4.50 per share and (b) 5 year warrants to purchase up to 244,531 shares of Common Stock at an exercise price of $7.75 per share. The terms of such warrants are substantially similar to the Series C Warrants except that the warrants issued to AGI are exercisable on a cashless basis and include full ratchet anti-dilution protection. Following below is a summary of the entire series C issuances: Year ended December 31, 2016 Six month period ended June 30, 2017 Thousands of U.S. $ (except units sold) (unaudited) Number of units sold 5,828.9 5,174.9 Gross amount 5,829 5,175 Net of related cash expenses 4,951 4,520 Net amount 4,642 4,246 Subject to certain ownership limitations described below, the Series C Preferred Stock are convertible at the option of the holder at any time and from time to time into shares of Common Stock at a conversion price of $4.50 per share (calculated by dividing the stated value per share of Preferred Stock, which is initially $1,000, by the conversion price per share). The conversion price of the Series C Preferred Stock is subject to adjustment for certain issuances of Common Stock or other securities of the Company at an effective price per share that is lower than the conversion price then in effect, as well as for stock splits, stock dividends, combinations of shares, similar recapitalization transactions and certain pro-rata distributions to common stockholders. In addition, the holders of Preferred Stock will be entitled to receive any securities or rights to acquire securities or property granted or issued by the Company pro rata to the holders of Common Stock to the same extent as if such holders had converted all of their shares of Series C Preferred Stock prior to such distribution. In the event of a fundamental transaction, such as a merger, consolidation, sale of substantially all assets and similar reorganizations or recapitalizations of the Company, the holders of Series C Preferred Stock will be entitled to receive, upon conversion of their shares of Series C Preferred Stock, any securities or other consideration received by the holders of the Common Stock pursuant to the fundamental transaction. Holders of Series C Preferred Stock are entitled to receive cumulative dividends at a rate of 5.5% per annum, based on the stated value per share of Series C Preferred Stock. Dividends on the Series C Preferred Stock are payable quarterly on March 31, June 30, September 30 and December 31 of each year, beginning on June 30, 2016, and on each conversion date (with respect to the shares of Preferred Stock being converted). For so long as required under the terms of the certificate of designations for the Company’s outstanding Series A Preferred Stock or Series B Preferred Stock, dividends will be payable only in shares of Common Stock. Thereafter, dividends on the Series C Preferred Stock will be payable, at the option of the Company, in cash and/or, if certain conditions are satisfied, shares of Common Stock or a combination of both. Shares of Common Stock issued as payment of dividends will be valued at the lower of (a) the then current conversion price of the Series C Preferred Stock or (b) the average of the volume weighted average price for the Common Stock on the principal trading market therefor for the 10 trading days immediately prior to the applicable dividend payment date. The Company will incur a late fee of 9% per annum, payable in cash, on dividends that are not paid within three trading days of the applicable dividend payment date. Subject to any limitations under the terms of the certificate of designations for the Company’s outstanding Series A Preferred Stock or Series B Preferred Stock, the Company may become obligated to redeem the Series C Preferred Stock in cash upon the occurrence of certain triggering events, including, among others, a material breach by the Company of certain contractual obligations to the holders of the Series C Preferred Stock, the occurrence of a change in control of the Company, the occurrence of certain insolvency events relating to the Company, or the failure of the Common Stock to continue to be listed or quoted for trading on one or more specified United States securities exchanges or a regulated quotation service. In addition, upon the occurrence of certain triggering events, each holder of Series C Preferred Stock will have the option to require the Company to redeem such holder’s shares of Preferred Stock for a redemption price payable in shares of Common Stock or receive an increased dividend rate of 9% on all of such holder’s outstanding Series C Preferred Stock. Subject to certain conditions contained in the Certificate of Designations, Preferences and Rights relating to the Series C Preferred Stock (the “Certificate of Designations”), the Company will have the option to force the conversion of the Series C Preferred Stock (in whole or in part) if (a) the volume weighted average price for the Common Stock on its principal trading market exceeds $7.00 for each of any 20 trading days during any 30 consecutive trading day period and the average daily dollar trading value for the Common Stock during such 30 day period exceeds $50,000 or (b) the Company receives approval to list the Common Stock on a national securities exchange. Subject to certain exceptions contained in the Certificate of Designations, if the Company fails to timely deliver certificates for shares of Common Stock issuable upon conversion of the Series C Preferred Stock (the “Conversion Shares”) and, as a result, the holder is required by its brokerage firm to purchase shares of Common Stock to deliver in satisfaction of a sale by such holder of the Conversion Shares (a “Buy-In”), the Company will be required to: (a) pay the converting holder in cash an amount equal to the amount, if any, by which such holder’s total purchase price (including any brokerage commissions) for the shares of Common Stock so purchased exceeds the product of (i) the aggregate number of Conversion Shares due to the holder, multiplied by (ii) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions); and (b) at the option of such holder, either reissue (if surrendered) the shares of Series C Preferred Stock equal to the number of shares of Series C Preferred Stock submitted for conversion (in which case, such conversion will be deemed rescinded) or deliver to such holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements. In addition, the Company will be required to pay partial liquidated damages of $10 for each $1,000 of stated value of any shares of Series C Preferred Stock which have been converted by a holder and in respect of which the Company fails to deliver Conversion Shares by the fifth trading day following the applicable conversion date and the Company will continue to pay such partial liquidated damages for each trading day after such eighth trading day until such certificates are delivered or the holder rescinds such conversion. As long as at least 35% of the originally issued shares of Series C Preferred Stock are outstanding, without the written consent of the holders of a majority in stated value of the outstanding Series C Preferred Stock, the Company will not be permitted to, among other things, incur indebtedness or liens not permitted under the Certificate of Designations; repay, repurchase, pay dividends on or otherwise make distributions in respect of any shares of Common Stock or other securities junior to the Series C Preferred Stock; enter into certain transactions with affiliates of the Company; or enter into any agreement with respect to the foregoing. Subject to the beneficial ownership limitation described below, holders of Series C Preferred Stock will vote together with the holders of Common Stock, Series A Preferred Stock and Series B Preferred Stock on an as‑converted basis. Holders will not be permitted to convert their Series C Preferred Stock if such conversion would cause such holder to beneficially own more than 4.99% of the outstanding Common Stock (subject to increase to 9.99%, at the option of the holder, upon no less than 61 days prior written notice to the Company) (the “Beneficial Ownership Limitation”). In addition, no holder may vote any shares of Series C Preferred Stock (on an as-converted to Common Stock basis) in excess of the Beneficial Ownership Limitation. Subject to certain limitations, so long as any purchaser holds any shares of Series C Preferred Stock, if (a) the Company sells any shares of Common Stock or other securities convertible into, or rights to acquire, Common Stock and (b) a purchaser then holding Series C Preferred Stock, Warrants, Conversion Shares or Warrant Shares (defined below) reasonably believes that any of the terms and conditions appurtenant to such issuance or sale are more favorable to the purchaser in such subsequent sale of securities than are the terms and conditions granted to such purchaser after taking into account all of the terms and conditions of the terms granted to the purchasers under the purchase agreement relating to the issuance and sale of the Series C Units and the terms granted in such subsequent issuance or sale, including all of the components of the Series C Units and of the securities or units involved in such subsequent issuance or sale, then the purchaser will be permitted to require the Company to amend the terms of this transaction (only with respect to such purchaser) so as to match the terms of the subsequent issuance (including, for the avoidance of doubt, any terms and provisions that are or may be less favorable to such purchaser). The Series C Warrants have a five-year term commencing on their respective issuance dates. Until the end of the applicable term, each Series C Warrant will be exercisable at any time and from time to time at an exercise price of $4.50 per share (with respect to the Series C-1 Warrants) or $7.75 per share (with respect to the Series C-2 Warrants). The Series C Warrants contain adjustment provisions substantially similar to those to the adjustment provisions of the Series C Preferred Stock as described above, except that the Series C Warrants do not include dilution protection for issuances of securities at an effective price per share lower than the conversion price of such Series C Warrants. In addition, the Series C Warrants provide for protection for a Buy-In on substantially the same terms as described above with respect to the Series C Preferred Stock. No holder may exercise its Series C Warrants in excess of the Beneficial Ownership Limitation. Based on the terms of the purchase agreements relating to the issuance and sale of the Series A Units and the Series B Units, respectively, so long as any initial purchaser of Series A Units or Series B Units, as applicable, holds any shares of Series A Preferred Stock or Series B Preferred Stock, respectively, if (a) the Company sells any shares of Common Stock or other securities convertible into, or rights to acquire, Common Stock and (b) a purchaser then holding Series A or Series B Preferred Stock or Warrants reasonably believes that any of the terms and conditions appurtenant to such issuance or sale are more favorable to the purchaser in such subsequent sale of securities than are the terms and conditions granted to such purchaser, then the purchaser will be permitted to require the Company to amend the terms of this transaction (only with respect to such purchaser) so as to match the terms of the subsequent issuance (including, for the avoidance of doubt, any terms and provisions that are or may be less favorable to such purchaser). Pursuant to the purchase agreements relating to the issuance and sale of the Series A Units and the Series B Units, the Company was required to and did notify the holders of the Series A Preferred Stock and Series B Preferred Stock of the closing of the sale of the Series C Units, and following receipt thereof such holders of Series A Preferred Stock and Series B Preferred Stock will be entitled, pursuant to the “most favored nation” provisions contained in their respective purchase agreements (as described above), to elect to amend the terms of their purchase of Series A Units and Series B Units, respectively, to match the terms of the Series C Units. The Company is obligated to amend the terms of any of Series A Units or Series B Units who timely makes such election and tenders its Series A Units or Series B Units for exchange. As of June 30, 2017, none of the Series A or B Unit holders asked the company to amend the terms of their Units. Upon their initial recognition, the Series C Preferred Stock issued together with detachable Series C Warrants (classified as equity) were measured based on the relative fair value basis and were presented net of the direct issuance expenses that were allocated to them. The Company has determined that, due to the economic characteristics and risks of the Series C Preferred Stock, based on their stated or implied substantive terms and features, such Preferred Stock are considered as more akin to equity than debt. Accordingly, it was determined that the economic characteristics and the risks of the embedded conversion option to Common Stock and those of the Series C Preferred Stock themselves (the ‘host contract’) are clearly and closely related. As a result, the embedded conversion feature was not required to be bifurcated. Since at each of the issuances dates of the Series C Preferred Stock the exercise price of the conversion feature (based on the effective conversion rate of the Series C Preferred Stock into Common Stock) was higher than the estimated fair value of the Company’s Common Stock, it was determined that given the current market price, conversion at the conversion price was not a beneficial transaction. Also, due to the liquidation preference and certain redemption rights for the benefit of the holders of the Series C Preferred Stock, upon the occurrence of certain contingent events, which are not considered as solely within the Company’s control management determined that the Series C Preferred Stock were to be presented as temporary equity. On each balance sheet date, the Company’s management assesses the probability of redemption of the outstanding Preferred Stock. In the event that management determines such redemption to be probable as of an applicable balance sheet date, the Company will reclassify the amount allocated to the preferred stock from temporary equity to liability. In addition, upon such determination, the difference between the amount that was allocated to the Preferred Stock (after deduction of issuance expenses) and the aggregate redemption amount of the Preferred Stock will be accreted over the period beginning on the date that it becomes probable that the instrument will become redeemable and ending on the earliest redemption date. |
INVENTORIES
INVENTORIES | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 4 – US dollars June 30, December 31, 2016 (unaudited) Raw materials 705,810 735,201 Work in process 794,582 633,132 Finished products 7,920 51,271 1,508,312 1,419,604 |
OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES | 6 Months Ended |
Jun. 30, 2017 | |
Payables and Accruals [Abstract] | |
OTHER CURRENT LIABILITIES | NOTE 5 – US dollars June 30, December 31, 2016 (unaudited) Employees and related institutions 353,250 363,738 Accrued expenses 588,338 261,651 Other current liabilities 15,848 88,160 957,436 713,549 |
FINANCING INCOME, NET
FINANCING INCOME, NET | 6 Months Ended |
Jun. 30, 2017 | |
Other Income and Expenses [Abstract] | |
FINANCING INCOME, NET | NOTE 6 – US dollars US dollars Six month period ended June 30, Three month period ended June 30, 2017 2016 2017 2016 (unaudited) (unaudited) Israeli CPI linkage difference on principal of loans from stockholders 26 (639 ) 1,393 825 Exchange rate differences 17,194 24,211 6,720 19,296 Change in fair value of Warrants with down-round protection (191,075 ) (64,212 ) (106,976 ) (20,702 ) Interest expenses on credit from banks and other 13,687 8,575 7,970 6,149 (160,168 ) (32,065 ) (90,893 ) 5,568 |
LOSS PER SHARE
LOSS PER SHARE | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
LOSS PER SHARE | NOTE 7 – In periods of net loss, basic loss per share is computed by dividing net loss for the period after consideration of the effect of dividends on preferred stock by the weighted average number of shares outstanding during the period. The loss and the weighted average number of shares used in computing basic and diluted loss per share for the six and three month periods ended June 30, 2017 and 2016 are as follows: US dollars US dollars Six month period ended June 30, Three month period ended June 30, 2017 2016 2017 2016 (unaudited) (unaudited) Loss for the period (5,087,526 ) (2,815,762 ) (2,557,201 ) (1,588,998 ) Cash dividend on Series A Preferred Stock (6,714 ) (9,453 ) (2,014 ) (4,753 ) Stock dividend on Series B Preferred Stock (491,668 ) (254,101 ) (245,637 ) (131,281 ) Stock dividend on Series C Preferred Stock (276,574 ) (20,355 ) (160,588 ) (20,355 ) Loss for the period attributable to common stockholders (5,862,482 ) (3,099,671 ) (2,965,440 ) (1,745,387 ) Number of shares Number of shares Six month period ended June 30, Three month period ended June 30, 2017 2016 2017 2016 Number of shares: Common shares used in computing basic income (loss) per share 6,116,366 5,716,566 6,205,104 5,742,468 Common shares used in computing diluted income (loss) per share 6,116,366 5,716,566 6,203,104 5,742,468 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 (*) 19,868,112 11,220,345 21,001,400 12,210,613 (*) All outstanding 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, because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was determined to be anti-dilutive. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 8 – On July 31, 2017, the Company, entered into a Securities Purchase Agreement with certain accredited investors pursuant to which, the Company issued to the Purchasers an aggregate of 1,000 Series C Units. The shares of Preferred Stock comprising the Units are convertible into an aggregate of 222,236 shares of Common Stock, and the Warrants comprising the Units are exercisable for an aggregate of 444,472 shares of Common Stock, in each case subject to certain adjustments. The Company received aggregate gross proceeds of $1,000,000 from the sale of the Units. The sale of the Units pursuant to the securities purchase agreement was the twelfth closing of an offering of Units by the Company. The first, second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth and eleventh closings, involving the sale by the Company of an aggregate of 1,133 Units, 1,351 Units, 890.5 Units, 1,050.65 Units, 540 Units, 357.75 Units, 506 Units, 403.9 Units, 2,560 Units, 1,551 Units and 660 Units, respectively (collectively, the “Prior Issuances”), were disclosed by the Company in Current Reports on Form 8-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on April 14, 2016, May 4, 2016, June 6, 2016, July 7, 2016, September 7, 2016, October 7, 2016, December 5, 2016, January 5, 2017, March 14, 2017, May 3, 2017 and June 23, 2017, respectively (collectively, the “Prior 8-Ks”), each of which is incorporated herein by reference. The terms of the Preferred Stock and the Warrants are the same as the terms of the Preferred Stock and Warrants issued in the Prior Issuances, as described in the Prior 8-Ks. Pursuant to the Placement Agent Agreement, at the closing of the sale of the Units the Company paid AGI, as a commission, an amount (payable in cash and Common Stock) equal to 10% of the aggregate sales price of the Units, plus a non-accountable expense allowance equal to 3% of the aggregate sales price of the Units. In addition, pursuant to the AGI Agreement, the Company is required to issue to AGI: (a) 5 year warrants to purchase up to 44,445 shares of Common Stock at an exercise price of $4.50 per share and (b) 5 year warrants to purchase up to 22,223 shares of Common Stock at an exercise price of $7.75 per share. The terms of these warrants will be substantially similar to the Warrants except that the AGI warrants will also be exercisable on a cashless basis and will include full ratchet anti-dilution protection. |
SUMMARY OF SIGNIFICANT ACCOUN16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of presentation | A. Basis of presentation Accounting Principles The 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, 2016. 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 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 three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 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 its subsidiary. Significant intercompany balances and transactions 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 remaining Series A Warrants and warrants issued to Andrew Garrett, Inc., (“AGI”) as part of the Series A Unit offering, the Series B Unit offering and the Series C Unit offering 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 down round protection feature, the probability that the exercise price of the warrants would decrease as the stock price decreased was incorporated into the valuation calculations. The changes in the fair value of the Level 3 liability are as follows (in US dollars): Warrants with down-round Protection 2017 2016 (unaudited) Balance, Beginning of the period 681,970 321,695 Warrants issued as consideration for placement services 273,650 234,008 Amount classified out of stockholders’ deficit and presented as Warrants with down-round protection - 341,662 Change in fair value Warrants with down-round protection (191,075 ) (64,212 ) Balance, End of period 764,545 833,153 The key inputs used in the fair value calculations were as follows: June 30, 2017 2016 Dividend yield (%) - - Expected volatility (%) (*) 56.59 62.16 Risk free interest rate (%) 0.92 0.72-1.11 Expected term of options (years) 0.70-4.98 1.70-5.00 Exercise price (US dollars) 4.50, 7.75 4.50, 7.75 Share price (US dollars) (**) 2.38 2.38 Fair value (US dollars) 0.06-0.76 0.61 (*) 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. (**) 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, 2017 and 2016. In reaching its estimation for such periods, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series C Units (See Note 3). |
Recently issued accounting pronouncements | C. Recently issued accounting pronouncements 1. Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards 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 ASU 2014-09 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. During 2016, the FASB issued several Accounting Standards Updates (“ASUs”) that focus on certain implementation issues of the new revenue recognition guidance including Narrow-Scope Improvements, Practical Expedients and technical corrections. In accordance with an amendment to ASU 2014-09, introduced by Accounting Standard 2015-14, “Revenue from contracts with Customers – Deferral of the Effective Date”, for a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period (the first quarter of fiscal year 2018 for the Company). Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company intends to adopt ASU 2014-09 as of January 1, 2018. The Company is in the process of evaluating the impact of ASU 2014-09 on its revenue streams and selling contracts, if any, and on its financial reporting and disclosures. Management is expecting to complete the evaluation of the impact of the accounting and disclosure changes on the business processes, controls and systems during 2017. Since the company did not report significant revenues, management believes that the adoption of ASU 2014-09 will not have a significant impact on its consolidated financial statements. 2. Accounting Standards Update 2015-11, “Simplifying the Measurement of Inventory” Effective January 1, 2017, the Group adopted ASU No. 2015-11, Simplifying the Measurement of Inventory (Topic 330) (“ASU 2015- 11”). ASU 2015-11 outlines that inventory within the scope of its guidance be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and the retail inventory method (RIM) are not impacted by the new guidance. Prior to the issuance of ASU 2015-11, inventory was measured at the lower of cost or market (where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin). The adoption of ASU 2015-11 did not have a significant effect on the consolidated financial statements. 3. Accounting Standard Update (ASU) No. 2017-11, “Earnings Per Share” In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Among others, Part I of ASU 2017-11 simplifies the accounting for certain financial instruments with down round features, which is a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise price based on the price of future equity offerings. Current accounting guidance creates cost and complexity for organizations that issue financial instruments with down round features by requiring, on an ongoing basis, fair value measurement of the entire instrument or conversion option. ASU 2017-11 require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when triggered (i.e., when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity. ASU 2017-11 also addresses navigational concerns within the FASB Accounting Standards Codification related to an indefinite deferral available to private companies. The provisions of the new ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (fiscal 2019 for the Company). Early adoption is permitted for all entities. The Company is evaluating the impact of ASU 2017-11 on its financial statements. Although this process has not been completed, managements believes that its provisions might impact the accounting of the financial instruments issued by the Company that include down-round protection. |
Reclassified amounts | D. Reclassified Amounts Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications did not have material effect on the reported results of operations, shareholder’s deficit or cash flows. |
SUMMARY OF SIGNIFICANT ACCOUN17
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Schedule of Changes in Fair Value of Level 3 Liability | The changes in the fair value of the Level 3 liability are as follows (in US dollars): Warrants with down-round Protection 2017 2016 (unaudited) Balance, Beginning of the period 681,970 321,695 Warrants issued as consideration for placement services 273,650 234,008 Amount classified out of stockholders’ deficit and presented as Warrants with down-round protection - 341,662 Change in fair value Warrants with down-round protection (191,075 ) (64,212 ) Balance, End of period 764,545 833,153 |
Schedule of Warrant Inputs | The key inputs used in the fair value calculations were as follows: June 30, 2017 2016 Dividend yield (%) - - Expected volatility (%) (*) 56.59 62.16 Risk free interest rate (%) 0.92 0.72-1.11 Expected term of options (years) 0.70-4.98 1.70-5.00 Exercise price (US dollars) 4.50, 7.75 4.50, 7.75 Share price (US dollars) (**) 2.38 2.38 Fair value (US dollars) 0.06-0.76 0.61 (*) 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. (**) 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, 2017 and 2016. In reaching its estimation for such periods, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series C Units (See Note 3). |
RECENT EVENTS (Tables)
RECENT EVENTS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
EVENTS DURING THE REPORTED PERIOD [Abstract] | |
Summary of Entire Series C Issuances | Following below is a summary of the entire series C issuances: Year ended December 31, 2016 Six month period ended June 30, 2017 Thousands of U.S. $ (except units sold) (unaudited) Number of units sold 5,828.9 5,174.9 Gross amount 5,829 5,175 Net of related cash expenses 4,951 4,520 Net amount 4,642 4,246 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | US dollars June 30, December 31, 2016 (unaudited) Raw materials 705,810 735,201 Work in process 794,582 633,132 Finished products 7,920 51,271 1,508,312 1,419,604 |
OTHER CURRENT LIABILITIES (Tabl
OTHER CURRENT LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of Other Current Liabilities | US dollars June 30, December 31, 2016 (unaudited) Employees and related institutions 353,250 363,738 Accrued expenses 588,338 261,651 Other current liabilities 15,848 88,160 957,436 713,549 |
FINANCING INCOME, NET (Tables)
FINANCING INCOME, NET (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Other Income and Expenses [Abstract] | |
Schedule of Financing Income, Net | US dollars US dollars Six month period ended June 30, Three month period ended June 30, 2017 2016 2017 2016 (unaudited) (unaudited) Israeli CPI linkage difference on principal of loans from stockholders 26 (639 ) 1,393 825 Exchange rate differences 17,194 24,211 6,720 19,296 Change in fair value of Warrants with down-round protection (191,075 ) (64,212 ) (106,976 ) (20,702 ) Interest expenses on credit from banks and other 13,687 8,575 7,970 6,149 (160,168 ) (32,065 ) (90,893 ) 5,568 |
LOSS PER SHARE (Tables)
LOSS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of Loss and Weighted Average Number of Shares | The loss and the weighted average number of shares used in computing basic and diluted loss per share for the six and three month periods ended June 30, 2017 and 2016 are as follows: US dollars US dollars Six month period ended June 30, Three month period ended June 30, 2017 2016 2017 2016 (unaudited) (unaudited) Loss for the period (5,087,526 ) (2,815,762 ) (2,557,201 ) (1,588,998 ) Cash dividend on Series A Preferred Stock (6,714 ) (9,453 ) (2,014 ) (4,753 ) Stock dividend on Series B Preferred Stock (491,668 ) (254,101 ) (245,637 ) (131,281 ) Stock dividend on Series C Preferred Stock (276,574 ) (20,355 ) (160,588 ) (20,355 ) Loss for the period attributable to common stockholders (5,862,482 ) (3,099,671 ) (2,965,440 ) (1,745,387 ) Number of shares Number of shares Six month period ended June 30, Three month period ended June 30, 2017 2016 2017 2016 Number of shares: Common shares used in computing basic income (loss) per share 6,116,366 5,716,566 6,205,104 5,742,468 Common shares used in computing diluted income (loss) per share 6,116,366 5,716,566 6,203,104 5,742,468 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 (*) 19,868,112 11,220,345 21,001,400 12,210,613 (*) All outstanding 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, because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was determined to be anti-dilutive. |
GENERAL (Details)
GENERAL (Details) - USD ($) | 1 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | 18 Months Ended | |
Apr. 30, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2017 | |
Class of Stock [Line Items] | ||||||
Accumulated deficit | $ 41,466,658 | $ 35,604,176 | $ 41,466,658 | $ 35,604,176 | $ 41,466,658 | |
Stockholders' deficit | 13,366,077 | 10,949,430 | $ 13,366,077 | $ 10,949,430 | $ 13,366,077 | |
Proceeds from convertible preferred stock and warrants | $ 9,470 | $ 4,520 | ||||
Number of units sold | 5,174.90 | 5,828.90 | ||||
Series C-2 Warrant [Member] | ||||||
Class of Stock [Line Items] | ||||||
Warrants term | 5 years | |||||
Warrant exercise price | $ 7.75 | $ 7.75 | $ 7.75 | |||
Series C-1 Warrant [Member] | ||||||
Class of Stock [Line Items] | ||||||
Warrants term | 5 years | |||||
Warrant exercise price | $ 4.50 | 4.50 | 4.50 | |||
Series B-1 Warrant [Member] | ||||||
Class of Stock [Line Items] | ||||||
Warrants term | 5 years | |||||
Warrant exercise price | $ 10 | 10 | 10 | |||
Series C Preferred Stock [Member] | ||||||
Class of Stock [Line Items] | ||||||
Dividend rate | 55.00% | |||||
Par value per share | $ 0.001 | 0.001 | 0.001 | |||
Conversion price | $ 4.50 | $ 4.50 | $ 4.50 | |||
Warrants term | 5 years | |||||
Number of common shares that will be issued from conversion of units | 2,445,317 | |||||
Number of shares covered by warrants | 4,890,634 | 4,890,634 | 4,890,634 | |||
Proceeds from issuance of Series C Units | $ 4,900,000 | $ 4,500,000 | ||||
Number of units sold | 11,003.80 | 11,003.80 | ||||
Series B Preferred Stock [Member] | ||||||
Class of Stock [Line Items] | ||||||
Par value per share | $ 0.001 | $ 0.001 | $ 0.001 | |||
Conversion price | $ 5.80 | $ 5.80 | $ 5.80 | |||
Percent of one share | 5.50% | 5.50% | 5.50% |
SUMMARY OF SIGNIFICANT ACCOUN24
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Changes in Fair Value of Level 3 Liability) (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Accounting Policies [Abstract] | ||
Balance, Beginning of the period | $ 681,970 | $ 321,695 |
Warrants issued as consideration for placement services | 273,650 | 234,008 |
Amount classified out of stockholders' deficit and presented as Warrants with down-round protection | 341,662 | |
Change in fair value Warrants with down-round protection | (191,075) | (64,212) |
Balance, End of period | $ 764,545 | $ 833,153 |
SUMMARY OF SIGNIFICANT ACCOUN25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Warrant Inputs) (Details) - Warrant [Member] - $ / shares | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Dividend yield (%) | |||
Expected volatility (%) | [1] | 56.59% | 62.16% |
Risk free interest rate (%) | 0.92% | ||
Share price (US dollars) | [2] | $ 2.38 | $ 2.38 |
Minimum [Member] | |||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Risk free interest rate (%) | 0.72% | ||
Expected term of options (years) | 8 months 12 days | 1 year 8 months 12 days | |
Exercise price (US dollars) | $ 0.0450 | $ 0.0450 | |
Fair value (US dollars) | $ 0.0006 | ||
Maximum [Member] | |||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Risk free interest rate (%) | 1.11% | ||
Expected term of options (years) | 4 years 11 months 23 days | 5 years | |
Exercise price (US dollars) | $ 0.0775 | $ 0.0775 | |
Fair value (US dollars) | $ 0.0076 | $ 0.0061 | |
[1] | 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. | ||
[2] | 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, 2017 and 2016. In reaching its estimation for such periods, management considered, among other things, a valuation prepared by a third-party valuation firm following the issuance of the Series B Units and the Series C Units (See Note 3). |
RECENT EVENTS (Details)
RECENT EVENTS (Details) | Jun. 07, 2017USD ($)$ / shares | May 05, 2017USD ($) | Apr. 07, 2017USD ($)$ / sharesshares | Apr. 07, 2017ILS (₪) | May 23, 2017ILS (₪) | Apr. 30, 2016$ / sharesshares | Jun. 30, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($) | Jun. 30, 2017USD ($)$ / sharesshares | Dec. 31, 2016shares | Jun. 30, 2017USD ($)$ / sharesshares | Jun. 23, 2017shares | May 03, 2017shares | Mar. 31, 2017shares | Mar. 14, 2017shares | Jan. 05, 2017shares | Dec. 05, 2016shares | Oct. 07, 2016shares | Sep. 07, 2016shares | Jul. 07, 2016shares | Jun. 06, 2016shares | May 04, 2016shares | Apr. 14, 2016shares |
Class of Stock [Line Items] | |||||||||||||||||||||||
Number of shares reserved for issuance under Plan | shares | 5,625,000 | 1,000,000 | |||||||||||||||||||||
Number of units sold | shares | 5,174.90 | 5,828.90 | |||||||||||||||||||||
Number of convertible preferred shares offered per unit sold | shares | 660 | 1,551 | 2,560 | 403.9 | 506 | 357.75 | 540 | 1,050.65 | 890.5 | 1,351 | 1,133 | ||||||||||||
Series C-1 Warrant [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Warrant exercise price | $ / shares | $ 4.50 | $ 4.50 | $ 4.50 | ||||||||||||||||||||
Warrants term | 5 years | ||||||||||||||||||||||
Series C-2 Warrant [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Warrant exercise price | $ / shares | $ 7.75 | $ 7.75 | $ 7.75 | ||||||||||||||||||||
Warrants term | 5 years | ||||||||||||||||||||||
Advisory Agreement with Andrew Garrett, Inc.[Member] | Placement Agent Warrants Tranche Two [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Conversion price | $ / shares | $ 4.50 | ||||||||||||||||||||||
Warrants term | 5 years | ||||||||||||||||||||||
Number of common stock shares callable by warrants | shares | 489,064 | ||||||||||||||||||||||
Advisory Agreement with Andrew Garrett, Inc.[Member] | Placement Agent Warrants Tranche One [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Warrant exercise price | $ / shares | $ 7.75 | ||||||||||||||||||||||
Warrants term | 5 years | ||||||||||||||||||||||
Number of common stock shares callable by warrants | shares | 244,531 | ||||||||||||||||||||||
Advisory Agreement with Andrew Garrett, Inc.[Member] | Initial Closing [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Commission fee to agent expressed as percentage of aggregate sales price of the Units | 6.00% | ||||||||||||||||||||||
Managment fee percentage commission to agent | 4.00% | ||||||||||||||||||||||
Non-accountable expense allowance fee to agent expressed as percentage of aggregate sales price of the Units | 3.00% | ||||||||||||||||||||||
Advisory Agreement with Andrew Garrett, Inc.[Member] | Second Closing [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Commission fee to agent expressed as percentage of aggregate sales price of the Units | 10.00% | ||||||||||||||||||||||
Non-accountable expense allowance fee to agent expressed as percentage of aggregate sales price of the Units | 3.00% | ||||||||||||||||||||||
Series C Preferred Stock [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Proceeds from issuance of Series C Units | $ | $ 4,900,000 | $ 4,500,000 | |||||||||||||||||||||
Number of units sold | shares | 11,003.80 | 11,003.80 | |||||||||||||||||||||
Dividend rate | 55.00% | ||||||||||||||||||||||
Par value per share | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||||||
Conversion price | $ / shares | $ 4.50 | $ 4.50 | $ 4.50 | ||||||||||||||||||||
Warrants term | 5 years | ||||||||||||||||||||||
Number of common shares that will be issued from conversion of units | shares | 2,445,317 | ||||||||||||||||||||||
Number of common stock shares callable by warrants | shares | 4,890,634 | 4,890,634 | 4,890,634 | ||||||||||||||||||||
Volume weighted average trading price for forced conversion of Preferred Stock | 7 | ||||||||||||||||||||||
Average daily dollar trading value for forced conversion of Preferred Stock | $ | $ 50,000 | ||||||||||||||||||||||
Preferred stock, liquidating damages | $ / shares | $ 10 | $ 10 | $ 10 | ||||||||||||||||||||
Convertible preferred stock, percentage outstanding which requires written consent of shareholders for Company to enter into certain transactions | 35.00% | ||||||||||||||||||||||
Convertible preferred stock, maximum beneficial ownership of Common Stock permitted to owners | 4.99% | ||||||||||||||||||||||
Convertible preferred stock, maximum beneficial ownership of Common Stock permitted to owners, after notice given to Company | 9.99% | ||||||||||||||||||||||
Series C Preferred Stock [Member] | April 2016 Offering [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Number of convertible preferred shares offered per unit sold | shares | 1 | ||||||||||||||||||||||
Dividend rate | 5.50% | ||||||||||||||||||||||
Conversion price | $ / shares | $ 4.50 | ||||||||||||||||||||||
Avner Gal [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Options outstanding | shares | 88,259 | ||||||||||||||||||||||
Weighted average exercise price | $ / shares | $ 6.25 | ||||||||||||||||||||||
Avner Gal [Member] | Options Granted [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Options outstanding | shares | 300,000 | ||||||||||||||||||||||
Weighted average exercise price | $ / shares | $ 4.50 | ||||||||||||||||||||||
Avner Gal [Member] | Additional Options Granted [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Options outstanding | shares | 50,000 | ||||||||||||||||||||||
Weighted average exercise price | $ / shares | $ 7.75 | ||||||||||||||||||||||
John Graham [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Base salary per year | $ | $ 500,000 | ||||||||||||||||||||||
Vesting period | 2 years | 2 years | |||||||||||||||||||||
One-time payment | $ | $ 375,000 | ||||||||||||||||||||||
John Graham [Member] | Vesting immediately [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Options outstanding | shares | 307,754 | ||||||||||||||||||||||
Weighted average exercise price | $ / shares | $ 4.50 | ||||||||||||||||||||||
John Graham [Member] | Vesting on the six month anniversary [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Options outstanding | shares | 923,262 | ||||||||||||||||||||||
Weighted average exercise price | $ / shares | $ 4.50 | ||||||||||||||||||||||
John Graham [Member] | Vesting in two years [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Options outstanding | shares | 442,980 | ||||||||||||||||||||||
Weighted average exercise price | $ / shares | $ 4.50 | ||||||||||||||||||||||
David Malka [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Base salary per year | $ | $ 5,508 | ||||||||||||||||||||||
Exchange rate | 3.63 | ||||||||||||||||||||||
Weighted average exercise price | $ / shares | $ 6.25 | ||||||||||||||||||||||
David Malka [Member] | Maximum [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Base salary per year | $ | $ 9,639 | ||||||||||||||||||||||
Annual performane bonus percentage | 864.00% | 864.00% | |||||||||||||||||||||
David Malka [Member] | Minimum [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Annual performane bonus percentage | 420.00% | 420.00% | |||||||||||||||||||||
David Malka [Member] | NIS [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Base salary per year | ₪ | ₪ 20,000 | ||||||||||||||||||||||
David Malka [Member] | NIS [Member] | Maximum [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Base salary per year | ₪ | ₪ 35,000 | ₪ 35,000 | |||||||||||||||||||||
Chief Strategy Officer, Ms. Angela Strand [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Base salary per year | $ | $ 150,000 | ||||||||||||||||||||||
Non-employee Director and Interim Officer [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Annual cash payment payable in four equal quarterly installments, subject to employee's continued service | $ | $ 35,000 | $ 35,000 | $ 35,000 | ||||||||||||||||||||
Amount to be paid each quarter for annual cash payment | $ | $ 8,750 | $ 8,750 | $ 8,750 | ||||||||||||||||||||
Warrant exercise price | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||||||
Each Member of Board Committee [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Amount of additional annual cash payment payable in four equal quarterly installments, subject to employee's continued service | $ | $ 5,000 | $ 5,000 | $ 5,000 | ||||||||||||||||||||
Amount to be paid each quarter for additional annual cash payment | $ | 1,250 | 1,250 | 1,250 | ||||||||||||||||||||
Board of Directors - Chairman [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Amount of additional annual cash payment payable in four equal quarterly installments, subject to employee's continued service | $ | 12,500 | 12,500 | 12,500 | ||||||||||||||||||||
Amount to be paid each quarter for additional annual cash payment | $ | $ 3,125 | 3,125 | 3,125 | ||||||||||||||||||||
Each Non-employee Director and Each Interim Officer [Member] | Stock Options [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
One-time award of options granted | shares | 14,894 | ||||||||||||||||||||||
One-time award of options granted, exercise price | $ / shares | $ 4.50 | ||||||||||||||||||||||
Stock options, expiration period | 10 years | ||||||||||||||||||||||
Each Non-employee Director and Each Interim Officer [Member] | Restricted Stock Units (RSUs) [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Cash value of Restricted Stock Units granted | $ | $ 45,000 | ||||||||||||||||||||||
Vice President [Member] | Restricted Stock Units (RSUs) [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Amount of additional annual cash payment payable in four equal quarterly installments, subject to employee's continued service | $ | $ 20,000 | $ 20,000 | $ 20,000 | ||||||||||||||||||||
Mr. Podwalski [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Base salary per year | $ | $ 240,000 | ||||||||||||||||||||||
Percentage of fully diluted shares of common stock | 1.00% | ||||||||||||||||||||||
Vesting period | 3 years | ||||||||||||||||||||||
Net grant fair value | $ | $ 270,000 | ||||||||||||||||||||||
Weighted average exercise price | $ / shares | $ 4.50 | ||||||||||||||||||||||
Mr. Podwalski [Member] | Maximum [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Annual performane bonus percentage | 80.00% | ||||||||||||||||||||||
Mr. Podwalski [Member] | Maximum [Member] | Bonus [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Annual performane bonus percentage | 37.50% | ||||||||||||||||||||||
Mr. Podwalski [Member] | Minimum [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Annual performane bonus percentage | 20.00% | ||||||||||||||||||||||
Mr. Podwalski [Member] | Minimum [Member] | Bonus [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Annual performane bonus percentage | 25.00% | ||||||||||||||||||||||
Mr. Podwalski [Member] | Bonus [Member] | |||||||||||||||||||||||
Class of Stock [Line Items] | |||||||||||||||||||||||
Base salary per year | $ | $ 25,000 |
RECENT EVENTS (Summary of Entir
RECENT EVENTS (Summary of Entire Series C Issuances) (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
EVENTS DURING THE REPORTED PERIOD [Abstract] | ||
Number of units sold | 5,174.90 | 5,828.90 |
Gross amount of Series C units sold | $ 5,175 | $ 5,829 |
Net of related cash expenses | 4,520 | 4,951 |
Net amount | $ 4,246 | $ 4,642 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 705,810 | $ 735,201 |
Work in process | 794,582 | 633,132 |
Finished products | 7,920 | 51,271 |
Inventories | $ 1,508,312 | $ 1,419,604 |
OTHER CURRENT LIABILITIES (Deta
OTHER CURRENT LIABILITIES (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | ||
Employees and related institutions | $ 353,250 | $ 363,738 |
Accrued expenses | 588,338 | 261,651 |
Other current liabilities | 15,848 | 88,160 |
Other current liabilities | $ 957,436 | $ 713,549 |
FINANCING INCOME, NET (Details)
FINANCING INCOME, NET (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Other Income and Expenses [Abstract] | ||||
Israeli CPI linkage difference on principal of loans from stockholders | $ 1,393 | $ 825 | $ 26 | $ (639) |
Exchange rate differences | 6,720 | 19,296 | 17,194 | 24,211 |
Change in fair value of Warrants with down round protection | (106,976) | (20,702) | (191,075) | (64,212) |
Interest expenses on credit from banks and other | 7,970 | 6,149 | 13,687 | 8,575 |
Financing income, net | $ (90,893) | $ 5,568 | $ (160,168) | $ (32,065) |
LOSS PER SHARE (Details)
LOSS PER SHARE (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Earnings Per Share [Abstract] | |||||
Loss for the period | $ (2,557,201) | $ (1,588,998) | $ (5,087,526) | $ (2,815,762) | |
Cash dividend on Series A Preferred Stock | (2,014) | (4,753) | (6,714) | (9,453) | |
Stock dividend on Series B Preferred Stock | (245,637) | (131,281) | (491,668) | (254,101) | |
Stock dividend on Series C Preferred Stock | (160,588) | (20,355) | (276,574) | (20,355) | |
Loss for the period attributable to common stockholders | $ (2,965,440) | $ (1,745,387) | $ (5,862,482) | $ (3,099,671) | |
Number of shares: | |||||
Common shares used in computing basic income (loss) per share | 6,205,104 | 5,742,468 | 6,116,366 | 5,716,566 | |
Common shares used in computing diluted income (loss) per share | 6,205,104 | 5,742,468 | 6,116,366 | 5,716,566 | |
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 (*) | [1] | 21,001,400 | 12,210,613 | 19,868,112 | 11,220,345 |
[1] | All outstanding 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, because the effect of the common shares issuable as a result of the exercise or conversion of these instruments was anti-dilutive. |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | 1 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | 18 Months Ended | ||||||||||||
Jul. 31, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2017 | Jun. 23, 2017 | May 03, 2017 | Mar. 14, 2017 | Jan. 05, 2017 | Dec. 05, 2016 | Oct. 07, 2016 | Sep. 07, 2016 | Jul. 07, 2016 | Jun. 06, 2016 | May 04, 2016 | Apr. 14, 2016 | |
Subsequent Event [Line Items] | |||||||||||||||||
Number of units sold | 5,174.90 | 5,828.90 | |||||||||||||||
Number of convertible preferred shares offered per unit sold | 660 | 1,551 | 2,560 | 403.9 | 506 | 357.75 | 540 | 1,050.65 | 890.5 | 1,351 | 1,133 | ||||||
Series C Preferred Stock [Member] | |||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||
Number of units sold | 11,003.80 | 11,003.80 | |||||||||||||||
Number of common shares that will be issued from conversion of units | 2,445,317 | ||||||||||||||||
Number of shares covered by warrants | 4,890,634 | 4,890,634 | 4,890,634 | ||||||||||||||
Proceeds from issuance of Series C Units | $ 4,900,000 | $ 4,500,000 | |||||||||||||||
Conversion price | $ 4.50 | $ 4.50 | $ 4.50 | ||||||||||||||
Warrants term | 5 years | ||||||||||||||||
Subsequent Event [Member] | |||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||
Number of common shares that will be issued from conversion of units | 222,236 | ||||||||||||||||
Number of shares covered by warrants | 444,472 | ||||||||||||||||
Proceeds from issuance of Series C Units | $ 1,000,000 | ||||||||||||||||
Percentage of aggregate sales price of units | 10.00% | ||||||||||||||||
Percentage of non accountable expense allowance | 3.00% | ||||||||||||||||
Subsequent Event [Member] | Series C Preferred Stock [Member] | |||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||
Number of units sold | 1,000 | ||||||||||||||||
Subsequent Event [Member] | Placement Agent Warrants Tranche Two [Member] | |||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||
Number of shares covered by warrants | 22,223 | ||||||||||||||||
Warrant exercise price | $ 7.75 | ||||||||||||||||
Warrants term | 5 years | ||||||||||||||||
Subsequent Event [Member] | Placement Agent Warrants Tranche One [Member] | |||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||
Number of shares covered by warrants | 44,445 | ||||||||||||||||
Warrant exercise price | $ 4.50 | ||||||||||||||||
Warrants term | 5 years |