COMMITMENTS AND CONTINGENT LIABILITIES

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

NOTE 9 – COMMITMENTS AND CONTINGENT LIABILITIES

On March 4, 2004, the OCS provided Integrity Israel with a grant of approximately $93,300 (NIS 420,000), for its plan to develop a non-invasive blood glucose monitor (the “Development Plan”). Integrity Israel is required to pay royalties to the OCS at a rate ranging between 3-5% of the proceeds from the sale of the Group's products arising from the Development Plan up to an amount equal to $93,300, plus interest at LIBOR from the date of grant. As of December 31, 2016, the remaining contingent liability with respect to royalty payment on future sales equals approximately $69,330, excluding interest. Such contingent obligation has no expiration date.

As of December 31, 2016, 2015 and 2014, the Group accrued royalties to the OCS in the amounts of $14,011, $8,167 and $1,793, respectively

Until mid of December 2015, Integrity Israel leased approximately 3,100 sq. ft. of office space in the city of Ashkelon, Israel as its principal offices and prototype laboratory. Pursuant to a verbal agreement with the landlord, Integrity Israel leased this facility on a monthly basis at a cost of approximately $2,934 (NIS 11,500). Currently, Integrity Israel leases approximately 5,500 sq. ft. of office space in the city of Ashdod, Israel for its principal offices. The lease term began on December 1, 2015 for a period of 5 years which can be extended for an additional 5 years at the option of the Company. Monthly lease payments including maintenance approximate $10,000. The Company estimates that its minimal rent and maintenance payments will approximate $120,000 per year over each of the next 5 years. In connection with the lease agreement, Integrity Israel provided the landlord a bank guarantee in the amount of approximately $35,000 (NIS 137,162) that can be exercised by the landlord in the case Integrity Israel fails to pay the monthly rent payments. The guarantee is renewed on an annual basis for a period of 5 years and is secured by funds on deposit with the bank, which generally must be sufficient to cover the principal amount guarantee.

During 2014, the Company engaged the Placement Agent in connection with an offering of up $25,000,000 of its securities, which engagement ultimately culminated in the issuance and sale of $8,500,000 Series B Units (the “2014 Offering”). Pursuant to a placement agent agreement with the Placement Agent entered into with respect to such private placement, the Placement Agent (or its sub-agents) was paid, as a commission, an amount equal to 6% of the funds raised in each, such offering, plus 4% of the funds as a management fee plus a 3% non-accountable expense allowance (13% in the aggregate), all in cash. In addition, pursuant to such placement agent agreement, the Company was required to and did issue to the Placement Agent (or its sub-agents) warrants to purchase up to 10% of the shares of Common Stock issued to investors (or underlying convertible securities issued to investors) in connection with such offerings at a price per share equal to the offering price subject to certain price adjustments. Based on the agreement signed in 2014, the Placement Agent will have a right of first refusal on any private equity, debt or rights offering for a period of 24 months from the date on which marketing efforts with respect to the 2014 offering began. In addition, pursuant to such agreement, the Company was required to use its reasonable efforts to have the Placement Agent named as a co-underwriter in any secondary public offering by the Company in the 12 months following completion of the 2014 offering. In addition, starting in September 2013, the Company retained the Placement Agent to provide certain advisory services for a monthly fee of $12,500 for the period starting September 2013 until December 2014 and $20,000 per month starting from January 2015.

During February 2016, the Company entered into an Advisory Agreement with the placement agent (“AGI’), pursuant to which the Company retained AGI on a non-exclusive basis to provide certain advisory services to the Company. As consideration for such services, the Company extended through December 31, 2019, the expiration date of 364,071 warrants issued to AGI and/or its designees in connection with the Company’s common stock offering completed in 2010 and the Series A Unit offering completed in 2012. The Advisory Agreement had an initial term of six months, subject to automatic renewal for additional 30 day terms unless terminated by either party with 30 days written notice. In April 2016, the Company and AGI amended again that Advisory Agreement to extend the term of the Advisory Agreement for an additional six months until March of 2017 and is not expected to be renewed. In consideration for such extension, the Company agreed to modify the terms of the 439,674 warrants issued to AGI and/or its designees in connection with the Series B unit offering to include full-ratchet anti-dilution protection. As a result of the two agreements the company recorded in its statement of operations for the year ended December 31, 2016, a one-time charge in the amount of $211,077 representing the incremental fair market value adjustments in respect of the above modified warrants issued to the placement agent. Such incremental fair market value adjustments represent the increase in the fair value of the warrants resulting from the above modifications and were recorded against stockholders’ deficit. In addition, as a result of the inclusion of anti-dilution protection, the Company classified $341,662, representing the fair market value at March 2016 of the above 439,674 warrants issued to AGI (after the above modification) out of stockholders’ deficit and presented them as Warrants with down round protection within long-term liabilities.

The Company paid the Placement Agent $1,014,974, $185,000 and $1,255,606, in cash during 2016, 2015, and 2014, respectively in connection with the above advisory service agreements and the offerings. See Notes 10B, Note 10D and Note 10F.1 with respect to warrants issued to the Placement Agent.