Viewbix Inc. - Annual Report: 2018 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2018

Commission file number 0-15746

VIRTUAL CRYPTO TECHNOLOGIES, INC.

(Exact Name Of Registrant As Specified In Its Charter)

Registrant’s Telephone Number, Including Area Code: (212) 400-7198

Securities Registered Pursuant to Section 12(g) of The Act: Common Stock, $0.0001

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

On June 30, 2018, the aggregate market value of the 13,605,672 shares of common stock held by non-affiliates of the registrant was approximately $2,027,245 based on the closing price of $0.149 of the Registrant’s common stock on June 29, 2018, the last trading day in June 2018. On March 28, 2019, the Registrant had 110,749,643 shares of common stock outstanding.

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.

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

TABLE OF CONTENTS

Cautionary Statement regarding Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Registrant has based these forward-looking statements on its current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about the Registrant that may cause its actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in this Annual Report on Form 10-K and in the Registrant’s other Securities and Exchange Commission filings.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Overview and background

On January 17, 2018, Virtual Crypto Technologies, Inc., f/k/a Emerald Medical Technologies, Inc. (the “Registrant” or “Company”) formed Virtual Crypto Technologies Ltd as a new wholly-owned subsidiary under the laws of the State of Israel (“Virtual Crypto Israel”) and appointed Mr. Alon Dayan, who has served as the Registrant’s Chief Executive Officer since June 30, 2018 and has been a member of the Company’s Board of Directors since March 14, 2018, as CEO of Virtual Crypto Israel. Virtual Crypto Israel was formed to develop and market software and hardware products facilitating, allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices (the “Products”).

On January 29, 2018, pursuant to resolution of the Registrant’s Board of Directors, the Registrant transferred the management shares of the Registrant’s former Israeli subsidiary, Emerald Medical Applications Ltd. (“Emerald IL”) to Attorney Eviatar Knoller, Esq., with offices in Tel Aviv-Jaffa, Israel, as trustee (the “Trustee”) for the purpose of enabling the Trustee to liquidate the management shares and/or the assets of Emerald IL to satisfy its debts.

The Company filed a Current Report on Form 8-K on January 24, 2018, with the United States Securities and Exchange Commission (the “SEC”), reporting that Virtual Crypto Israel had entered into a binding term sheet (the “Chiron Term Sheet”) with Chiron Refineries Ltd. (“Chiron”), a public company listed on the Tel-Aviv Stock Exchange (TASE: CHR). Pursuant to the Chiron Term Sheet: (i) Virtual Crypto Israel agreed to appoint a wholly-owned subsidiary of Chiron, to be organized under the laws of the Turkish Republic of Northern Cyprus (the “Distributor”), as the exclusive distributor of Virtual Crypto Israel’s Products in Turkey, including the territory of Turkish Republic of Northern Cyprus (collectively, the “Territory”); and (ii) the Distributor shall have the right to appoint sub-distributors within the Territory. The appointment of the Distributor was subject to the payment by the distributor to Virtual Crypto Israel of $250,000 as an appointment fee, of which $150,000 was to be deemed an advance payment by the distributor made on account of future purchases of the Company’s Products.

The Company further granted the Distributor an option, exercisable by the Distributor within 12 months from the date on which the ATM Product, including the related software and hardware, was fully tested and ready for installation and operation, to be appointed as an exclusive distributor of the Products for the Federal Republic of Nigeria. If the option was exercised, the Distributor was required to pay Virtual Crypto Israel an appointment fee not more than $250,000. In November 2018, Chiron reported that it had encountered financial difficulties and as such the Company will no longer pursue the transactions contemplated by the Chiron Term Sheet.

To date, $100,000 was paid by the Distributor to Virtual Crypto Israel, which has been recognized as revenues for the year ended December 31, 2018.

The Registrant filed a Definitive Information Statement on February 12, 2018 to change its name from Emerald Medical Applications Corp. to Virtual Crypto Technologies, Inc. to reflect its new operations and business focus and, effective on March 7, 2018, FINRA approved the Registrant’s name change and its trading symbol was changed from MRLA to VRCP on the OTCQB.

The disclosure in this annual report relates to our business activities during the fiscal year ended December 31, 2018. Additional disclosure has been included in this annual report related to recent developments and subsequent events that occurred after the fiscal year ended December 31, 2018. Reference is made to the disclosure in Note 10-Subsequent Events, to the Notes to Consolidated financial Statements.

During the period commencing January 16, 2018 through March 23, 2018, the Registrant raised $1.9 million in equity capital (the “Equity Raise”) through the offering of units (the “Unit Offering”) at a price of $0.07 per Unit, each Unit consisting of: (i) one (1) share of the Company’s common stock (the “Shares”); (ii) one (1) common stock purchase warrant exercisable for a period of twelve months to purchase one additional Share at an exercise price of $0.14 per Share (the “Class F Warrants”); and (iii) one (1) common stock purchase warrant exercisable for a period of twelve months to purchase one additional Share at an exercise price of $0.28 per Share (the “Class G Warrants”).The proceeds of the Equity Raise are being utilized by the Registrant to fund the operations of Virtual Crypto Israel including, but not limited to the costs associated with the development of the Products. Reference is made to the disclosure under Item 5. “Market For Registrant’s Common Stock, Related Stockholder Matters And Issuer Purchase Of Equity” and under the subcaption “Sale of Unregistered Securities in 2018” with respect to the Equity Raise from the sale of units in 2018.

The Unit Offering was made by the Registrant: (i) principally pursuant to the exemption provided by Regulation S promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Act”); and (ii) to a lesser extent pursuant to Regulation D promulgated by the SEC under the Act; and (iii) and only to “accredited investors” as that term is defined in Rule 501 of Regulation D promulgated by the SEC under the Act. With respect to the Unit Offering made pursuant to Regulation S, the Units were offered in offshore transactions to persons who are not “U.S. Persons” as that term is defined in Rule 902 of Regulation S promulgated by the SEC under the Act.

Recent Developments

Share Exchange Agreement

The operations of Virtual Crypto Israel only generated revenues of $100,000 during the year end December 31, 2018 from one customer, Chiron, who has encountered financial difficulties. During 2018, we spent $790,413 in order to develop our systems in an industry that has experienced significant difficulties over the last 18 months. We believe that this has led to a decrease in the anticipated demand for Virtual Crypto Israel’s products and services. Therefore, on February 7, 2019, we filed a Form 8-K reporting that the Registrant entered into a share exchange agreement (the “Share Exchange Agreement”) with Algomizer Ltd., an Israeli Corporation (“Algomizer”), pursuant to which Algomizer will assign, transfer and deliver its 99.83% holdings in Viewbix Ltd., an Israeli corporation, to us in exchange for shares of restricted common stock of representing 65% of the issued and outstanding share capital of the Company on a fully diluted basis on the closing date, excluding certain warrants to purchase shares of common stock, which will expire in 2020 and with an exercise price representing a valuation equal to $30,000,000 (“Fully Diluted Share Capital”). In addition, upon the earlier of: (a) the launch of a live video product to an American consumer in the U.S by Viewbix Ltd., or (b) the launch of an interactive television product to an American consumer in the U.S., Viewbix Ltd., we will issue Algomizer additional shares of restricted common stock of the Company representing 5% of the Fully Diluted Share Capital.

Furthermore, on the closing date, we will issue Algomizer: (i) warrants to purchase shares of restricted common stock with an exercise price representing a valuation for the Company of $15,000,000 on Fully Diluted Share Capital basis, which will represent 10% of the Fully Diluted Share Capital immediately following the closing, which warrants will be exercisable for a period of ten years, and (ii) warrants to purchase shares of restricted common stock with an exercise price representing a valuation for the Company of $25,000,000 on Fully Diluted Share Capital basis, which will represent 10% of the Fully Diluted Share Capital immediately following the closing, which latter warrants will be exercisable for a period of ten years.

The closing of the Share Exchange Agreement is conditioned upon us filing an amendment to our certificate of incorporation to change the Company’s name to ViewBix Inc., effecting a reverse split of our shares of common stock at a ratio of 1:15, which we intend to effect whether or not the transactions under the Share Exchange Agreement will consummate, conversion of our outstanding convertible notes into shares of restricted common stock and Algomizer obtaining a tax pre-ruling from the Israeli Tax Authority relating to the Share Exchange Agreement.

ViewBix Ltd., through its ViewBix Studio, provides its clients with a video engagement platform designed to add enhanced branding and interactive elements – from call-to-action buttons to email captures – to digital videos. ViewBix Studio is simple, intuitive and requires no coding experience, thereby enabling clients to enhance videos and publish them across any platform, for any device in just minutes. Videos enhanced by Viewbix are compatible with existing ad serving, measurement and analytics platforms and easily work within existing agency or client processes for launching advertising campaigns. Beyond adding interactions to video, Viewbix uses second-by-second measurement of engagements to uncover contextual insights as to what, when and how users are engaging or responding to brand messaging.

Reverse Stock Split

On February 26, 2019, stockholders holding a majority of our outstanding shares of common stock approved an amendment to our certificate of incorporation in order to affect a reverse stock split of the of our common stock on a 1-for-15 basis. We intend to effect such reverse stock split once all approvals for such actions are obtained.

Pursuant to the Reverse stock split, each fifteen (15) shares of our common stock will be automatically converted, without any further action by our stockholders, into one share of common stock. No fractional shares will be issued as the result of the reverse stock split. Instead, each stockholder will be entitled to receive one share of common stock in lieu of the fractional share that would have resulted from the reverse stock split.

ITEM 1A. RISK FACTORS

The shares of our Common Stock are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose their entire amount invested in the Common Stock. Accordingly, prospective investors should carefully consider, along with other matters referred to herein, the following risk factors in evaluating our business before purchasing any shares of Common Stocks. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, you may lose all or part of your investment. You should carefully consider the risks described below and the other information in this Prospectus before investing in our Common Stock. Prospective investors should also carefully consider the fact that several of the risk factors related to our former business are no longer applicable and that there are new risk factors applicable to our new business operations.

Risks Associated with Our Business

Our former DermaCompare operation never achieved market acceptance nor were any revenues ever generated. The failure of such acceptance caused us to cease our DermaCompare operation and divest our DermaCompare subsidiary in January 2018.

Our revenues were expected to come from the sale of the DermaCompare product. As a result, we continued to incur operating losses until our new management and Board of Directors determined to divest the DermaCompare subsidiary. We are now dependent upon our ability to successfully manufacture, via third-party agreements, to develop and market our planned Products implementing software and hardware facilitating, allowing and supporting the purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices (collectively, our “Products”)

We only commenced operations in March 2018, following the equity raise, in the business of developing and marketing software and hardware products facilitating, for the purpose of allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices and, as a result, have no history of operations in such business.

On January 17, 2018, we organized Virtual Crypto Israel as a new, wholly-owned Israeli subsidiary to develop and market software and hardware products facilitating, allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices (the “Products”). To date, these efforts have not produced any significant revenues from our new business activities and we have virtually no history of operations in developing and marketing the Products.

Our historical financial information does not reflect our new business activities nor our recent agreement to distribute our Products.

As a result, our historic operations do not provide any basis for an evaluation of our business or our current business operations or focus. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations in new and developing fields such manufacturing and marketing Products for the purchase and sale of cryptocurrencies through ATMs, tablets, PCs and mobile devices. We may expect to incur additional net losses over the next several years as we seek to develop our operations in the field of supporting the purchase and sale of cryptocurrencies using our Products. The amount of future losses and when, if ever, we will achieve profitability are uncertain. If we are unsuccessful at executing on our business plan, our business, prospects, and results of operations may be materially adversely affected.

We have an evolving business model.

As blockchain technologies and cryptocurrencies become more widely available and utilized in early 2018, we expected the services and products associated with them to evolve and, as a result, our Products would have to continue to evolve. Very recently, the Securities and Exchange Commission (the “SEC”) issued a Report that promoters that use initial coin offerings or token sales to raise capital may be engaged in the offer and sale of securities in violation of the Securities Act of 1933, as amended (the “Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). While we are not involved, nor will we engage in the business of initial coin offerings or token sales, any adverse impact on the cryptocurrency industry that may occur as a result of the recent SEC Report or other potential regulatory actions may adversely impact our ability to successfully market our Products. From time to time we may modify aspects of our business model rand our Products and there can be no assurance that these or any other modifications will be successful or will not result in harm to the business. We will continue, however, to try and develop Products with in anticipation of any positive change or improvement in the regulatory environments for blockchain technologies and cryptocurrencies, of which there can be no assurance. Notwithstanding the foregoing, we fully intend to maintain the existence and operations of Virtual Crypto Israel and at December 31, 2018, we had approximately $500,000 in cash available for our Virtual Crypto Israel operations

Our management team has limited experience in the field of manufacturing and marketing our new Products, which are still in development, to support the cryptocurrency market.

The Registrant’s management only determined in or about January 2018 to shift our primary corporate focus towards the manufacture and sale of software and hardware Products facilitating, allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices. Our management and that of Virtual Crypto Israel has relatively limited experience in supporting purchase and/or sale of cryptocurrencies and the blockchain technology industry generally. While we intend to expand our management team and staff as market conditions justify with individuals with more experience in this industry and will closely scrutinize any individuals we engage, we cannot assure you that well-qualified individuals will be available to us or that our assessment of individuals we retain will prove to be correct, if and when we determine to engage new personnel, of which there can be no assurance. These individuals may be unfamiliar with the requirements of being involved in a public company which could cause us to have to expend time and resources helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.

The further development and acceptance of cryptocurrency trading, of which there can be no assurance, represents a new and rapidly changing industry.

If an when the market conditions and regulatory environment for our Products improve, of which there can be no assurance, we will be dependent upon our ability to manufacture and market our Products in a timely manner if we hope to succeed in serving this new and developing industry. We will be subject to a variety of factors that are difficult to evaluate. Further slowing or stopping of the development or acceptance of cryptocurrencies and our ability to manufacture Products in a timely manner and within the limits of our capital resources may adversely affect an investment in our common stock.

The use of our Products to purchase and sell cryptocurrencies to, among other things, buy and sell goods and services and/or the acquisition of cryptocurrencies as an investment, is part of a new and evolving industry that has confronted certain adverse regulatory pressure, particularly from the SEC. There can be no assurance that our Products will be accepted by this new and likely demanding market that employs the use of a computer-generated mathematical and/or cryptographic protocol. The growth of this industry, in general, is subject to a high degree of uncertainty. The factors affecting the further development of this industry, include, but are not limited to:

A decline in the popularity or acceptance of cryptocurrencies caused by regulatory uncertainty, among other reasons, would harm our ability to market our Products and, as a result, could adversely impact our ability to generate revenues and profits, if any.

Currently, there is relatively small use of cryptocurrencies in the retail and commercial marketplace in comparison to relatively large use by speculators; as a result, we expect that the market for our Products may develop slowly, if at all.

Cryptocurrencies have only recently become accepted as a means of payment for goods and services by certain major retail and commercial outlets and use of cryptocurrencies by consumers to pay such retail and commercial outlets remains limited. As a result, the demand for our Products may be expected to develop slowly, if at all. As a result, we reasonably anticipate that we will not generate positive cash flow from operations for the foreseeable and there can be no assurance that we will ever generate profits.

If we do not keep pace with technological changes, our Products, if and when developed, may not become competitive and/or our competitors may develop and market similar products that receive greater market acceptance.

The market for blockchain technology is characterized by rapid technological change, frequent product and service innovation and evolving industry standards. As a result, our Products must be able to keep pace with this rapidly developing and competitive marketplace and at the same time deal with continuing regulatory uncertainty. There can be no assurance that we will be able to manufacture our Products successfully or, if we can manufacture Products that achieve market acceptance, that we will be able to fulfill demand if such demand exceeds our production capabilities. In fact, there can be no assurance that demand for our Products will ever develop. We expect that we will be dependent on third party manufacturers for the foreseeable future but at present have no firm arrangements for the manufacture of our Products. If we are unable to provide enhancements and new features for our Products and any future product offerings that achieve market acceptance or that keep pace with these technological developments, our business could be adversely affected.

It may be illegal now, or in the future, to acquire, own, hold, sell or use cryptocurrencies and, as a result, the potential use and demand for our Products could be materially adversely affected.

Although currently cryptocurrencies generally are not regulated or are lightly regulated in most countries, including the United States, one or more countries may take regulatory actions in the future that could severely restrict the right to acquire, own, hold, sell or use cryptocurrencies which would adversely impact demand for our Products and/or limit their acceptance by potential users, including locations where we expect to place our Products. Such restrictions may adversely affect the Company. Such circumstances would have a material adverse effect on the ability of the Company to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on the business, prospects or operations of the Company and potentially the value of any cryptocurrencies the Company holds or expects to acquire for its own account and harm investors.

We will be dependent upon our ability to continue to raise equity and/or debt financing at acceptable terms.

We believe that in order to continue as a going concern, including the costs of being a public company, we will need approximately $60,000 per year simply to cover the administrative, legal and accounting fees. We have funded these losses primarily through the sale of restricted shares of our Common Stock and the issuance of convertible notes, which have subsequently been converted into restricted shares of Common Stock.

We generated revenues of $100,000 for the year ended December 31, 2018, all of which came from one customer with whom we are no longer doing business, and no revenues for the ended December 31, 2017.

Notwithstanding our capital raise from the sale of our equity securities primarily during the period from January 2018 through March 2018, following the formation of Virtual Crypto Israel, there can be no assurance that we will have adequate capital resources or be able to continue to raise equity and/or debt capital to fund planned operations or that any additional funds will be available to us when needed or at all, or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our plan of operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

Our new Products will be dependent upon software still in development; Software failures, breakdowns in the operations of our servers and communications systems or the failure to implement system enhancements could harm our business.

Our success depends on the efficient and uninterrupted operation of our servers and communications system, all of which are still in early stages of development. A failure of our network or data gathering procedures could impede the processing of data, delivery of databases and services, client data and day-to-day management of our business and could result in the corruption or loss of data. While we plan that all of our operations will have disaster recovery plans in place, such plans, when in place, might not adequately protect us and any failure could irreparably damage any efforts for establishing a successful market presence. In addition, any failure by our computer environment to provide our required data communications capacity could result in interruptions in our service, which could be expected to prevent us from achieving any market acceptance for our new Products.

Additionally, significant delays in the planned delivery of system enhancements, improvements and inadequate performance of the systems once they are completed could damage our reputation and harm our business. Long-term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities and acts of terrorism, particularly involving cities in which we have offices, could adversely affect our businesses. Although, we plan to carry property and business interruption insurance for our business operations, our coverage might not be adequate to compensate us for all losses that may occur.

We face risks related to the storage of customers’ and their end users’ confidential and proprietary information.

Our Products are being designed to maintain the confidentiality and security of our customers’ and their end users’ confidential and proprietary data that are stored on our server systems, which may include sensitive personal data. However, any accidental or willful security breaches or other unauthorized access to these data could expose us to liability for the loss of such information, time-consuming and expensive litigation and other possible liabilities as well as negative publicity. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are difficult to recognize and react to. We may be unable to anticipate these techniques or implement adequate preventative or reactionary measures.

Compliance with changing regulations concerning corporate governance and public disclosure may result in additional expenses.

In recent years, there have been several changes in laws, rules, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and various other new regulations promulgated by the SEC and rules promulgated by the national securities exchanges.

The Dodd-Frank Act, enacted in July 2010, expands federal regulation of corporate governance matters and imposes requirements on publicly-held companies, including us, to, among other things, provide stockholders with a periodic advisory vote on executive compensation and also adds compensation committee reforms and enhanced pay-for-performance disclosures. While some provisions of the Dodd-Frank Act were effective upon enactment, others will be implemented upon the SEC’s adoption of related rules and regulations. The scope and timing of the adoption of such rules and regulations is uncertain and accordingly, the cost of compliance with the Dodd-Frank Act is also uncertain.

In addition, Sarbanes-Oxley specifically requires, among other things, that we maintain effective internal control over financial reporting and disclosure of controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of Sarbanes-Oxley Act (“Section 404”), and our independent registered public accounting firm is required to attest to our internal control over financial reporting.

Our testing, or the subsequent testing by our independent registered public accounting firm may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 will require that we incur substantial accounting expenses and expend significant management efforts. We currently have limited internal audit capabilities and will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

These and other new or changed laws, rules, regulations and standards are, or will be, subject to varying interpretations in many cases due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Further, compliance with new and existing laws, rules, regulations and standards may make it more difficult and expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. Members of our board of directors and our principal executive officer and principal financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors and executive officers, which could harm our business. We continually evaluate and monitor regulatory developments and cannot estimate the timing or magnitude of additional costs we may incur as a result.

We may need to increase the size of our organization and may experience difficulties in managing growth, if any.

At present, we are a small company. If and when the regulatory market permits and the market for blockchain and crypto-currencies stabilize, of which there can be no assurance, we expect to experience a period of expansion in infrastructure and overhead and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate new managers. Our future financial performance and its ability to compete effectively will depend, in part, on its ability to manage any future growth effectively.

The loss of key personnel could adversely affect our business. We may not be able to hire and retain qualified personnel to support our growth.

The Company’s success depends to a significant extent upon the efforts of its CEO, and other key senior employees and other key personnel. The loss of the services of such personnel could adversely affect our business and our ability to implement our growth plan. We cannot assure you that the services of the members of our management team will continue to be available to us, or that we will be able to find a suitable replacement for any of them. We do not have key man insurance on any members of our management team. If any member of our management team were to die and we are unable to replace either or both of them for a prolonged period of time, we may be unable to carry out our long-term business plan and our future prospect for growth, and our business, may be harmed.

Our success is dependent upon our ability to attract, train, manage and retain sales, marketing and other qualified personnel. There is substantial competition for qualified personnel, and an inability to recruit or retain qualified personnel may impact our ability to implement our strategy to grow our business.

If we are unable to adopt, implement and maintain equity compensation arrangements that provide sufficient incentives, we may be unable to hire and retain employees and attract qualified candidates in the future. If we are unable to hire and retain employees, including qualified technical personnel, and attract additional qualified candidates, our business and results of operations could be adversely affected.

We may not be able to successfully expand our business through acquisitions.

We review corporate and product line acquisition candidates as a part of our growth strategy. If we decided to undertake an acquisition, we may not be able to successfully integrate it in order to realize the full benefit of such acquisition. Factors which may affect our ability to grow successfully through acquisitions include:

We may be unable to integrate ViewBix Ltd.’s business and technology successfully or achieve the expected benefits of such acquisition.

As part of our business strategy, on February 7, 2019, we entered into a Share Exchange Agreement with Algomizer Ltd., an Israeli corporation, pursuant to which Algomizer will assign, transfer and deliver its 99.83% holdings in Viewbix Ltd., an Israeli corporation, to us in exchange for shares of restricted common stock as further detailed in “Item 1. Description of Business” above. The Share Exchange Agreement is subject to certain closing conditions including us filing an amendment to our certificate of incorporation to change the Company’s name to ViewBix Inc., effecting a reverse split of our shares of common stock at a ratio of 1:15, conversion of our outstanding convertible notes into shares of restricted common stock and Algomizer obtaining a tax pre-ruling from the Israeli Tax Authority relating to the Share Exchange Agreement. If these conditions are not satisfied or waived, the acquisition will not be consummated. There can be no assurance that we will complete the acquisition on the time frame that we anticipate or under the terms set forth in the Share Exchange Agreement, or at all. Failure to complete the acquisition of ViewBix Ltd. or any delays in completing the acquisition could have an adverse impact on our future business and operations. In addition, we will have incurred significant acquisition-related expenses without realizing the expected benefits.

In addition, even if the acquisition of ViewBix Ltd. under the Share Exchange Agreement is consummated, we may encounter difficulties integrating the business, technology, products, personnel or operations of ViewBix Ltd., particularly if the key personnel of ViewBix Ltd. choose not to work for us or we have difficulty retaining the customers or partners of ViewBix Ltd. due to changes in management or otherwise. Moreover, the anticipated benefits of the acquisition of ViewBix Ltd. may not be realized or we may be exposed to unknown liabilities.

Risks Related to Our Common Stock

Shares issuable upon the conversion of warrants may substantially increase the number of Shares available for sale in the public market and depress the price of our stock.

As of December 31, 2018, we had outstanding: (i) Class F Warrants exercisable to purchase 27,697,855 Shares, at an exercise price of $0.28 per Share.; (ii) Class G Warrants exercisable to purchase 27,697,855 Shares, at an exercise price of $0.14 per Share; (iii) Class H Warrants exercisable to purchase 1,321,429 Shares, at an exercise price of $0.14 per Share; and (iv) Class I Warrants exercisable to purchase 571,429 Shares, at an exercise price of $0.14 per Share .

In addition, upon the closing of the Share Exchange Agreement, of which there can be no assurance, we will issue to Algomizer: (i) warrants to purchase shares of restricted common stock with an exercise price representing a valuation for the Company of $15,000,000 on Fully Diluted Share Capital basis, which will represent 10% of the Fully Diluted Share Capital immediately following the closing, which warrants will be exercisable for a period of ten years, and (ii) warrants to purchase shares of restricted common stock with an exercise price representing a valuation for the Company of $25,000,000 on Fully Diluted Share Capital basis, which will represent 10% of the Fully Diluted Share Capital immediately following the closing, which latter warrants will be exercisable for a period of ten years.

To the extent any of these Warrants are exercised and any additional warrants are granted and subsequently exercised, there will be further dilution to stockholders. Until the warrants expire, these warrant holders will have an opportunity to profit from any increase in the market price of our Shares without assuming the risks of ownership. Holders of options and warrants may exercise these securities at a time when we could obtain additional capital on terms more favorable.

The exercise price of the warrants will dilute the voting interest of the owners of presently outstanding shares by adding a substantial number of additional Shares of our Common Stock. We have reserved Shares of Common Stock for issuance upon the exercise of the warrants and may increase the Shares reserved for these purposes in the future.

The Shares of our Common Stock which are issuable upon the exercise of any outstanding warrants may be sold in the public market pursuant to Rule 144, if applicable. The sale of our common stock issued or issuable upon the exercise of the warrants and options described above, or the perception that such sales could occur, may adversely affect the market price of our common stock.

We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.

We have offered and sold restricted shares of Common Stock and other restricted securities to investors pursuant to certain exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Act”), as well as those of various state securities laws, including the exemptions provided under Regulation S and Regulation D promulgated by the SEC under the Act. The basis for relying on such exemptions is factual; that is, the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering. We have not received a legal opinion to the effect that any of our prior offerings were exempt from registration under any federal or state law. Instead, we have relied upon the operative facts as the basis for such exemptions, including information provided by investors themselves.

If any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption from the registration or qualification provisions of such state statutes. If investors were successful in seeking rescission, we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for the exemptions upon which it has relied, we may become subject to significant fines and penalties imposed by the SEC and state securities agencies.

The availability of a large number of authorized but unissued shares of Common Stock may, upon their issuance, lead to dilution of existing stockholders.

We are authorized to issue 490,000,000 shares of Common Stock, $0.0001 par value per share, of which, as of March 28, 2019, 110,749,643 shares of Common Stock were outstanding. Additional shares may be issued by our board of directors without further stockholder approval. The issuance of large numbers of shares, possibly at below market prices, is likely to result in substantial dilution to the interests of other stockholders. In addition, issuances of large numbers of shares may adversely affect the market price of our Common Stock. Reference is made to the disclosure under Item 1 “Description of Business” and under the subcaption “Recent Development” with respect to the issuance of shares: (i) on the conversion of convertible notes; (ii) representing 65% of the issued and outstanding share capital of the Company on a fully diluted basis on the closing date of the Share Exchange Agreement; and (iii) of up to 5,000,000 restricted shares of the Company’s common stock, as well as the issuance of Class T cashless warrants to purchase up to 3,000,000 restricted shares of the Company’s common stock, exercisable within 36 months at an exercise price of $0.01 per restricted shares, as compensation for services rendered by directors, employees and consultants. Such restricted shares and warrants shall be allocated among the relevant existing personnel at the discretion of the Company’s chief executive officer and chief financial officer. As of the date of this Form 10-K, no restricted shares nor Class T warrants were issued by the Company.

Our Certificate of Incorporation authorizes 10,000,000 shares of preferred stock, $0.0001 par value per share of which none were issued and outstanding as of the date of this registration statement. The board of directors is authorized to provide for the issuance of these unissued shares of preferred stock in one or more series, and to fix the number of shares and to determine the rights, preferences and privileges thereof. Accordingly, the board of directors may issue preferred stock which may convert into large numbers of shares of Common Stock and consequently lead to further dilution of other shareholders.

We have never paid cash dividends and do not anticipate doing so in the foreseeable future.

We have never declared or paid cash dividends on our common shares. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations and capital requirements, as well as other factors deemed relevant by our board of directors.

Our Common Stock is subject to the “Penny Stock” rules of the SEC and the trading market in our stock is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our Common Stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability to buy and sell our Common Stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Our stock is thinly traded, sale of your holding may take a considerable amount of time.

The shares of our Common Stock are thinly-traded on the OTCQB Market, meaning that the number of persons interested in purchasing our Common Stock at or near bid prices at any given time may be relatively small or non-existent. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our Common Stock will develop or be sustained, or that current trading levels will be sustained. Due to these conditions, we can give you no assurance that you will be able to sell your shares at or near bid prices or at all if you need money or otherwise desire to liquidate your shares.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of Common Stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act, subject to certain limitations. In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months, subject only to the current public information requirement. Affiliates may sell after six months, subject to the Rule 144 volume, manner of sale (for equity securities), current public information and notice requirements. Any substantial sales of our Common Stock pursuant to Rule 144 may have a material adverse effect on the market price of our Common Stock. Reference is made to the disclosure under the Risk Factor “The availability of a large number of authorized but unissued shares of Common Stock may, upon their issuance, lead to dilution of existing stockholders” above.

If we fail to maintain effective internal controls over financial reporting, the price of our Common Stock may be adversely affected.

Our internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our Common Stock. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Stock.

We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a timely manner, our business could be harmed and our stock price could decline.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm. The standards that must be met for management to assess the internal controls over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards.

We expect to incur expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In addition, although attestation requirements by our independent registered public accounting firm are not presently applicable to us, we could become subject to these requirements in the future and we may encounter problems or delays in completing the implementation of any resulting changes to internal controls over financial reporting. In the event that our Chief Executive Officer or Chief Financial Officer determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how the market prices of our shares will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.

Our share price could be volatile, and our trading volume may fluctuate substantially.

The price of our common shares has been and may in the future continue to be extremely volatile, with the sale price fluctuating from a low of $0.1 to a high of $2.24 since 2012. Many factors could have a significant impact on the future price of our common shares, including:

Our annual and quarterly results may fluctuate, which may cause substantial fluctuations in our common stock price.

Our annual and quarterly operating results may in the future fluctuate significantly depending on factors including the timing of purchase orders, new product releases by us and other companies, gain or loss of significant customers, price discounting of our product, the timing of expenditures, product delivery requirements and economic conditions. Revenues related to our product are required to be recognized upon satisfaction of all applicable revenue recognition criteria. The recognition of revenues from our product is dependent on a number of factors, including, but not limited to, the terms of any license agreement and the timing of implementation of our products by our customers.

Any unfavorable change in these or other factors could have a material adverse effect on our operating results for a particular quarter or year, which may cause downward pressure on our common stock price. We expect quarterly and annual fluctuations to continue for the foreseeable future.

Delaware law contains provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our stock.

Provisions in our certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition involving us that our stockholders may consider favorable. For example, our certificate of incorporation authorizes our board of directors to issue up to ten million shares of “blank check” preferred stock. As a result, without further stockholder approval, the board of directors has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights, preferred stockholders could make it more difficult for a third party to acquire us.

We are also subject to the anti-takeover provisions of the DGCL. Under these provisions, if anyone becomes an “interested stockholder,” we may not enter into a “business combination” with that person for three years without special approval, which could discourage a third party from making a takeover offer and could delay or prevent a change in control of us. An “interested stockholder” is, generally, a stockholder who owns 15% or more of our outstanding voting stock or an affiliate of ours who has owned 15% or more of our outstanding voting stock during the past three years, subject to certain exceptions as described in the DGCL.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

After the year-ended December 31, 2018: (i) the Registrant’s subsidiary, Virtual Crypto IL, leased offices facilities from an unaffiliated third-party at 10 Ha’amal Street, Rosh Ha’ayin, Israel 4809234 consisting of approximately 50 square feet of office space, for $800 per month. The Registrant believes that its present facilities are sufficient for the foreseeable future.

ITEM 3. LEGAL PROCEEDING

In April 2017, a lawsuit was filed with the Tel Aviv court by Mr. Wayn claiming certain damages to the total amount of $100,000, under the assertion of wrongful dismissal by the Registrant and Emerald IL. The Registrant believes these claims to be unsubstantiated and wholly without merit and intends to defend itself against these claims. The Company believes that he will not be successful in his claim. Nevertheless, the outcome of the proceeding will not materially affect the Registrant.

In December 2017, a liquidation request was filed with the Tel Aviv District Court by a group of former employees of Emerald IL, under the assertion of delay of pay and insolvency. On December 20, 2017, at a hearing before the court, it was ordered that the Emerald IL shall settle its pension debts to the former employees under applicable Israeli law within 21 days and settle its other debts to them in 60 days, the failure of which would result in a winding-up order (the equivalent of a liquidation) could be given. Based on the collaboration of Emerald IL and its former employees and the fact that the Company was in negotiation with third-parties for the infusion of equity capital and has started negotiating the sale of certain assets, the Company’s legal advisors believe that the liquidation claim will be dismissed by the court. The amounts being claimed by the former employees was less than $96,000 and are included in current liabilities at December 31, 2018.

On January 29, 2018, the “Registrant”) transferred the ordinary shares of the Registrant’s former Israeli subsidiary, Emerald IL to Attorney Eviatar Knoller, Esq., with offices at 20 Lincoln, Tel Aviv-Jaffa 6713412, as trustee (the “Trustee”). The purpose of the transfer of the management shares to the Trustee, pursuant to resolution of the Registrant’s Board of Directors, was to enable the Trustee to liquidate the management shares and/or the assets of Emerald IL to satisfy its debts and satisfy its financial obligations to former employees. As a result, the former employees of Emerald IL commenced an action in a court of competent jurisdiction in Israel to liquidate Emerald IL and use any assets to satisfy the debts owed to the former employees.

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY

Market Information

Our common stock is currently quoted on the OTCQB market under the symbol VCRP. For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. The below prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

Holders of Common Stock

Our transfer agent is Transfer Online, 512 SE Salmon Street, Portland, OR 97214-3444, Phone: (503) 227-2950.

Dividends

Holders of common stock are entitled to dividends if declared by the Board of Directors, out of funds legally available therefore. We have never declared cash dividends on our common stock and our Board of Directors does not anticipate paying cash dividends in the foreseeable future as it intends to retain future earnings to finance the growth of our businesses.

Rule 144 Shares

As of the date of this Registration Statement, we do not have any significant number of shares of our Common Stock that are currently available for sale to the public in accordance with the volume and trading limitations of Rule 144.

Outstanding Warrants

As described in Note 3. Convertible Nots, the Company’s 6,334,626 Class A Warrants and 5,400,478 Class B Warrants were cancelled during the first quarter of 2018, in connection with the change in terms of the convertible notes.

As described above in this Note 4. Stockholders’ Equity, the Company issued 27,697,855 Class F and 27,697,855, Class G Warrants in connection with the $0.07 Unit Offering.

On January 26, 2018, the Company signed a two-year consulting agreement with Maz Partners, pursuant to which it will to provide investment and corporate finance advice to the Company in consideration for 200,000 Class H Warrants. Each Class H Warrant is exercisable through to January 2020 to purchase one (1) Share at an exercise price of $0.14 per Share. The fair value of these Class H Warrants at the issuance date was $39,845 and was charged to General and administration expenses in the Statement of Comprehensive Loss with a corresponding credit to Additional Paid-in Capital in the Statement of Changes in Stockholders’ Deficit.

The following table summarizes information of outstanding warrants as of December 31, 2018:

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes information of outstanding options as of December 31, 2018:

Sale of Unregistered Securities

During the last three years, the Registrant issued the following restricted shares which were not registered under the Act

Sale of Unregistered Securities in 2016:

During 2016, the Registrant issued Class A Warrants and Class B Unit Warrants to the following entities for bona fide services to the Registrant. The issuances of these Warrants were in consideration for convertible note payable and was made without registration under the Act in reliance upon the exemptions provided in Section 4(2) of the Act and Reg S.

Sale of Unregistered Securities in 2017:

On February 24, 2017, Publicis Groupe 90 (“Publicis 90”) invested 500,000 Euros or approximately U$526,000 and 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. 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 each, 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 number 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.

In July and August 2017, the Company issued 571,429 units to two accredited investors for $0.14 per unit in total amount of $80,000. Each unit consist (i) 571,429 restricted shares at a price of $0.14 per share, (ii) 571,429 warrants exercisable for a one-year period in exercise price of $0.14, and (iii) 571,429 warrants exercisable for a two-year. As of December 31, 2017, the Company had not issued the shares to the accredited investors.

Sale of Unregistered Securities in 2018:

During the first quarter of 2018, the Company received the aggregate amount of $1,940,950 from certain “accredited investors” in consideration for the issuance of 27,697,855 of the Company’s units at an offering price of $0.07 per Unit, defined as the “$0.07 Unit Offering” discussed above, each consisting of: (i) one Share; (ii) one Class F Warrant exercisable for a period of twelve months to purchase one additional Share at an exercise price of $0.14 per Share; and (iii) one Class G Warrant exercisable for a period of twelve months to purchase one additional Share at an exercise price of $0.28 per Share. The offer and sale of these Units, without registration under the Securities Act of 1933, as amended (the “Act”), was made in reliance upon the exemption provided by Section 4(2) of the Act and/or Regulation S and Regulation D promulgated thereunder.

On February 8, 2018, in connection with the August 2017 Unit Offering discussed above, the Company issued 571,429 units of the Company’s securities to two accredited investors for consideration of $80,000 which was received in August 2017. Each Unit in the August 2017 Unit financing consisted of: (i) one Share; (ii) one Class H Warrant exercisable for twelve months to purchase one additional Share at a price of $0.14 per Share; and (iii) one Class I Warrant exercisable for twenty-four months to purchase one additional Share at a price of $0.14 per Share.

On March 12, 2018, the Company issued a total of 3,629,999 restricted Shares to certain consultants in consideration for services rendered during the first quarter of 2018, which Shares were valued at $892,300, based on the closing share price on the day prior to the date of issuance. The above-mentioned amount was recorded as a charge to the Company’s Statement of Comprehensive Loss, with a corresponding credit to Additional Paid in Capital in the Company’s Statement of Changes in Stockholders’ Equity.

On March 20, 2018, the Company issued a total of 62,500 restricted Shares pursuant to the exercise of a stock option at an exercise price of $0.01 per Share, which option was granted in connection of certain services rendered in October 2016.

On March 9, 2018, the Company signed a consulting agreement with Ayin, Nun, Chaf, Yeuzt Ltd, pursuant to which it will to provide professional legal advice to the Company in consideration for 550,000 Class H Warrants. Each Class H Warrant is exercisable through to March 2020 to purchase one (1) Share at an exercise price of $0.14 per Share.

On April 20, 2018, the Company issued a total of 700,000 restricted Shares to certain consultants in connection with services rendered during the second quarter of 2018, which Shares were valued at $112,000, based on the closing share price on the day prior to the date of issuance. The above-mentioned amount was recorded as a charge to the Company’s Statements of Operations and Comprehensive Loss, with a corresponding credit to Additional Paid in Capital in the Company’s Statement of Changes in Stockholders’ Deficit.

During the year ended December 31, 2018 the Company issued a total of 54,621,800 Shares in connection with the conversion of convertible note in amount of $546,218.

ITEM 6. SELECTED FINANCIAL DATA

None.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND PLAN OF OPERATION

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 consolidated 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

On January 23, 2018, the Registrant, through its newly organized, wholly-owned Israeli subsidiary, Virtual Crypto Technologies Ltd. (the “Subsidiary” or “Virtual Crypto Israel”), entered into a binding term sheet (the “Term Sheet”) with Chiron Refineries Ltd. (“Chiron”), a public company listed on the Tel-Aviv Stock Exchange (TASE: CHR). Pursuant to the Term Sheet, the Registrant’s Subsidiary agreed to: (i) appoint a wholly-owned subsidiary of Chiron, under incorporation under the laws of the Turkish Republic of Northern Cyprus, as the exclusive distributor (the “Distributor”) of our Subsidiary’s products (as defined below) in the territory of the Republic of Turkey, including the territory of Turkish Republic of Northern Cyprus (the “Territory”); and (ii) the Distributor shall have the right to appoint sub-distributors within the Territory.

Virtual Crypto Technologies Ltd. was formed on January 17, 2018, to develop and market software and hardware products facilitating, allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices (the “Products”).

On January 29, 2018, Virtual Crypto Technologies, Inc., f/k/a Emerald Medical Applications Corp. (the “Registrant”) transferred the management shares of the Registrant’s former Israeli subsidiary, Emerald Medical Applications Ltd. (“Emerald IL”) owned by the Registrant to Attorney Eviatar Knoller, Esq., with offices at 20 Lincoln, Tel Aviv-Jaffa 6713412, as trustee (the “Trustee”). The purpose of the transfer of the management shares to the Trustee, pursuant to resolution of the Registrant’s Board of Directors dated January 29, 2018, was to enable the Trustee to liquidate the management shares and/or the assets of Emerald IL to satisfy its debts.

The operations of its former subsidiary never generated any revenues and was unable to raise capital to fund its ongoing operations and satisfy its financial obligations to former employees. As a result, the former employees of Emerald IL commenced an action in a court of competent jurisdiction in Israel to liquidate Emerald IL and use any assets to satisfy the debts owed to the former employees. Effective March 8, 2018, Emerald IL ceased to be a wholly-owned subsidiary and a part of the Registrant.

On January 17, 2018, the Registrant formed Virtual Crypto Technologies Ltd as a new wholly-owned subsidiary under the laws of the State of Israel (“Virtual Crypto Israel”).

Our Business Operations during 2018

We were 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”). We believed that the 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. As discussed above, we determined in January 2018 to terminate the business of our DermaCompare subsidiary, Emerald IL, and transferred the assets of that subsidiary to the Trustee for liquidation.

Results of Operations during the year ended December 31, 2018 as compared to the year ended December 31, 2017

We generated revenues of $100,000 for the year ended December 31, 2018, all of which were generated from our Chiron term sheet agreement. We are no longer pursuing our business relationship with Chiron or its subsidiary. We generated no revenues for the ended December 31, 2017 during which fiscal year we were still trying to commercially exploit our DermaCompare technology, to no avail. We had operating expenses related to research and development and general and administrative expenses

During the year ended December 31, 2018, we incurred $25,006,486 in net loss due to $790,413 in research and development expenses and $1,773,839 in general and administrative expenses, $22,542,234 in financing expenses.

During the year ended December 31, 2017, we incurred $1,573,906 in net loss due to $557,300 in general and administrative expenses and $307,516 in financing expenses and $709,090 Loss from discontinued operations available to shareholders of the company.

Liquidity and Capital Resources

On December 31, 2018, we have had current assets of $558,677 consisting of $499,919 in cash and other receivables of $41,516 and marketable securities of $17,242. We had $975,153 in current liabilities consisting of $13,115 in accounts payable and accrued liabilities, $7,064 employee payable, and short-term portion of convertible notes of $485,449 and liabilities held of sale in respect of our discontinued operations of $469,525.

On December 31, 2017, we have had current assets of $15,181 consisting of $2,959 in cash and other receivables of $12,222. We had fixed assets, net of $14,290. We had $1,011,941 in current liabilities consisting of $445,653 in accounts payable and accrued liabilities, $82,331 in accounts payable to related party, $98,476 employee payable, and short-term portion of convertible notes of $385,481.

We had negative working capital of $416,476 and $996,760 as of December 31, 2018 and December 31, 2017, respectively. The Company is assessing a number of options to increase its working capital to better sustain its operations. During the first quarter of 2018 we raised $1.9 million through the issuances of convertible loans and addition equity financings. Our total liabilities as of December 31, 2018 were $975,153 compared to $1,618,106 at December 31, 2017.

During the year ended December 31, 2018, we had negative cash flow from operations of $1,544,054 which was mainly the result of a net loss of $25,006,486, depreciation expense of $14,290, increase in provision for settlements of convertible loan of $21,472,897, $1,150,675 worth of shares and warrants issued for services, $1,040,838 amortization of debt discount, $50,000 decreased of deferred revenues, and loss from marketable securities of $32,758, offset by decrease in working capital of $199,026.

During the year ended December 31, 2017, we had negative cash flow from operations of $630,015 which was mainly the result of a net loss of $1,573,906, $2,866 increase in other receivables, $40,339 increase in amounts due from related party and offset by, $189,461 increase in accounts payable and accrued liabilities and $350,208 interest and amortization of discount on convertible debt.

During the year ended December 31, 2018, we had no cash flow effect from investing activities.

During the year ended December 31, 2017, we had negative investing activities resulted from decrease in restricted cash $11,866.

During the year ended December 31, 2018, we had positive cash flow from financing activities of $2,041,014, which was the result of proceeds of $1,940,951 received from sale of common stock and related warrants (net of issuance expenses), $100,000 received from the issuance of short-term convertible notes, and $63 from the exercise of options. Based on the receipt of these funds, we believe we have adequate capital to operate pursuant to our business plan through December 2019.

During the year ended December 31, 2017, we had positive cash flow from financing activities of $606,342 which was the result of proceeds of $526,342 received from sale of common stock and related warrants (net of issuance expenses), and $80,000 from the Receipt on account of stock. Based on the receipt of these funds, we believe we have adequate capital to operate pursuant to our business plan through December 2019

Availability of Additional Capital

Our potential financing transactions may include the issuance of equity and/or debt securities including convertible debt, obtaining credit facilities, or other financing mechanisms. In the event that we seek to raise funds through additional private placements of equity or convertible debt, the trading price of our common stock could be adversely affected. Further, any adverse conditions in the financial markets could make it more difficult to obtain future financing through the issuance of equity or debt securities when and if needed. Even if we are able to raise a sufficient amount of funds that may be required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek additional and/or alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we may have to curtail our plan of operations.

The Company has only limited capital. Additional financing is necessary for the Company to continue as a going concern. Our independent auditors have issued an unqualified audit opinion for the year ended December 31, 2018 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.

Off-Balance Sheet Arrangements

As of December 31, 2018, and 2017, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

Contractual Obligations and Commitments

As of December 31, 2018, and 2017, we did not have any contractual obligations.

Critical Accounting Policies

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. As applicable to the consolidated financial statements included elsewhere in this report, the most significant estimates and assumptions relate to (i) the going concern assumptions, (iv) measurement of Convertible Note.

Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included elsewhere in this report. Our management believes that, as for the financial statements for the periods included in this report, the going concern assessment is a critical accounting policy. However, due to the early stage of operations of the Company, there are no other accounting policies that are considered to be critical accounting policies by management.

Going Concern Uncertainty

The development and commercialization of our product will require substantial expenditures. We have not yet generated any material revenues and have incurred substantial accumulated deficit and negative operating cash flows. We currently have no sources of recurring revenue and are therefore dependent upon external sources for financing our operations. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations. As a result, our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Recently issued accounting pronouncements

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp.) and its subsidiary (the “Company”) as of December 31, 2018 and the related consolidated statements of comprehensive loss, stockholders’ deficit and cash flows for the year in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for each of the year in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

The consolidated financial statements of the Company for the year ended December 31, 2017, before the effects of the retrospective adjustments for the discontinued operations discussed in Note 1C to the financial statements, were audited by other auditors whose report, dated April 17, 2018, expressed an unqualified opinion on those statements with an explanatory paragraph regarding the Company’s ability to continue as a going concern. We also have audited the retrospective adjustments to the 2017 consolidated financial statements for the operations discontinued in 2018, as discussed in Note 1C to the financial statements. In our opinion, such retrospective adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2017 consolidated financial statements of the Company other than with respect to the retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2017 consolidated financial statements taken as a whole.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’ has not yet generated material revenues from its operations to fund its activities and is therefore dependent upon external sources for financing its operations. As of December 31, 2018, the Company has incurred accumulated deficit of $41,626,905, stockholder’s deficit of $416,476 and negative operating cash flows. These factor among others, as discussed in Note 1 to the consolidated financial statements raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of' these uncertainties.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Halperin Ilanit.

Certified Public Accountants (Isr.)

Tel Aviv, Israel

March 28, 2019

We have served as the Company’s auditor since 2018

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp.)

Opinion on the Financial Statements

We have audited, before the effects of the retrospective adjustments for the discontinued operations discussed in Note 1C to the consolidated financial statements, the accompanying consolidated balance sheet of Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp.) and its subsidiary (the “Company”) as of December 31, 2017 and the related consolidated statements of comprehensive loss, shareholders’ deficit and cash flows for the year ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”) (the 2017 financial statements before the effects of the retrospective adjustments discussed in Note 1C to the financial statements are not presented herein). In our opinion, the 2017 financial statements before the effects of the retrospective adjustments for the discontinued operations discussed in Note 1C to the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America. We were not engaged to audit, review, or apply any procedures to the retrospective adjustments for the discontinued operations discussed in Note 1C to the consolidated financial statements, and accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied. Those retrospective adjustments were audited by other auditors.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s lack of revenues and substantial operating losses raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of' these uncertainties.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Brightman Almagor Zohar & Co.

Certified Public Accountants

Member of Deloitte Touche Tohmatsu Limited

Tel Aviv, Israel

April 17, 2018

We began serving as the Company’s auditor in 2016. In 2018, we became the predecessor auditor.

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Consolidated Balance Sheets

(*) less than $1

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

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Consolidated Statements of Comprehensive Loss

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

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Consolidated Statements of Changes in Stockholders’ Deficit

(*) less than $1

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

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Consolidated Statements of Cash Flows

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

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Notes to Consolidated Financial Statements 

Note 1. General

On March 16, 2015, Zaxis and Emerald Israel executed the Share Exchange Agreement, which closed on July 14, 2015 (the “Share Exchange Agreement”) and Emerald Israel became the Company’s wholly-owned subsidiary. Emerald Israel was engaged in the business of developing Emerald Israel’s DermaCompare technology and the development, sale and service of imaging solutions utilizing its DermaCompare software for use in derma imaging and analytics for the detection of skin cancer.

During the fourth quarter of 2015, in connection with the Share Exchange Agreement, the Company changed its name to Emerald Medical Applications Corp.

Management’s best estimate of the potential value of the Excess Net Assets at the date of the cancellation of the shares of Series A Preferred Convertible Stock was $150,000 and therefore, the Company recorded a charge to Additional Paid-in Capital in the Statement of Changes in Stockholders’ Deficit with a corresponding credit to liabilities. Management’s best estimate of the potential value of the Excess Net Assets as of December 31, 2018, was nil. Accordingly, the Company recorded a finance income of $150,000 in its Consolidated Statements of Comprehensive Loss a result of the reversal of the relating liability.

As such, as of December 31, 2018, there were no shares of Series A Preferred Convertible Stock outstanding.

Liabilities held for sale: