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Notes Payable

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Note 5. Notes Payable

Notes payable and accrued interest as of December 31, 2017 and 2016 are as follows:

		December 31, 2017				December 31, 2016

Principle		$	920,484			$	745,860
Discount			-				(306,529)
Accrued interest			71,162				32,768
Total			991,646				472,099

Issuances of convertibles notes during 2016 and 2017

On March 24, 2016, a convertible note payable and Class A warrants to purchase 187,500 common shares were issued to GoldMed Ltd for a consideration of $75,000 The note bears interest at 8% per annum and is convertible through March 23, 2017. The exercise price of the warrant is $0.80 and expires 12 months after issuance. The warrants and the beneficial conversion feature were valued at $75,000, which resulted in a $75,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On April 11, 2016, a convertible note payable and Class A warrants to purchase 200,000 common shares were issued to Maz Partner. The note bears interest at 8% per annum and is convertible through April 10, 2017. The exercise price of the warrant is $0.80 and expires 12 months after issuance. The warrants and the beneficial conversion feature were valued at $80,000, which resulted in a $80,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On June 20, 2016, a convertible note payable and Class A warrants to purchase 1,000,000 common shares and Class B warrants to purchase 1,000,000 common shares were issued to Alpha Anstalt Capital (“Alpha”). The note bears interest at 8% per annum and is convertible through June 19, 2017. The exercise price of the Class A warrants is $0.80 and expires 12 months after issuance and the exercise price of Class B warrants is $0.80 and expires 60 months after issuance. The warrants and the beneficial conversion feature were valued at $440,000, which resulted in a $440,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On June 30, 2016, a convertible note payable and Class A warrants to purchase 100,000 common shares were issued to Ilan Malka. The note bears interest at 8% per annum and is convertible through June 29, 2017. The exercise price of the warrant is $0.80. The warrants and the embedded beneficial conversion feature were valued at $40,000, which resulted in a $40,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On July 7, 2016, a convertible note payable and Class A warrants to purchase 250,000 common shares and Class B warrants to purchase 250,000 were was issued to Firstfire Global Opportunities Fund LTC (“Firstfire”). The exercise price of the Class A warrants is $0.80 and expires 12 months after issuance and the exercise price of Class B warrants is $0.80 and expires 60 months after issuance. The warrants and the beneficial conversion feature were valued at $100,000, which resulted in a $100,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note. The note bears interest at 8% per annum and is convertible through July 6, 2017.

The terms of the convertibles note and warrants to Alpha Capital and Firstfire Global Opportunities Fund LTC

The conversion price of the loans and the exercise price of Class A warrants and Class B warrants issued to Alpha and Firstfire, which had an exercise price of $0.80, were adjusted to $0.14, based on the Company’s share price on the 275^th calendar day after the issuance date in accordance with the original provisions of the agreement. The exercise price is subject to certain adjustments, including down round protection.

In July 2016, the Company granted an option to Alpha and Chi Squared (the “Alpha Chi Option”) to purchase Notes for an aggregate of up to $385,000 (up to $350,000 for Alpha and up to $35,000 for Chi Squared Capital Inc.) (“Option Notes”) and Warrants (“Option Warrants”) substantially identical to the Notes and Warrants issued. The Company accounts for the Alpha Chi Option as derivative liabilities that are measured at their far value at each period end as further detailed below.

The above-referenced convertible notes were due during 2017. A settlement agreement was reached with Alpha and Chi Squared Capital Inc. on August 7, 2017, as described below, and agreements were reached with other convertible note holders in 2018 as detailed in Note 11, Subsequent Events.

Settlement Agreement

Effective August 7, 2017, the Company entered into the settlement agreement with Alpha and Chi Squared Capital Inc. as a result of the fact that Alpha and Chi Squared had taken the position that certain defaults may have occurred as a result of actions and/or inactions by the Company with respect to the Company’s obligations under convertible notes (the “Notes”) issued during 2016, which the Company did not deem to be defaults (the “Settlement Agreement”).

Pursuant to the Settlement Agreement, the Notes, which had originally provided for a maturity date of June 19, 2017 and were in the original principal amounts of $400,000 and $40,000, respectively, were extended until June 19, 2019, in consideration for which the Company agreed to an increase in the principal amounts to $551,600 and $55,160, respectively, both of which retain the adjusted conversion price of $0.14, calculated in accordance with the terms of the original Notes. Such conversion price is subject adjustments in the event of future financing at a price of less than $0.14 per share. As a further part of the settlement, the Company agreed to issue Alpha and Chi Squared a total of 528.82 newly authorized shares of Series A Convertible Preferred Stock having a stated value and liquidation preference of $1,000 per share, and are convertible into a total of 3,778,647 shares based upon a conversion price of $0.14 per share, subject to adjustment in the event of a future financing such that the amount of ordinary shares to be issued pursuant to conversion of Series A Convertible Preferred Stock will represent the value of $1,000, per 1 Series A Convertible Preferred Stock, based on a conversion price which is identical to the ordinary share price at which securities are offered in such future financing. The Series A Convertible Preferred Stock shall be entitled to receive dividends on the same basis as Ordinary Shares and shall have no voting rights.

As part of the Settlement Agreement, the Company extended the Alpha Chi Option to July 15, 2018.

The settlement was accounted for as extinguishment of the pre-settlement notes and re issuance of the Notes and Series A Convertible Preferred Stock. As a result of the Settlement Agreement, the Company recorded a charge to general and administrative expenses in the Statement of Operation Losses of $440,684 representing the penalties and liquidation damages portion of the above-mentioned provision, and $219,276 was charged to finance expenses in the Statement of Operating Losses. The Series A Convertible Preferred Stock were recorded in shareholders’ equity at their fair value at the effective date of the settlement. As the Company concluded the conversion feature embedded in the amended notes is not a beneficial conversion feature pursuant to the provisions of ASC 470-20 (“Debt with Conversion and Other Options”), the post amendment carrying amount of the convertible notes, which was based on the fair value of the convertible notes at the effective date of the settlement, was recorded in liabilities in its entirely.

The Company accounts for options to purchase convertible notes and warrants (refer to the Alpha Chi Option above) as derivative liabilities that are measured at their far value at each period end, in accordance with ASC 815 (“Derivatives and Hedging”).

The Company uses directly observable inputs as well as significant unobservable inputs in the valuation of these derivative liabilities (level 3 measurements). The inputs used in the valuation are risk free interest rate, expected volatility, expect option term, expected dividend yield and Company specific discount rate.

The fair value of the derivative liabilities at December 31, 2017, as well prior to and following the effective date of the aforementioned settlement, was immaterial. The fair value of the derivative liabilities as of December 31, 2016 was $336,272. Finance expense from revaluation of the derivative liabilities included in the Company’s statement of operations was $336,272 for the year ended December 31 2016 and finance income was $336,272 for the year ended December 31, 2017.

Non-convertible note

On July 8, 2014, the Company issued a convertible note to Axel Springer Plug & Play Accelerator GmbH in the amount of $29,719. Accrued interest as of December 31, 2017 amounted to $3,316. In terms of the original agreement, as of December 31, 2017 and 2016, the convertible note is no longer convertible.