Convertible Loans

6 Months Ended

Jun. 30, 2022

Convertible Loans [Abstract]

CONVERTIBLE LOANS

NOTE 3:- CONVERTIBLE LOANS

a. On February 21, 2019, the Company received a convertible loan from third party (“February 2019 Lender”), with a two-year term, in the principal amount of $550 which bears 10% annual interest rate (“February 2019 Loan”).

The Company at its option shall have the right to redeem, in part or in whole, outstanding principal amount and interest under this loan agreement prior to the maturity date. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to 20% of the outstanding principal amount being redeemed plus outstanding and accrued interest.

The February 2019 Lender shall be entitled to convert at its option any portion of the outstanding and unpaid principal or accrued interest into fully paid and nonassessable of shares of common stock, at the lower of the fixed conversion price then in effect or the market conversion price. The number of shares of common stock issuable upon conversion of any conversion amount shall be determined by dividing (x) such conversion amount by (y) the fixed conversion price of $20.00 or (z) 80% of the lowest the volume-weighted average price of the Company’s shares of common stock during the 10 trading days immediately preceding the conversion date.

 As of December 31, 2021, the Company has defaulted on the February 2019 Loan and the February 2019 Loan was presented in fair value in the financial statements for the year ended December 31, 2021.

On January 18, 2022, the Company paid accrued interest of the February 2019 Loan in the amount of $20. In concurrence with the payment of accrued interest, the February 2019 Loan was extended to August 31, 2022. In the event that the Company completes a capital raise of at least $500 during the period through to August 31, 2022, the February 2019 Loan will be extended to December 31, 2022.

Conversion feature

In accordance with ASC 815-15-25 the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within current liabilities in the Company’s balance sheet. The conversion component is then marked to market at each reporting period with the resulting gains or losses shown in the statements of operations.

The fair value of the conversion feature (hereafter “Convertible Component”) in the amount of $279 ($264 at March 31, 2022) was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model below:

	March 31, 2022			June 30, 2022
Share price	$	0.80		$	0.55
Dividend yield		0			0	%
Risk-free interest rate		1.35	%		2.51	%
Expected term (in years)		0.75			0.50
Volatility		164.65	%		175.75	%

The February 2019 Loan is included in the convertible loans in current liabilities as of June 30, 2022, in the amount of $185, and $506 as of December 31, 2021.

During the six months ended June 30, 2022, the Company recorded financial income related to February 2019 Loan in the amount of $301, and interest and financial expenses in the amount of $38 in the six months ended June 30, 2021.

b. On October 15, 2019, the Company received a convertible loan from a third party (“October 2019 Lender”) in the principal amount of $1,100 that bears an annual 10% interest rate (“October 2019 Loan”). The October 2019 Loan has a two year term. Prior to the maturity date of the October 2019 Loan, the Company, at its option, has the right to redeem, in cash, in part or in whole, the amounts outstanding provided that as of the date of the redemption notice (i) the volume-weighted average price of the Company’s ordinary shares is less than $12.50 and (ii) there is no equity condition failures as defined therein. In the event that the Company wishes to redeem any amount under the convertible loan, the Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to 20% of the outstanding amount being redeemed in addition to outstanding and accrued interest.

The October 2019 Lender shall be entitled to convert the principal loan and the outstanding interest (the “Conversion Amount”) into such number of ordinary shares determined by dividing (x) such Conversion Amount by (y) the fixed conversion price of $12.50 or (z) 80% of the lowest the volume-weighted average price of the Company’s ordinary shares during the 10 trading days immediately preceding the conversion date.

As of December 31, 2021, the Company has defaulted on the October 2019 Loan and the October 2019 Loan is presented in fair value in the financial statements for the year ended December 31, 2021.On January 18, 2022, the Company paid accrued interest of the October 2019 Loan in the amount of $55. In concurrence with the payment of accrued interest, the October 2019 Loan was extended to August 31, 2022. In the event that the Company completes a capital raise of at least $500 during the period through to August 31, 2022, the October 2019 Loan will be extended to December 31, 2022.

Conversion feature

In accordance with ASC 815-15-25 the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value separately from the convertible notes, within current liabilities in the Company’s balance sheet. The conversion component is then marked to market at each reporting period with the resulting gains or losses shown in the statements of operations.

The fair value of the conversion feature (hereafter “Convertible Component”) in the amount of $698 ($725 at March 31, 2022) was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model below:

The Company estimated the fair value of BCF using the Monte Carlo option pricing model using the following weighted average assumptions:

	March 31, 2022			June 30, 2022
Share price	$	0.80		$	0.55
Dividend yield		0			0	%
Risk-free interest rate		1.35	%		2.51	%
Expected term (in years)		0.75			0.50
Volatility		164.65	%		175.75	%

The October 2019 Loan is included in the convertible loans in current liabilities as of June 30, 2022, in the amount of $987, and $2,142 as of December 31, 2021.

During the six months ended June 30, 2022, the Company recorded financial income related to October 2019 Loan in the amount of $1,101, and interest and financial expenses in the amount of $324 in the six months ended June 30, 2021.

c. On August 7, 2020, the Company received a convertible loan from a third party (“August 2020 Lender”) in the amount of $200 (the “August 2020 Loan”). Per the terms of the Agreements, the August 2020 Loan has a maturity date of August 7, 2022 (“Maturity Date”) and accrues annual interest at a rate of 10%.

The August 2020 Loan is convertible by the August 2020 Lender into Shares, at their discretion, at the lower of a fixed price of $1.02 (the “Fixed Conversion Price”) or 80% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock during the 10 trading days immediately preceding the conversion date (the “Market Conversion Price”).

The Company also granted the August 2020 Investor warrants to purchase 50,000 shares of common stock of the Company at an exercise price of $2.00 per share, such exercise price is subject to any future price-based anti-dilution adjustments. Accordance with ASU 2017-11 the warrants were classified in shareholders equity. The fair value of the warrants granted was $35 using the Black-Scholes-Merton option pricing model.

The fair value of the conversion feature (hereafter “Convertible Component”) in the amount of $128 was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model below:

	December 31, 2021			June 30, 2022
Share price	$	0.65		$	0.55
Dividend yield		0			0	%
Risk-free interest rate		0.23	%		1.28	%
Expected term (in years)		0.58			0.11
Volatility		145.70	%		175.75	%

The August 2020 Loan is included in the convertible loans in short term liabilities as of June 30, 2022, in the amount of $229, and $168 as of December 31, 2021.

During the six months ended June 30, 2022, the Company recorded interest and financial expenses related to the August 2020 Loan in the amount of $44, and during the six months ended June 30, 2021, the Company recorded interest and financial income related to the August 2020 Loan in the amount of $73.

d. On July 31, 2020, the Company received a convertible loan from Mr. Shmuel Yannay (a third party at that time, and a director of the Company as of October 28, 2021) in the amount of $100 (“Director Loan”). The loan has a maturity date of July 31, 2022 (“Maturity Date”) and accrues annual interest at a rate of 10%

The Director Loan is convertible into Shares, at his discretion, at the lower of a fixed price of $1.02 (the “Fixed Conversion Price”) or 80% of the lowest volume weighted average price (“VWAP”) of the Company’s common stock during the 10 trading days immediately preceding the conversion date (the “Market Conversion Price”).

The Company also granted the Mr. Yannay warrants to purchase 25,000 shares of common stock of the Company at an exercise price of $2.00 per share, such exercise price is subject to any future price-based anti-dilution adjustments. Accordance with ASU 2017-11 the warrants were classified in shareholders equity. The fair value of the warrants granted was $18 using the Black-Scholes-Merton option pricing model.

The fair value of the conversion feature (hereafter “Convertible Component”) an amount of $64 was estimated using the Monte Carlo Simulation Model to compute the Convertible Component’s fair value. The assumptions used to perform the Monte-Carlo simulation model below:

	December 31, 2021			June 30, 2022
Share price	$	0.65		$	0.55
Dividend yield		0			0	%
Risk-free interest rate		0.23	%		1.28	%
Expected term (in years)		0.58			0.11
Volatility		145.70	%		175.55	%

The Director Loan is included in the convertible loans in short term liabilities as of June 30, 2022, in the amount of $115, and $85 as of December 31, 2021.

During the six months ended June 30, 2022, the Company recorded interest and financial expenses related to the Director Loan in the amount of $18, and during the six months ended June 30 ,2021, the Company recorded interest and financial income related to the Director Loan in the amount of $27.

e. On June 13, 2022, Saffron Tech entered into a Simple Agreement for Future Equity (“June 2022 SAFE”) agreement with a third party (“June 2022 Investor”) for gross proceeds of $50 (“SAFE 2022 Investment Amount”).   The June 2022 SAFE shall be converted into Shares, following a financing event of at least $2,000 (“Equity Event”). The number of Shares to be issued shall be calculated as the amount being converted divided by the conversion price (“Conversion Price”). The Conversion Price is calculated as the SAFE Price or the Discount Price (both defined below), which gives the June 2022 Investor the greatest number of Shares.   The SAFE Price is the Valuation Cap ($5,000) divided by the Company Capitalization, being the total all the share capital of the company and all the Shares available for issuance under the Company’s investitive plan, immediately prior to the Equity Event. Discount Price is the number of shares multiplied by the Discount Rate (80%).   In the event of a liquidity event, the Company will issue Shares equal to the June 2022 SAFE Investment Amount divided by the liquidity price, as defined in the June 2022 SAFE Agreement.   If there is a dissolution event, the Company will pay the investor an amount equal to the purchase amount, without any interest.