NOTE 7: WARRANTS TO PURCHASE ORDINARY SHARES

Following to Note 1e, the Warrants issued in the Private Placement are eligible also for “cashless exercise” in case the underlying Ordinary Shares are not registered for resale. In addition, the Warrants contain non-standard “full ratchet” anti-dilution protections upon issuance of securities at a price below the then-existing exercise price and are subject to certain net settlement cash feature in case of failure to timely deliver registered Ordinary Shares upon exercise. Therefore, these warrants are accounted and recorded as a liability according to the provisions of ASC 815-40, “Derivatives and Hedging - Contracts in Entity’s Own Equity” and measured using the following assumptions of the Monte Carlo option pricing model:

	August 4,			September 30,
	2016			2016

Risk-free interest rate (1)	1.03		%	1.12		%
Expected volatility (2)	72.7		%	70.4		%
Expected life (in years) (3)	5.0			4.84
Expected dividend yield (4)	0		%	0		%
Fair value per warrant:	$	1.46		$	1.69

(1)

Risk free interest rate based on yield rates of non-index linked U.S. Federal Reserve treasury bonds.

(2)

Expected volatility was calculated based on actual historical share price movements of companies in the same industry over a term that is equivalent to the expected term of the warrants.

(3)

Expected life was based on the contractual term of the warrants.

(4)

Expected dividend yield was based on the fact that the Company has not paid dividends to its shareholders in the past and does not expect to pay dividends to its shareholders in the future.

The Company re-measured these warrants at fair value in the total amount of $11,076 as of September 30, 2016. Consequently, during the three and nine months periods ended September 30, 2016, the Company recorded $1,507 as a financial expense as a result of change in the warrants’ fair value.