UNITED
STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549












FORM
10-Q












[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For
the quarterly period ended June 30, 2017



Commission
file number: 0-15476



Emerald
Medical Applications Corp(Exact Name Of Registrant As Specified In Its Charter)



|Delaware                                     |  | 68-0080601                              
|-------------------------------------------- |  | ----------------------------------------
|(State
    of Incorporation)                 |  | (I.R.S.
    Employer Identification No.)
|                                             |  |                                         
|7
    Imber Street, Petach Tikva, Israel     |  | 4951141                                 
|(Address
    of Principal Executive Offices) |  | (ZIP
    Code)                          



Registrant’s
Telephone Number, Including Area Code: +(972) 3-744-4505



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No
[X]



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in
Rule 12b-2 of the Exchange Act) or a smaller reporting company.





|Large
    accelerated filer [  ] | Accelerated
    filer [  ] | Non-Accelerated
    filer [  ] | Smaller
    reporting company [X]
|-------------------------------- | -------------------------- | ------------------------------ | ---------------------------------



On
August 21, 2017, the Registrant had 22,513,010 shares of common stock outstanding.


























TABLE
OF CONTENTS



|Item         |  | Description                                                        |  | Page
|------------ |  | ------------------------------------------------------------------ |  | ----
|             |  |                                                                    |  |     
|             |  | PART
    I - FINANCIAL INFORMATION                                 |  |     
|             |  |                                                                    |  |     
|ITEM
    1.  |  | FINANCIAL
    STATEMENTS                                           |  | 4   
|ITEM
    2.  |  | MANAGEMENT’S
    DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS |  | 12  
|ITEM
    3.  |  | QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     |  | 15  
|ITEM
    4.  |  | CONTROLS
    AND PROCEDURES                                        |  | 15  
|             |  |                                                                    |  |     
|             |  | PART
    II - OTHER INFORMATION                                    |  |     
|             |  |                                                                    |  |     
|ITEM
    1.  |  | LEGAL
    PROCEEDINGS                                              |  | 15  
|ITEM
    1A. |  | RISK
    FACTORS                                                   |  | 15  
|ITEM
    2.  |  | UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    |  | 15  
|ITEM
    3.  |  | DEFAULT
    UPON SENIOR SECURITIES                                 |  | 15  
|ITEM
    4.  |  | MINE
    SAFETY DISCLOSURE                                         |  | 15  
|ITEM
    5.  |  | OTHER
    INFORMATION                                              |  | 15  
|ITEM
    6.  |  | EXHIBITS                                                           |  | 15  







2











PART
I - FINANCIAL INFORMATION



|ITEM
    1. FINANCIAL STATEMENTS Back to Table of Contents |                                                                                             
|---------------------------------------------------------- | --------------------------------------------------------------------------------------------
|                                                           | Balance
    Sheets – June 30, 2017 (Unaudited) and December 31, 2016                        
|                                                           | Statements
    of Operations - Three and Six Months Ended June 30, 2017 and 2016 (Unaudited)
|                                                           | Statements
    of Stockholders’ - Six Months Ended June 30, 2017 and 2016 (Unaudited)       
|                                                           | Statements
    of Cash Flows - Six Months Ended June 30, 2017 and 2016 (Unaudited)          
|                                                           | Notes
    to Unaudited Interim Financial Statements                                         









3









Emerald
Medical Applications Corp.

Balance
Sheets

As
of June 30, 2017 (Unaudited) and December 31, 2016



Back
to Table of Contents







|                                                                                                                                                                                      |  | June
    30, 2017 |             |   | December
    31, 2016 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | --------------------- | -
|Assets                                                                                                                                                                                |  |                   |             |   |                       |  
|Current
    assets:                                                                                                                                                                   |  |                   |             |   |                       |  
|Cash
    and cash equivalents                                                                                                                                                         |  | $                 | 14,110      |   |                       | $
|Other
    receivable                                                                                                                                                                  |  |                   | 3,658       |   |                       |  
|Total
    current assets                                                                                                                                                              |  |                   | 17,768      |   |                       |  
|                                                                                                                                                                                      |  |                   |             |   |                       |  
|Restricted
    cash                                                                                                                                                                   |  |                   | 13,109      |   |                       |  
|Fixed
    assets, net of accumulated depreciation of $30,700 at June 30, 2017 and $21,029 at December 31, 2016                                                                        |  |                   | 28,129      |   |                       |  
|Total
    assets                                                                                                                                                                      |  | $                 | 59,006      |   |                       | $
|                                                                                                                                                                                      |  |                   |             |   |                       |  
|Liabilities
    and Stockholders’ Equity (Deficit)                                                                                                                                    |  |                   |             |   |                       |  
|Current
    liabilities:                                                                                                                                                              |  |                   |             |   |                       |  
|Accounts
    payable and accrued liabilities                                                                                                                                          |  | $                 | 279,284     |   |                       | $
|Provision
    for settlement of convertible notes                                                                                                                                     |  |                   | 740,860     |   |                       |  
|Accounts
    payable - related party                                                                                                                                                  |  |                   | 88,178      |   |                       |  
|Employee
    payable                                                                                                                                                                  |  |                   | 118,508     |   |                       |  
|Accrued
    interest payable                                                                                                                                                          |  |                   | 58,801      |   |                       |  
|Short
    term payable                                                                                                                                                                |  |                   | 32,695      |   |                       |  
|                                                                                                                                                                                      |  |                   |             |   |                       |  
|Convertible
    note, net of discount of Nil at June 30, 2017 and $305,417 at December 31, 2016                                                                                       |  |                   | 724,605     |   |                       |  
|Total
    current liabilities                                                                                                                                                         |  |                   | 2,042,931   |   |                       |  
|Total
    liabilities                                                                                                                                                                 |  |                   | 2,042,931   |   |                       |  
|                                                                                                                                                                                      |  |                   |             |   |                       |  
|Stockholders’
    equity (deficit)                                                                                                                                                    |  |                   |             |   |                       |  
|Preferred
    stock, $0.0001 par value; 10,000,000 shares authorized; none issued.                                                                                                    |  |                   | -           |   |                       |  
|Common
    stock, $0.0001 par value; 490,000,000 shares authorized; 21,321,613 and 19,962,728 shares issued and outstanding at June 30,
    2017 and December 31, 2016, respectively. |  |                   | 2,255       |   |                       |  
|Accumulated
    other comprehensive income                                                                                                                                            |  |                   | (19,337     | ) |                       |  
|Additional
    paid-in capital                                                                                                                                                        |  |                   | 14,438,006  |   |                       |  
|Accumulated
    deficit                                                                                                                                                               |  |                   | (16,404,849 | ) |                       |  
|Total
    stockholders’ deficit                                                                                                                                                       |  |                   | (1,983,925  | ) |                       |  
|Total
    liabilities and stockholders’ deficit                                                                                                                                       |  | $                 | 59,006      |   |                       | $



The
accompanying notes are an integral part of these financial statements.





4







Emerald
Medical Applications Corp.

Statements
of Operations

For
the Three and Six Months ended June 30, 2017 and 2016

(Unaudited)

Back
to Table of Contents



|                                                            |  | Six
    Months    |            |   | Six
    Months    |   |            | Three
    months  |  |   | Three
    
    months |  
|----------------------------------------------------------- |  | ----------------- | ---------- | - | ----------------- | - | ---------- | ----------------- |  | - | --------------------- | -
|                                                            |  | ended             |            |   | ended             |   |            | ended             |  |   | ended                 |  
|                                                            |  | June
    30, 2017 |            |   | June
    30, 2016 |   |            | June
    30, 2017 |  |   | June
    30, 2016     |  
|                                                            |  |                   |            |   |                   |   |            |                   |  |   |                       |  
|Revenues                                                    |  | $                 | -          |   |                   | $ | -          |                   |  | $ | -                     |  
|Expenses:                                                   |  |                   |            |   |                   |   |            |                   |  |   |                       |  
|Research
    and development                                |  |                   | 349,821    |   |                   |   | 295,350    |                   |  |   | 168,583               |  
|General
    and administrative expenses                     |  |                   | 682,606    |   |                   |   | 2,820,401  |                   |  |   | 520,953               |  
|Total
    operating expenses                                |  |                   | 1,032,427  |   |                   |   | 3,115,751  |                   |  |   | 689,536               |  
|                                                            |  |                   |            |   |                   |   |            |                   |  |   |                       |  
|Loss
    from operations                                    |  |                   | (1,032,427 | ) |                   |   | (3,115,751 | )                 |  |   | (689,536              | )
|                                                            |  |                   |            |   |                   |   |            |                   |  |   |                       |  
|Finance
    income (expense)                                |  |                   | (662,181   | ) |                   |   | 27,547     |                   |  |   | (441,187              | )
|Net
    loss                                                |  | $                 | (1,694,608 | ) |                   | $ | (3,088,204 | )                 |  | $ | (1,130,724            | )
|                                                            |  |                   |            |   |                   |   |            |                   |  |   |                       |  
|Basic
    and diluted (net loss per share)                  |  | $                 | (0.08      | ) |                   | $ | (2.03      | )                 |  | $ | (0.05                 | )
|Weighted
    average shares outstanding - basic and diluted |  |                   | 20,995,941 |   |                   |   | 18,121,314 |                   |  |   | 21,321,613            |  



The
accompanying notes are an integral part of these financial statements.





5







Emerald
Medical Applications Corp.

Statements
Stockholders’ Deficit

For
the Six Months Ended June 30, 2017

(Unaudited)



Back
to Table of Contents



|                                                                         |  |        |            |  | Additional |   |       | Other         |  |   |             |   |  | Total         |        
|------------------------------------------------------------------------ |  | ------ | ---------- |  | ---------- | - | ----- | ------------- |  | - | ----------- | - |  | ------------- | -------
|                                                                         |  | Common |            |  | Paid-in    |   |       | Comprehensive |  |   | Accumulated |   |  | stockholders’ |        
|                                                                         |  | Shares |            |  | Amount     |   |       | Capital       |  |   | Income      |   |  | Deficit       |        
|Balance
                                         as of December 31, 2016 |  |        | 19,931,478 |  |            | $ | 1,994 |               |  | $ | 13,826,957  |   |  | $             | (19,337
|Common
    stock issued for cash                                         |  |        | 1,315,563  |  |            |   | 132   |               |  |   | 526,081     |   |  |               | -      
|Cashless
    exercise of Warrants                                        |  |        | 1,096,395  |  |            |   | 110   |               |  |   | (110        | ) |  |               | -      
|Conversion
    of Convertible Note to shares                             |  |        | 74,572     |  |            |   | 7     |               |  |   | 10,393      |   |  |               | -      
|Issuance
    of Shares                                                   |  |        | 125,000    |  |            |   | 12    |               |  |   | (12         | ) |  |               | -      
|Share
    based compensation                                             |  |        | -          |  |            |   | -     |               |  |   | 74,697      |   |  |               | -      
|Net
    loss for the period                                              |  |        | -          |  |            |   | -     |               |  |   | -           |   |  |               | -      
|Balance
    as of June 30, 2017                                          |  |        | 22,543,008 |  |            | $ | 2,255 |               |  | $ | 14,438,006  |   |  | $             | (19,337



The
accompanying notes are an integral part of these financial statements.





6







Emerald
Medical Applications Corp.

Statements
of Cash Flows

For
the Six Months Ended June 30, 2017 and 2016

(Unaudited)

Back
to Table of Contents



|                                                                                |  | Six
    Months    |            |   | Six
    Months    |  
|------------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ----------------- | -
|                                                                                |  | ended             |            |   | ended             |  
|                                                                                |  | June
    30, 2017 |            |   | June
    30, 2016 |  
|Operating
    Activities:                                                       |  |                   |            |   |                   |  
|Net
    loss                                                                    |  | $                 | (1,694,608 | ) |                   | $
|Adjustments
    to reconcile net loss to net cash used in operating activities: |  |                   |            |   |                   |  
|Depreciation
    expense                                                        |  |                   | 7,445      |   |                   |  
|Amortization
    of debt discount                                               |  |                   | 325,399    |   |                   |  
|Shares
    issued for services                                                  |  |                   | -          |   |                   |  
|Options
    issued for services                                                 |  |                   | -          |   |                   |  
|Employee
    option expenses                                                    |  |                   | 74,697     |   |                   |  
|Decrease
    in accounts payable and accrued liabilities                        |  |                   | 37,656     |   |                   |  
|Increase
    in provision for settlements of convertible loan                   |  |                   | 740,860    |   |                   |  
|Decrease
    in amounts due from related party                                  |  |                   | (34,832    | ) |                   |  
|Increase
    in accrued interest                                                |  |                   | 26,033     |   |                   |  
|Increase
    in other receivables                                               |  |                   | 5,698      |   |                   |  
|Net
    cash used in operating activities                                       |  |                   | (511,652   | ) |                   |  
|                                                                                |  |                   |            |   |                   |  
|Investing
    Activities:                                                       |  |                   |            |   |                   |  
|Increase
    in restricted cash                                                 |  |                   | (1,184     | ) |                   |  
|Purchase
    of fixed assets                                                    |  |                   | (3,771     | ) |                   |  
|Net
    cash provided by investing activities                                   |  |                   | (4,955     | ) |                   |  
|                                                                                |  |                   |            |   |                   |  
|Financing
    Activities:                                                       |  |                   |            |   |                   |  
|Proceeds
    from sale of common stock (net of issuance expenses)               |  |                   | 526,231    |   |                   |  
|Principal
    repayments on debt                                                |  |                   | -          |   |                   |  
|Issuance
    of short-term convertible notes                                    |  |                   | -          |   |                   |  
|Net
    cash provided by financing activities                                   |  |                   | 526,231    |   |                   |  
|                                                                                |  |                   |            |   |                   |  
|Net
    increase in cash                                                        |  |                   | 9,624      |   |                   |  
|Cash
    and cash equivalents - beginning of period                             |  |                   | 4,486      |   |                   |  
|Cash
    and cash equivalents - end of period                                   |  | $                 | 14,110     |   |                   | $
|                                                                                |  |                   |            |   |                   |  
|Non
    cash investing and financing Activities                                 |  |                   |            |   |                   |  
|Common
    stock issued pursuant to convertible note                            |  |                   | 10,400     |   |                   |  
|Cashless
    exercise of Warrants                                               |  |                   | 153,495    |   |                   |  





The
accompanying notes are an integral part of these financial statements.





7











Emerald
Medical Applications Corp.

Notes
to Unaudited Interim Financial Statements

June
30, 2017

Back
to Table of Contents



Note
1. The Company and Significant Accounting Policies.



Organizational
Background:



Emerald
Medical Applications Corp (the “Company” or “Registrant”), was incorporated in the State of Ohio in 1989
under a predecessor name, Zaxis International Inc. (“Zaxis”). On August 25, 1995, Zaxis merged with a subsidiary of
The InFerGene Company, a Delaware corporation, which entity changed its name to Zaxis International Inc.and the Company was reincorporated
in Delaware as Zaxis. On December 30, 2014, Zaxis entered into a non-binding Memorandum of Understanding with Emerald Medical
Applications Ltd., which was then a private limited liability company incorporated under the laws of the State of Israel (“Emerald”).



On
March 16, 2015, Zaxis and Emerald executed the Share Exchange Agreement, which closed on July 14, 2015. The Share Exchange Agreement
was accounted for as a reverse recapitalization. As a result, the historical financial statements of the Registrant were replaced
with the historical financial statements of Emerald.



The
Company and its subsidiary, Emerald, are collectively referred to as the “Company”.



Emerald
Medical Applications Ltd, a wholly-owned subsidiary of the Registrant effective July 14, 2015, was organized as a privately-owned
company under the laws of the State of Israel on February 17, 2010. Emerald is a mobile digital-health startup company engaged
in the development, sale and service of imaging solutions utilizing its proprietary DermaCompare software that it developed for
use in derma imaging and analytics (“DermaCompare”). Emerald believes that its proprietary DermaCompare software represents
an advancement in skin cancer screening that should enable physicians to more readily identify and monitor changes in their patients’
skin characteristics.



Emerald’s
DermaCompare solution allows dermatologists and other medical care professionals, using a set of 25 total body photography (“TBP”),
to capture sets of skin lesion images with, among other devices, digital cameras, camera-equipped smart phones or tablets. These
TBP images are then transmitted online and are remotely analyzed by professionals using our DermaCompare software.



Our
sales and marketing plan, which has already commenced, is to sell licenses for our DermaCompare imaging software to: NHSs, HMOs,
health insurance companies, hospitals and medical clinics through distributers, health care channel partners or directly through
independent salespersons and/or web purchase to dermatologists and other physicians (GPs) that we expect to purchase licenses
based on the number of potential numbers of patients.



Basis
of Presentation and significant Accounting Policies:



The
accompanying consolidated financial statements include the accounts of the Company or in the first person notations “we,”
“us” and “our”) and its wholly owned subsidiary prepared in accordance with accounting principles generally
accepted in the United States of America and with the instructions to Form 10-Q. The financial statements presented
herein have not been audited by an independent registered public accounting firm, but include all material adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition,
results of operations and cash flows for the period. However, these results are not necessarily indicative of results for any
other interim period or for the full fiscal year. The preparation of financial statements in conformity with generally accepted
accounting principles requires us to make certain estimates and assumptions for the reporting periods covered by the financial
statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual
amounts could differ from these estimates.



Certain
information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting
principles have been omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The accompanying
consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.



Recent
Accounting Pronouncements



The
Company assesses the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board on its
financial statements. Following are newly issued standards or material updates to the Company’s previous assessments from
its Annual Report on Form 10-K for the fiscal year ended December 31, 2016:





8









In
May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting,” which clarifies when
a change to terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires
modification accounting if the vesting condition, fair value or the award classification is not the same both before and after
a change to the terms and conditions of the award. The new guidance is effective on a prospective basis beginning on January 1,
2018 and early adoption is permitted. The Company does not expect the adoption of this standard to have an impact on its consolidated
financial statements.



Note
2. Stockholders’ Equity.



Recent
Issuances of Common Stock



On
July 7, 2016, the Company announced that it had been awarded first prize of 500,000 Euros or approximately U$526,000, in a competition
against over 3,500 other tech companies in the Publicis Groupe 90 initiative at the inaugural edition of Viva Technology Paris.
On February 24, 2017, the Registrant accepted a Reg S Subscription Agreement from Publicis 90 in consideration for the issuance
to Publicis 90 of 1,315,563 restricted shares of the Registrant’s common stock at a subscription price of $0.40 per share
representing the award of 500,000 Euros. The issuance was made in reliance upon the exemptions provided in Section 4(2) of the
Securities Act of 1933, as amended (the “Act”) and Regulation S promulgated by the SEC under the Act.



On
April 25, 2017, a holder of a convertible note in the principal amount of $100,000 converted $10,400 into 74,572, shares based
on an adjusted conversion price of $0.14. The conversion price was adjusted on March 22, 2017 pursuant to the provisions of the
2016 Secured Convertible Note Agreement..



On
June 12, 2017, certain warrant holders holding 1,100,000 Class A Warrants and 1,100,000 Class B Warrants, elected to exercise
certain warrants on a cashless basis. In accordance with the 2016 Secured Convertible Note Agreement the Class A warrants and
Class B warrants were increased to 5,665,626, respectively, based on an adjusted share price of $0.14 per share and 3,451,490
Class B Warrants were converted to 1,096,395 shares at $0.14 per share. The exercise price and amount of shares issued were adjusted
on March 22, 2017.



On
June 12, 2017, the Company completed the issuance of 125,000 shares of the Company’s common stock to Alpha Anstalt
Capital (“Alpha”) pursuant to the Company’s agreement with Alpha in the prior year.



Employee
Stock Options



A
summary of the Company’s activity related to options to employees, executives and directors and related information is as
follows:



|                                         |  | For
    the six month period ended June 30, 2017 |          
|---------------------------------------- |  | ------------------------------------------------ | ---------
|                                         |  | Number
    of Options                            |          
|Outstanding
    at December 31, 2016     |  |                                                  | 4,754,677
|Granted                                  |  |                                                  | -        
|Exercised                                |  |                                                  | -        
|Cancelled                                |  |                                                  | (349,125 
|Outstanding
    at June 30, 2017         |  |                                                  | 4,405,552
|Options
    exercisable at end of period |  |                                                  | 3,610,833



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 shares on June 30, 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 June 30, 2017 have been separated into exercise prices, as follows:



|Exercise
    Price 
    ($) |     |  | Stock
    options 
    outstanding |  |           | Weighted
    average remaining
    contractual life - years |  |  | Stock
    options 
    exercisable | 
|--------------------------- | --- |  | ---------------------------------- |  | --------- | ----------------------------------------------------------- |  |  | ---------------------------------- | 
|                            | 0.4 |  |                                    |  | 1,426,320 |                                                             |  |  | 8.75                               | 
|                            | 0.2 |  |                                    |  | 1,281,875 |                                                             |  |  | 8.50                               | 
|                            | (*) |  |                                    |  | 1,697,357 |                                                             |  |  | 8.75                               | 
|                            |     |  |                                    |  | 4,405,552 |                                                             |  |  | 8.75                               | 



(*)
Less than $0.01.





9









Compensation
expense recorded by the Company in respect of its stock-based employee compensation awards in accordance with ASC 718-10 for the
three and six month periods ended June 30, 2017, were $58,650 and $117,301, respectively (three and six month periods ended June
30, 2016- 244,542 and $455,032, respectively).



Note
3. Related Party Transactions.



There
were no transactions with related parties during the six-month period ended June 30, 2017 and there is $88,178 outstanding to
related party in respect of costs paid on behalf of the Company as of June 30, 2017 (as of June 30, 2017 - $125,962).



During
the six months ended June 30, 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 Innovation Authority 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 June 30, 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.



All
the Convertible notes fell due during the six months ended June 30, 2017. The Company is currently in discussions to extend these
notes and believe that these discussions will be successful. (See also note 7)



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 $2,972,501, 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 $15,746,103. 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.



|                              |  | As
    of 
    June 30, 2017 |            |   | As
    of
    December 31, 2016 |  
|----------------------------- |  | ---------------------------- | ---------- | - | ------------------------------- | -
|Net
    loss carry-forward    |  | $                            | 19,349,640 |   |                                 | $
|                              |  |                              |            |   |                                 |  
|Total
    deferred tax assets |  |                              | 6,425,899  |   |                                 |  
|Valuation
    allowance       |  |                              | (6,425,899 | ) |                                 |  
|                              |  |                              |            |   |                                 |  
|Net
    deferred tax assets   |  | $                            | -          |   |                                 | $





10









Note
7. Subsequent Events.



Effective
August 7, 2017, the Company entered into the settlement agreement with Alpha Anstalt Capital and Chi Squared Capital Inc. as a
result of the fact that Alpha and Chi Squared had taken the position that certain defaults may have occurred as a result of actions
and/or inactions by the Company with respect to the Company’s obligations under convertible notes (the “notes”)
issued during 2016, which the Company did not deem to be defaults (the “Settlement Agreement”).



Pursuant
to the Settlement Agreement, the Notes, which had originally provided for a maturity date of June 19, 2017 and were in the original
principal amounts of $400,000 and $40,000, respectively, were extended until June 19, 2019, in consideration for which the Company
agreed to an increase in the principal amounts to $551,600 and $55,160, respectively, both of which retain the adjusted conversion
price of $0.14, calculated in accordance with the terms of the original Notes. As a further part of the settlement, the Company
agreed to issue Alpha and Chi Squared a total of 528.82 newly authorized shares of Series A Convertible Preferred Stock having
a stated value and liquidation preference of $1,000 per share, and are convertible into a total of 3,778,647 shares based upon
a conversion price of $0.14 per share, and subject to certain adjustments. The Series A Preferred Stock shall be entitled to receive
dividends on the same basis as Ordinary Shares and shall have no voting rights



As
a result of the Settlement Agreement, the Company recorded a provision in the balance sheet in the amount of $740,860, bringing
the total of (i) the fair value of the Series A Convertible Preferred Stock, and (ii) the increase in the fair value of the Notes.
A corresponding charge was made in general and administrative expenses in the Statement of Operation Losses of $440,684 representing
the penalties and liquidation damaged portion of the above-mentioned provision, and $300,176 was charged to finance expenses
in the Statement of Operating Losses.





11









ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONSBack
to Table of Contents



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



We
are a digital health startup company engaged in the development, sale and service of imaging solutions utilizing our proprietary
DermaCompare software that we developed for use in derma imaging and analytics (our “DermaCompare” or “Product”).
In our development of the DermaCompare technology, we utilized the knowledge learned from advanced military image processing and
data analytics to improve the analysis of medical images for the benefit of patients and the medical community. We believe that
our proprietary DermaCompare software represents an advancement in skin cancer screening that should enable physicians to more
readily identify and monitor changes in their patients’ skin characteristics.



DermaCompare
is Emerald’s first application of its technology, which we believe represents an advance in the early detection of skin
cancer. DermaCompare is based on automated image analytics software using advanced algorithms for alignment, anchoring, identifying
and detecting changes in the shapes, colors and sizes of skin lesions, which could potentially become Melanoma. We apply our DermaCompare
technology in image capture, correction and intelligent data extraction in the market for derma imaging products.



Our
DermaCompare solution allows dermatologists and other medical care professionals, using a set of 25 total body photography (“TBP”),
to capture sets of skin lesion images with, among other devices, digital cameras, camera-equipped smart phones or tablets. These
images are then transmitted online and are remotely analyzed by professionals using our DermaCompare software.



Our
DermaCompare imaging software has 2 main modules:



| | ● | A
    SaaS cloud-based Dr. Module that can be launched on any desktop computer connected to the Internet; or              
| | - | --------------------------------------------------------------------------------------------------------------------------
| | ● | Mobile
    APP for mass population uses can be installed on smart phones or tablets with iOS or Android operating systems.



Our
future plans also contemplate the use of wearable computing and imaging devices such as Google glasses or other comparable devices.



Our
sales and marketing plan, which has already commenced, is to sell licenses for our DermaCompare imaging software to: NHSs, HMOs,
health insurance companies, hospitals and medical clinics through distributers, health care channel partners or directly through
independent salespersons and/or web purchase to dermatologists and other physicians (GPs) that we expect to purchase licenses
based on the number of potential numbers of patients.



In
furtherance of our business plan, which has resulted in us becoming an operating company, we have entered into a series of agreements
with unaffiliated third parties for the distribution of its DermaCompare Technology, as follows:



1.
On August 12, 2013, Emerald entered into an exclusive distribution with Derma Italy Sri, organized under the laws of the Italy
(“Derma Italy”), pursuant to which Derma Italy was granted exclusive distribution rights in Italy;



2.
On December 1, 2013, Emerald entered into a distribution agreement with S. Bokhorst - Creatiekracht, organized under the laws
of the Netherlands, pursuant to which S. Bokhorst was granted exclusive distribution in the Netherlands;



3.
On February 6, 2014, Emerald entered into a distribution agreement with Medical Edge Pty Ltd, organized under the laws of Australia
(“Medical Edge”), pursuant to which Medical Edge was granted exclusive distribution rights in the markets of Australia,
New Zealand and Oceania;



4.
On January 14, 2015, Emerald entered into a Project Agreement with Realize S.A. and Ubitech, entities engaged in IT related to
medical technology in Greece, and MEDISP and MPUoP, academic and research institutes in Greece (collectively, the “Greek
Partners”). Emerald and the Greek Partners anticipate imminent grants from the Office of Chief Scientist of the State of
Israel and the General Secretariat for Research and Technology of Greece, respectively, the proceeds of which will be used for
development of enhanced smartphone applications for diagnosis of early stage Melanoma.





12









During
the six months ended June 30, 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 June 30, 2017 as compared to the three months ended June 30, 2016



We
have not generated any revenues during the three months ended June 30, 2017 and 2016. During the three-month period ended June
30, 2017 and 2016 we incurred $1,130,724 and $1,187,972, respectively, in net losses.



Our
research and development expenses decreased to $168,583 for the three months ended June 30, 2017 as compared to $192,002 during
the same period in the prior year. The decrease was due to decreased research and development expenses of Emerald Medical Applications
Ltd.



Our
general and administrative expenses decreased to $520,953 for the three months ended June 30, 2016 as compared to $1,016,932 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 June
30, 2016.



Interest
expense increased to $441,187 for the three months ended June 30, 2017 as compared income of to $20,962 during the same period
in the prior year. The increase in the current period is due to the penalties and liquidation damages calculated in the Settlement
Agreement between the Company that Alpha and Chi Squared that have been charged to general and administrative expenses.



Results
of Operations during the six months ended June 30, 2017 as compared to the six months ended June 30, 2016



We
have not generated any revenues during the six months ended June 30, 2017 and 2016. During the six-month period ended June 30,
2017 and 2016 we incurred $1,694,608 and $3,088,204, respectively, in net losses.



Our
research and development expenses increased to $349,821 for the six months ended June 30, 2017 as compared to $295,350 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 $682,606 for the six months ended June 30, 2017 as compared to $2,820,401 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 six months ended June
30, 2016.



Interest
expense increased to $662,181 for the six months ended June 30, 2017 as compared income of to $27,547 during the same period in
the prior year. The increase in the current period is due to the penalties and liquidation damages calculated in the Settlement
Agreement between the Company that Alpha and Chi Squared that have been charged to general and administrative expenses.



Liquidity
and Capital Resources



Our
balance sheet as of June 30, 2017 reflects current assets of $17,768 consisting of cash of $14,110 and other receivables of $3,658.
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 $28,139, as of June 30, 2017 and $31,803 as of December 31, 2016.



As
of June 30, 2017, we had total current liabilities of $2,042,931 consisting of $279,284 in accounts payable and accrued liabilities,
$740,860 as a provision for settlement of convertible notes, $88,178 in accounts payable to related parties, $118,508 employees
payable, $58,801 accrued interest payable, $724,605 in convertible notes payable and $32,695 in short term notes payable.



We
had negative working capital of $2,025,163 as of June 30, 2017 compared to negative working capital $944,355 at December 31, 2016.
Our total liabilities as of June 30, 2017 were $1,997,231 compared to $958,197 at December 31, 2016.



During
the six month period ended June 30, 2017, we had negative cash flow from operations of $511,652, which was the result of a net
loss of $1,694,608, increase in accrued interest of $26,033, $7,445 depreciation expense, $325,399 for amortization of debt discount,
$5,698 increase in other receivables, $740,860 increase in the provision for the settlement of convertible loans, 37,656 increase
in accounts payable and accrued liabilities, offset by $34,832 decrease in amounts due from related party.





13









During
the six months ended June 30, 2017, we had negative cash flow from investing activities of $4,995, which was the result of an
increase in restricted cash of $1,184 and the acquisition of fixed assets valued in the amount of $3,771.



During
the period ended June 30, 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 June 30, 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.





14









ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKBack to Table
of Contents



We
have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.



ITEM
4. CONTROLS AND PROCEDURESBack to Table of Contents



Evaluation
of Disclosure Controls and Procedures



As
of June 30, 2017, the Company’s chief executive officer and chief financial officer conducted an evaluation regarding the
effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange
Act. Based upon the evaluation of these controls and procedures required by Rules 13a-15 or 15d-15, our chief executive officer
and chief financial officer concluded that our disclosure controls and procedures were ineffective as of the end of June 30, 2017
under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).



Changes
in Internal Control Over Financial Reporting



There
were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation
required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended June 30, 2017 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



PART
II - OTHER INFORMATION



ITEM
1. LEGAL PROCEEDINGSBack to Table of Contents



None.



ITEM
1A. RISK FACTORSBack to Table of Contents



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.



ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSBack to Table
of Contents



None.



ITEM
3. DEFAULTS UPON SENIOR SECURITIESBack to Table of Contents



None.



ITEM
4. MINE SAFETY DISCLOSUREBack to Table of Contents



None.



ITEM
5. OTHER INFORMATIONBack to Table of Contents



None.



ITEM
6. EXHIBITSBack to Table of Contents



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



|Exhibit
    No. |  | Description                                                                                                                                    
|--------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|31.1            |  | Certification
    of CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|31.2            |  | Certification
    of CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1            |  | Certification
    of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.              
|32.2            |  | Certification
    of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.              





15









SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned.



EMERALD
MEDICAL APPLICATIONS CORP.



|By: | /s/
    Alimi Ahmed                                        | 
|--- | ---------------------------------------------------------- | 
|    | Alimi
    Ahmed                                            | 
|    | Chief
    Executive Officer                                | 
|    | (Principal
    Executive Officer)                          | 
|    | Date:
    August 23, 2017                                  | 
|    |                                                            | 
|By: | /s/
    Gadi Levin                                         | 
|    | Gadi
    Levin                                             | 
|    | Chief
    Financial Officer                                | 
|    | (Principal
    Financial and Principal Accounting Officer) | 
|    | Date:
    August 23, 2017                                  | 





16