NOTE 7 - STOCK CAPITAL

Stockholders Rights:

Shares of common stock confer upon their holders the right to receive notice to participate and vote in general meetings of shareholders of the Company, the right to receive dividends, if declared, and the right to receive a distribution of any surplus of assets upon liquidation of the Company.

Preferred A shares confer upon their holders the right to receive dividends when paid to holders of common stock of the Company on an as-converted basis, and the right to receive a distribution of any surplus of assets upon liquidation of the Company before any distribution or payment shall be made to the holders of any common stock.

Preferred C shares confer upon their holders the right to receive dividends when paid to holders of common stock of the Company on an as-converted basis. The shares of Series C Convertible Preferred Stock have the right to receive a distribution of any surplus of assets upon liquidation of the Company before any distribution or payment shall be made to the holders of any other securities.

Issuance of Shares:

On August 19, 2016 and prior to consummation of the merger, Artemis issued 524 shares of common stock (221,307 shares as adjusted to reflect the reverse recapitalization and reverse stock split) for an aggregate purchase price of $127, which was received in October 2016.

In August 2016, immediately upon consummation of the Merger, the Company issued 68,321 shares of the Company’s common stock, as well as 453 shares of the Company’s newly designated Series A Convertible Preferred Stock convertible into 658,498 shares of common stock, to an investor for an aggregate purchase price of $481,000 (net of issuance expenses). These shares have anti-dilution protection for a period of twenty four months. The anti-dilution protection has not been triggered through the date of these financial statements. In addition, the the investor within a 24-month period may purchase up to an additional 100% of its preferred A shares at 120% of the per share purchase price in August 2016. This additional purchase option was recorded in equity.

In October 2017, the Company issued 300,000 shares of the Company’s common stock, warrants to purchase 275,000 shares of common stock, as well as 250 shares newly designated Series C Convertible Preferred Stock to investors for an aggregate purchase price of $550,000 less issuance expenses. Each share of Series C Convertible Preferred Stock is convertible into 1,000 shares of common stock, subject to adjustments in the event of future financing at a price of less than the conversion price. Preferred shares confer upon their holders the right to receive dividends when paid to holders of common stock of the Company on an as-converted basis. The shares of Series C Convertible Preferred Stock have the right to receive a distribution of any surplus of assets upon liquidation of the Company before any distribution or payment shall be made to the holders of any other securities.

The 275,000 warrants contain a full ratchet anti-dilution price protection so that, in most situations upon the issuance of any common stock or securities convertible into common stock at a price below the then-existing exercise price of the outstanding warrants, the warrant exercise price will be reset to the lower common stock sales price.

As such anti-dilution price protection, does not meet the specific conditions for equity classification, the Company is required to classify the fair value of these warrants as a liability, with changes in fair value to be recorded as income (loss) due to change in fair value of warrant liability. The estimated fair value of our warrant liability at issuance date, was approximately $319. The Company recorded a finance expense of $109 at December 31, 2017 in respect of these warrants.

The Company uses the Black-Scholes valuation model to estimate fair value of these warrants. In using this model, the Company makes certain assumptions about risk-free interest rates, dividend yields, volatility, expected term of the warrants and other assumptions. Risk-free interest rates are derived from the yield on U.S. Treasury debt securities. Dividend yields are based on our historical dividend payments, which have been zero to date. Volatility is estimated from the historical volatility of our common stock as traded on NASDAQ. The expected term of the warrants is based on the time to expiration of the warrants from the date of measurement.

In accordance with ASC-820-10-50-2(g), the Company has performed a sensitivity analysis of the derivative warrant liabilities of the Company which are classified as level 3 financial instruments. The Company recalculated the value of warrants by applying a +/- 5% changes to the input variables in the Black-Scholes model that vary over time, namely, the volatility and the risk-free rate. A 5.0% decrease or increase in volatility would not cause a material change in the value of the warrants. A 5.0% decrease or increase in the risk-free rate would not have materially changed the value of the warrants; the value of the warrants is not strongly correlated with small changes in interest rates.

Reverse Stock Split:

On December 16, 2016, the Company effected a one-for-fifty (1:50) reverse stock split of its issued and outstanding shares of common stock. Share data included in these financial statements is retroactively adjusted as if the reverse stock split had occurred at the beginning of the earliest period presented.

Options issued to consultants and employees:

On August 22, 2016, the Company granted 126,730 stock options to consultants. Each stock option is exercisable into a share of the Company’s common stock of and expires no later than 10 years from the date of grant.

One third of the options vested on the grant date, and one third of the options vest upon the first and second anniversaries of the grant date, with the option becoming fully vested on August 22, 2018. As a result, the Company recognized compensation expenses in the amount of $75, included in Research & Development Expenses. 35,202 of these options were exercised in July 2017.

On August 1, 2017, the Company granted 242,640 stock options to the Company’s CEO. Each stock option is exercisable into a share of the Company’s common stock. . As a result, the Company recognized compensation expenses in the amount of $31 included in General & Administrative Expenses.

Upon termination of the CEO’s employment agreement any of the then unvested options shall expire immediately. All vested options may be exercised for a period of 90 days from the termination of the agreement. The options are subject to a 48 month vesting period whereby 5,055 options were vested on September 1, 2017 and 5,055 options become vested on the first day of each following month assuming the employment agreement has not been terminated.

A summary of the Company's option activity and related information is as follows:

	For the Twelve months ended December 31, 2017
	Number of stock options		Weighted average exercise price		Aggregate intrinsic value

Outstanding at beginning of period		126,730		0.01
Granted		242,640		1.30
Exercised		35,202		0.01
Cancelled		-

Outstanding at end of period		334,168	$	0.95		218,321
Options exercisable at period end		69,505	$	0.39		84,429

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company’s common stock on December 31, 2017, and the exercise price, multiplied by the number of in-the-money stock options on those dates) that would have been received by the stock option holders had all stock option holders exercised their stock options on those dates.

The stock options outstanding as of December 31, 2017 and 2016, have been separated into exercise price, as follows:

Exercise price		Stock options outstanding as of December 31,				Weighted average remaining contractual life – years as of December 31,				Stock options exercisable as of December 31,
$		2 0 1 7		2 0 1 6		2 0 1 7		2 0 1 6		2 0 1 7		2 0 1 6
	0.01		91,528		126,730		8.64		9.65		49,283		42,243
	1.30		242,640		-		9.68		-		20,220		-

			334,168		126,730		9.40		9.65		69,503		42,243

(*) Less than 1

Compensation expense recorded by the Company with respect to its stock-based employee compensation awards in accordance with ASC 718-10 for the year ended December 31, 2017 and 2016 was $103 and $36, respectively.

As the exercise price of the options is nominal, the Company estimated their fair values based on the value of the Company's shares at the measurement date.