Note 3. Related Party Transactions.

There were no transactions with related parties during the three month period ended March 31, 2017.

During the three months ended Mach 31, 2016, the Company issued 1,195,000 shares to three acting directors, for services valued at a total value of $1,194,403, arrived at using the stock price on date of grant of $1.00 per Nasdaq.com.

Note 4. Commitments and Contingencies.

The Company received grants to fund research and development projects from the State of Israel according to guidelines and procedures of the Office of the Chief Scientist of the Ministry of Industry and Trade. According to the agreement, the Company is obligated to pay royalties on the sale of products developed with the participation of the Chief Scientist. The royalty rate is 3.5% of sales and the total royalties will not exceed the amount of the grants received. As of March 31, 2017 and December 31, 2016,total grants received amounted approximately $222 thousands.

The obligation to pay royalties is contingent upon the successful outcome of the Company's research and development projects and the attainment of sales. The Company has no obligation to pay royalties, if sales are not generated, and if the research and development project fails.

Note 5. Convertible Notes.

Convertible notes in the amount of $155,000 fell due during March 2017 and the remaining balance falls due during June 2017. The Company is currently in discussions to extend these notes and believe that these discussions will be successful.

Note 6. Income Taxes.

The Company is subject to income taxes under the Israeli and U.S. tax laws:

Corporate tax rates

The Company is subject to Israeli corporate tax rate of 25% in 2016, 24% in 2017 and 23% from 2018. The Company is subject to a blended U.S. tax rate (federal as well as state corporate tax) of 35%.

As of December 31, 2016, the Company generated net operating losses in Israel of approximately $ 2,775,621, which may be carried forward and offset against taxable income in the future for an indefinite period.

As of December 31, 2016, the Company generated net operating losses in the U.S. of approximately $ 14,937,342. Net operating losses in the United States are available through 2035. Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.

The Company is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will not be available for the tax losses to be utilized in the future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts.

Note 7. Subsequent Events.

Overview

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which refer to future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Plan of Operations

During the three months ended March 31, 2017 and the year ended December 31, 2016, we raised $1,516,187 through the issuance of equity and debt and we may be expected to require up to an additional $1.5 million in capital during the next 12 months to fully implement our business plan and fund our operations. 

Results of Operations during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016

We have not generated any revenues during the three months ended March 31, 2017 and 2016. During the three month period ended March 31, 2017 and 2016 we incurred $557,887 and $1,900,230, respectively, in net losses.

Our research and development expenses increased to $178,887 for the three months ended March 31, 2017 as compared to $103,348 during the same period in the prior year. The increase was due to continued research and development expenses of Emerald Medical Applications Ltd.

Our general and administrative expenses decreased to $158,165 for the three months ended March 31, 2016 as compared to $1,799,520 during the same period in the prior year. The significant decrease was due to increased expenses relating to the merger between the Company and Emerald Medical Applications Ltd. as well as share based compensation that were incurred during the three months ended March 31, 2016.

Interest expense increased to $220,835 for the three months ended March 31, 2017 as compared income of to $2,638 during the same period in the prior year due to increased loans and convertible notes.

Depreciation expense increased to $3,488 for the three months ended March 31, 2017 as compared to $2,509 during the same period in the prior year due to additional fixed assets purchased during the year.

Liquidity and Capital Resources

Our balance sheet as of March 31, 2017 reflects current assets of $134,512 consisting of cash of $122,992 and other receivables of $11,520. As of December 31, 2016, we had current assets of $13,842 consisting of cash of $4,486, and other receivables of $9,356. We had fixed assets, net of accumulated depreciation of $29,169, as of March 31, 2017 and $31,803 as of December 31, 2016.

As of March 31, 2017, we had total current liabilities of $1,049,950 consisting of $225,094 in accounts payable and accrued liabilities, $82,645 in accounts payable to related parties, $69,935employee payable, $47,468 accrued interest payable, $593,338 in convertible notes payable and $31,470 in short term notes payable.

We had negative working capital of $873,651 as of March 31, 2017 compared to negative working capital $900,627 at December 31, 2016. Our total liabilities as of March 31, 2017 were $1,049,950 compared to $958,197 at December 31, 2016.

During the period ended March 31, 2017, we had negative cash flow from operations of $406,160, which was the result of a net loss of $557,887, increase in accrued interest of $14,700, $3,488 depreciation expense, $58,650 shares issued for services, $183,750 for amortization of debt discount, offset by $2,166 decrease in other receivables, $33,699 decrease in accounts payable and accrued liabilities, $31,406 decrease in employee payable, and $41,590 decrease in amounts due from related party.

During the three months ended March 31, 2017, we had negative cash flow from investing activities of $1,547, which was the result of an increase in restricted cash of $693 and the acquisition of fixed assets valued in the amount of $854.

During the period ended March 31, 2017, we had positive cash flow from financing activities of $526,213 which was the result of $526,213 proceeds from issuance of equity.

There are no limitations in the Company's certificate of incorporation on the Company's ability to borrow funds or raise funds through the issuance of restricted common stock to effect a business combination. The Company's limited resources and lack of having cash-generating business operations may make it difficult to borrow funds or raise capital. The Company's limitations to borrow funds or raise funds through the issuance of restricted capital stock required to effect or facilitate a business combination may have a material adverse effect on the Company's financial condition and future prospects, including the ability to complete a business combination. To the extent that debt financing ultimately proves to be available, any borrowing will subject us to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest, including debt of an acquired business.

The Company has only limited capital. Additional financing is necessary for the Company to continue as a going concern. Our independent auditors have unqualified audit opinion for the period ended March 31, 2017 with an explanatory paragraph on going concern.

In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon continued operations of the Company. Management believes that actions presently being taken to obtain additional equity financing will provide the opportunity to continue as a going concern.

ITEM 4. CONTROLS AND PROCEDURES Back to Table of Contents

None.

See risk factors discussed in Part I, "Item 1. Description of Business, subheading Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016.

None.

None.

None.

None.

(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein.