Convertible Loans

9 Months Ended

Sep. 30, 2015

Convertible Loans [Abstract]

CONVERTIBLE LOANS

NOTE 5: CONVERTIBLE LOANS:

A. On May 12, 2013, the Company entered into a Finance Agreement with Activa Red Green (the "Lender"), pursuant to which the Lender loaned to the Company $100 thousand with a maturity date of May 11, 2014 (the "Loan"). The Loan bears annual interest of 20%. In addition, in the event of default and nonpayment the Loan shall bear additional penalty interest of 4% per annum. The Lender is entitled to convert the loan into shares of common stock of the Company at a conversion price of $0.10 per share and upon such conversion receive with a warrant to purchase 1/10 share of common stock at the a price per share of $0.10. The loan was fully paid in May, 2014.

The Company determined that the convertible loan does not fall within the scope of ASC 480-10: Distinguishing Liabilities from Equity. The embedded conversion feature should not be bifurcated in accordance with ASC 815: Derivatives and Hedging. In addition, the Company followed ASC 470-20: Debt, to determine whether a beneficial conversion feature exists at loan inception and came to the conclusion that a beneficial conversion feature should not be recognized.

B.

On October 29, 2013, the Company entered into a Convertible Loan Agreement, according to which, the lenders will provide a loan in the amount of $1.391 million. The loan is linked to the Euro and bears an annual interest of 10% to be repaid in one lump sum with the loan principal upon the lapse of one year as of the closing date. The lenders may convert the loan into shares of the Company’s common stock on each of the dates falling upon: (1) the lapse of 6 months after the closing date, and (2) the lapse of 1 year as of the closing date. The loan is convertible into "Conversion Units" which in total include 7,224,777 common shares of the Company, and Warrants exercisable into 722,478 common shares of the Company each at a strike price of $0.19078 for a period of 18 months after issuance. The lenders are entitled to require that the loan shall be repaid upon the lapse of 6 months after the closing date, by delivering a written notice to the Company at least 21 days prior to such date, and in such case the Company is required to repay the loan (principal and interest accrued until such date) on such earlier date. During 2014 the lenders and the Company agreed to extend the payment date under the same terms to October 29, 2015, and a second extension is currently being negotiated.

The Company determined that the convertible loan does not fall within the scope of ASC 480-10. The embedded conversion feature and the prepayment clause should not be bifurcated in accordance with ASC 815. In addition, the Company followed ASC 470-20 to determine whether a beneficial conversion feature exists at loan inception and came to the conclusion that a beneficial conversion feature should not be recognized. The Company recorded issuance costs of approximately $73 thousand, which is amortized using the effective interest rate of the loan over the loan period. As of September 30, 2015, all the issuance costs were recorded in the Statements of Operations.

C. On February 13 and 27, 2014, the Company entered into a Convertible Loan Agreement with some of its shareholders and new investors, in which it borrowed an aggregate amount of $2.8 million. The loans are convertible into a total of 7,963,542 common shares of the Company. Some of the loans are linked to the Euro, and all of the loans bear interest at an annual rate of 10%. The Company shall repay the loan amount and the interest, in one lump sum, on the “Final Repayment Day”, which is 12 months after the applicable closing date or, if extended by the lender, 24 months from the applicable closing date.

The Company recorded issuance costs of approximately $154  thousand, which are amortized using the effective rate of the loan over the loan period. As of September 30, 2015, all the deferred issuance costs were recorded in the Statements of Operations.

In 2015, the Company repaid $108 thousand plus interest of the February 2014 loans and $364 thousand of the February 2014 loans were converted into 1,040,586 of shares of common stock.

Additionally, $800 thousand of the February 2014 loans were extended for an additional 6 months to be repaid with interest in August 2015. The remaining $1.391 million in loans were extended for one additional year in consideration of the issuance of an additional 1,285,714 warrants at an exercise price of $0.35 per share. $300 thousand of the extended February 2014 loans were repaid in September 2015, and the remaining $500 thousand in loans were extended for an additional 6 months, to be repaid with interest in February 2016.

The Company determined that the convertible loans do not fall within the scope of ASC 480-10. The embedded conversion feature and the extension clause should not be bifurcated in accordance with ASC 815. In addition, the Company followed ASC 470-20 to determine whether a beneficial conversion feature exists at loan inception and came to the conclusion that a beneficial conversion feature should not be recognized.

D. In December 2014, the Company entered into a convertible loan agreement with lenders, according to which the lenders will provide a loan in the amount of $923 thousand. The loan is linked to the Euro and matures in December 2015, and bears an annual interest of 10% to be repaid in a lump sum on such maturity date. This loan is convertible into "Conversion Units" which in total include 4,835,413 shares of common stock, and warrants exercisable into 2,417,706 shares of common stock each at an exercise price of $0.19078 for a period of 60 months after issuance.

The Company determined that the convertible loan does not fall within the scope of ASC 480-10. The embedded conversion feature and the extension clause should not be bifurcated in accordance with ASC 815. In addition, the Company followed ASC 470-20 to determine whether a beneficial conversion feature exists at loan inception and came to the conclusion that a beneficial conversion feature should not be recognized.

The Company recorded issuance costs of approximately $62 thousand, which are amortized using the effective rate of the loan over the loan period. As of June September, 2015, the unamortized issuance costs of $30 thousand were presented in other current assets. 

E. On July 28, 2015, the Company entered into a convertible loan agreement pursuant to which the lender loaned the Company the principal amount of $1 million. The loan matures in July 2016, subject to certain prepayment rights of the lender. The lender is entitled to require that the loan be repaid within 6 months after the closing date, at which time the lender may demand prepayment of the loan amount, including any accrued and unpaid interest. The loan bears an annual interest rate of 10%, to be paid every 6 months. The loan is convertible into 5,241,640 shares of common stock of the Company upon either: (i) the maturity date, or (ii) the occurrence of an event of default. In connection with the loan, the Company also granted the lender warrants to acquire 1,572,492 shares of common stock of the Company at an exercise price of $0.19078 per share, exercisable over a period of 5 years from the date of issuance.

In accordance with ASC 470 "Debt", the Company allocated the total proceeds between the loan and the warrants based on their relative fair value at the closing date. The discount arising from this allocation amounted to $65 thousand at the closing and is being amortized using the interest method over the term of loan. As of September 30, 2015, the unamortized discount amounted to $54 thousand.

The Company recorded issuance costs of $50, which are amortized over the loan period. As of September 30,2015, the unamortized issuance costs of $41were presented in other current assets.