Viewbix Inc. - Quarter Report: 2020 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

or

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

For the transition period from __________________ to _______________________

Commission file number: 000-15746

VIEWBIX INC.

(Exact Name Of Registrant As Specified In Its Charter)

Registrant’s Telephone Number, Including Area Code: +972 9-774-1505

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

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

On June 30, 2020, the Registrant had 31,201,669 shares of common stock issued and outstanding.

VIEWBIX INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2020

CONTENTS

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

U.S. dollars in thousands (except share data)

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

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

CONSOLIDATED BALANCE SHEETS (Unaudited) (Cont.)

U.S. dollars in thousands (except share data)

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

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

U.S. dollars in thousands (except share data)

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

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT Unaudited)

U.S. dollars in thousands (except share data)

(*) Representing an amount less than $ 1.

(**) The number of shares prior to the reverse recapitalization have been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction. Refer to Note 1 for further information.

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

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

U.S. dollars in thousands (except share data)

(*) Represents an amount less than $1

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

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

U.S. dollars in thousands (except share data)

Supplemental Cash Flow Information:

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

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

U.S. dollars in thousands (except share data)

NOTE 1 - GENERAL

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

U.S. dollars in thousands (except share data)

NOTE 1 - GENERAL (Cont.)

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

U.S. dollars in thousands (except share data)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

NOTE 3 - OTHER ACCOUNTS RECEIVABLES

Composition:

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

U.S. dollars in thousands (except share data)

NOTE 4 - PROPERTY AND EQUIPMENT

Composition:

NOTE 5 - OTHER ACCOUNTS PAYABLES

Composition:

NOTE 6 - STOCKHOLDERS DEFICT

Ordinary shares confer the right to participate in the general meetings, to one vote per share for any purpose, to an equal part, on share basis, in distribution of dividends and to equally participate, on share basis, in distribution of excess of assets and funds from the Company and they shall not confer other privileges unless stated hereunder or in the Companies Law otherwise. Some investors have standard anti-dilutive rights, registration rights, and information and representation rights.

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

U.S. dollars in thousands (except share data)

NOTE 6 - STOCKHOLDERS DEFICT (Cont.)

Preferred shares may have been converted into ordinary shares of Viewbix Ltd at any time. The preferred shares would have automatically converted into ordinary shares if (a) the holders of at least (i) 67% (sixty seven percent) of the issued and outstanding Preferred C/C-1 shares, (ii) a majority of the issued and outstanding Preferred B shares, and (iii) a majority of the issued and outstanding Preferred A shares, so agree in writing; or (b) in the event of an IPO.

The conversion price for any class or series of preferred would have been subject to adjustment, as follows: at any time, upon each issuance or deemed issuance by the Company of any new securities at a price per share less than the applicable conversion price in effect on the date of and immediately prior to the issuance of such new securities, the conversion price shall be reduced.

Preferred shares had priority in the distribution of dividends and upon liquidation in accordance with the Company’s Articles of Association (“AOA”). These rights may be changed if a meeting of the Company’s stockholders gather up and decides on a change of regulations in this context.

The preference mechanism for liquidation and the distribution of dividends gave priority to the most recent preferred stockholders.

The preferred shares were convertible into 16,199,520 ordinary shares of the Company.

The Company’s AOA do not provide redemption rights to the holders of the preferred shares. In the event of a liquidation event, all the funds and assets of the Company available for distribution among all the stockholders shall be distributed based on a certain mechanism as described in the Company’s AOA. Although the preferred shares are not redeemable, in the event of certain “deemed liquidation events” that are not solely within the Company’s control (including merger, acquisition, or sale of all or substantially all of the Company’s assets), the holders of the preferred shares would be entitled to preference amounts paid before distribution to other stockholders (as explained in the previous paragraph) and hence effectively redeeming the preference amount. In accordance with ASR 268 and ASC 480 “Distinguishing Liabilities from Equity”, the Company’s preferred shares are classified outside of stockholders’ deficit as a result of these in-substance contingent redemption rights

As of December 31, 209 the preferred shares were no longer outstanding

As detailed in Note 1, as part of the Recapitalization Transaction in July 2019, the Company issued 20,281,085 shares of common stock to Gix in exchange for its 99.83% holdings in Viewbix Israel. The number of shares prior to the reverse capitalization have been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction. As Part of the transaction all preferred shares were converted into ordinary shares

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

U.S. dollars in thousands (except share data)

NOTE 6 - STOCKHOLDERS DEFICT (Cont.)

The following table summarizes information of outstanding warrants as of June 30, 2020:

Additionally In connection with the Share Exchange Agreement, upon the earlier of: (a) the launch of a live video product to an American consumer in the United States by Viewbix Israel, or (b) the launch of an interactive television product to an American consumer in the United States by Viewbix Israel, the Company will issue to Gix an additional 1,642,193 shares of restricted common stock of the Company.

All of the Company’s warrants meet the US GAAP criteria for equity classification

During January and March 2020, 50,000 class H warrants expired.

During January 2020, 38,095 class I warrants expired.

During April 2020, 142,857 Class G warrants expired.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

During August 2019, a law suit was filed against the Company and, the parent company Gix. claiming that the applicants were entitled to receive shares of the Company as part of the consideration in the Company’s acquisition by Gix. In the opinion of the Company’s management, the applicants’ claims are based on incorrect assumptions and deals with the distribution of the internal shares between the applicants and the other former shareholders of the Company before the acquisition transaction, resulting in a consideration coming to the applicants following the acquisition transaction. As of the date of signing the financial statements the parties are engaged in an advanced settlement negotiations.

The understanding of the Company and its legal advisers and based on the settlement negotiations is that the claim may not create financial exposure to the Company.

In April 2017, a lawsuit was filed by a former CEO of the Company with the Tel Aviv District Court (the “Tel Aviv Court”) against the Company claiming certain damages in the total amount of $100, under the assertion of wrongful termination by the Company and Emerald Israel. The Company believes these claims to be unsubstantiated and wholly without merit and accordingly filed its response with the Tel Aviv Court in October of 2017. The dispute was initially heard by the Tel Aviv Court on February 13, 2020 and a supplemental hearing has been set for March 19, which has subsequently been postponed to September 29, 2020.

As of June 30, 2020, the company’s management, in consultation with its legal advisors, believes that their claim will be successful and should the plaintiff be successful, they will be awarded an insignificant amount and therefore no amount has been provided for in these financial statements.

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

U.S. dollars in thousands (except share data)

NOTE 8 - FINANCIAL EXPENSES (INCOME), NET

Composition:

NOTE 9 - TAXES ON INCOME

Viewbix Israel are taxed according to Israeli tax laws. The Israeli corporate tax rate is 23% in the years 2019 and onwards.

Viewbix Inc. is taxed according to U.S. tax laws. On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which among other provisions, reduced the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

U.S. dollars in thousands (except share data)

NOTE 9 - TAXES ON INCOME (Cont.)

As of June 30, 2020, the Company has provided valuation allowances of $6,951 in respect of deferred tax assets resulting from tax loss carryforward and other temporary differences. Management currently believes that because the Company has a history of losses, it is more likely than not that the deferred tax regarding the loss carryforward and other temporary differences will not be realized in the foreseeable future.

As of June 30, 2020 Viewbix Israel incurred operating losses in Israel of approximately $13,330 which may be carried forward and offset against taxable income in the future for an indefinite period.

As of June 30, 2020 the Company generated net operating losses in the U.S. of approximately $18,390 Net operating losses in the U.S. are available through 2035. Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.

NOTE 10: LOSS PER SHARE-BASIC AND DILUTED

Composition:

VIEWBIX INC. (Formerly known as Virtual Crypto Technologies, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

U.S. dollars in thousands (except share data)

NOTE 11 - TRANSACTION AND BALANCES WITH PARENT COMPANY

Balances:

As part of the agreement with Gix, the parties agreed to have the Company’s operations outsourced to Gix from the agreement date and until the acquisition is consummated. The following term were included in the agreement pursuant to the above:

No amounts were paid by the Company to Gix during 2020 and 2019 in respect of the above, which resulted in a parent company payable of $1,611 as of December 31, 2019 and $1,853, as of June 30, 2020.

NOTE 11 - COVID-19 PANDEMIC IMPLICATIONS

The COVID-19 pandemic originated in Wuhan, China, in late 2019 and quickly thereafter spread to multiple countries, including the United States, Israel and many countries in Europe. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. While COVID-19 is still spreading and the final implications of the pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. At this time, the pandemic has caused states of emergency to be declared in various countries, travel restrictions imposed globally, quarantines established in certain jurisdictions and various institutions and companies being closed. The company is actively monitoring the pandemic and taking any necessary measures to respond to the situation in cooperation with the various stakeholders.

Due to the uncertainty surrounding the COVID-19 pandemic, The company will continue to assess the situation, including government-imposed restrictions, market by market. It is not possible at this time to estimate the full impact that the COVID-19 pandemic could have on our business, the continued spread of COVID-19, and any additional measures taken by governments, health officials or by the company in response to such spread, could adversely affect the company’s business, results of operations and financial condition. The COVID-19 pandemic and mitigation measures have also negatively impacted global economic conditions, which, in turn, could adversely affect the company’s business, results of operations and financial condition. The extent to which the COVID-19 outbreak continues to impact the company’s financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity, longevity and impact of the COVID-19 pandemic on economic activity.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Statements

The following management’s discussion and analysis section should be read in conjunction with the Company’s unaudited financial statements as of June 30, 2020 and 2019, and the related statements of comprehensive loss, statement of changes in stockholders’ equity (deficit) and statements of cash flows for the three months then ended, and the related notes thereto contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”).

Forward-Looking Statements

This management discussion and analysis section contains forward-looking statements, such as statements of the Company’s plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions “will,” “may,” “could,” “should,” etc., or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with which may cause our actual results to differ from those anticipated in our forward-looking statements. For a discussion of these and other risks that relate to our business and investing in our common stock, you should carefully review the risks and uncertainties described in this Quarterly Report on Form 10-Q, and those contained in section captioned “Risk Factors” of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 20, 2020 (the “Annual Report”). The Company’s actual results could differ materially from those contemplated in these forward-looking statements as a result of these factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

Overview and background

Viewbix Inc. (f/k/a Virtual Crypto Technologies, Inc., f/k/a Emerald Medical Applications Corp.) (the “Registrant” or the “Company”) is an interactive video technology and data platform that provides its clients with deep insights into their video marketing performance as well as the effectiveness of its messaging.

Recent Developments

Share Exchange Agreement

On February 7, 2019, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Gix Internet Ltd. (f/k/a Algomizer Ltd.) (TASE:GIX), a company organized under the laws of the State of Israel (“Gix”), pursuant to which on July 25, 2019 (the “Closing Date”), Gix assigned, transferred and delivered its 99.83% holdings in Viewbix Ltd. (“Viewbix Israel”) to the Company in exchange for shares of restricted common stock, par value $0.0001 per share of the Company (the “Common Stock”), representing 65% of the issued and outstanding share capital of the Company on a fully diluted basis as of the Closing Date, following the conversion of certain convertible notes of the Company and excluding certain warrants to purchase shares of Common Stock expiring in 2020 and additional warrants as further described below (the “Fully Diluted Share Capital”). In addition, upon the earlier of: (a) the launch of a live video product to an American consumer in the United States by Viewbix Israel, or (b) the launch of an interactive television product to an American consumer in the United States by Viewbix Israel, the Company agreed to issue to Gix an additional 1,642,193 shares of restricted Common Stock representing 5% of the Fully Diluted Share Capital immediately following the Closing Date.

On July 24, 2019, and in connection with the Share Exchange Agreement, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of Delaware reflecting its name change from Virtual Crypto Technologies, Inc. to Viewbix Inc. to reflect its new operations and business focus. On August 7, 2019, FINRA approved the Registrant’s name change and its trading symbol was changed from “VRCP” to “VBIX” on the OTCQB.

On the Closing Date, (i) the Company issued 20,281,085 shares of Common Stock to Gix in exchange for consideration consisting of 99.83% holdings in Viewbix Israel, and (ii) convertible notes representing 3,434,889 shares of Common Stock then currently issued to holders were converted. The shares of Common Stock were issued under Regulation S. The Company also issued a total of 7,298,636 warrants to purchase shares of Common Stock to Gix, whereby (i) 3,649,318 of such warrants to purchase shares of Common Stock were issued with an exercise price of $0.48, and (ii) 3,649,318 of such warrants to purchase shares of Common Stock were issued with an exercise price of $0.80.

Following the Closing Date, Viewbix Israel became a subsidiary of the Registrant. Viewbix Israel was incorporated in February 2006 in Israel.

On June 6, 2020, Algomizer Ltd. changed its name to Gix.

On January 1, 2020, the Company announced certain cost reduction measures due the Company not achieving certain revenues goals. In connection with these cost reduction measures, on January 1, 2020, Mr. Jonathan Stefansky, the Company’s then chief executive officer and member of the Company’s board of directors, tendered his resignation from the Board, and on the same date the sides reached a mutual understanding whereby Mr. Stefansky would step down as chief executive officer, effective March 1, 2020. On the same date, the Company and Mr. Hillel Scheinfeld, the Company’s then chief operating officer, reached a similar mutual understanding and agreed he would step down, also effective March 1, 2020. Mr. Amihay Hadad, the Company’s chief financial officer, was appointed to the Company’s board of directors on January 1, 2020, and, effective as of March 1, 2020, he was also appointed as the Company’s chief executive officer as well.

On January 27, 2020, the Company entered into an agreement with a third-party to sell Virtual Crypto Technologies Ltd. for NIS 50,000 ($14, 459), which transaction was consummated on February 12, 2020.

Results of Operations

Results of Operations During the Three Months Ended June 30, 2020 as Compared to the Three Months Ended June 30, 2019

Our revenues were $33 thousand for the three months ended June 30, 2020, compared to $42 thousand during the same period in the prior year. The reason for the decrease in the three months ended June 30, 2020 is due to the fact that beginning on January 1, 2020, the Company announced and began implementing certain cost reduction measures.

Our cost of revenues were $0 thousand for the three months ended June 30, 2020, compared to $5 thousand during the same period in the prior year. The reason for the decrease in the three months ended June 30, 2020 is due to the fact that beginning on January 1, 2020, the Company announced and began implementing certain cost reduction measures.

Our research and development expenses were $0 thousand for the three months ended June 30, 2020, as compared to $53 thousand during the same period in the prior year. The reason for the decrease in the three months ended June 30, 2020 is due to the fact that beginning on January 1, 2020, the Company announced and began implementing certain cost reduction measures.

Our selling and marketing expenses were $0 thousand for the three months ended June 30, 2020, as compared to $58 thousand during the same period in the prior year. The reason for the decrease in the three months ended June 30, 2020 is due to the fact that on January 1, 2020, the Company announced a certain cost reduction measures.

Our general and administrative expenses decreased to $94 thousand for the three months ended June 30, 2020 as compared to $110 thousand during the same period in the prior year. Our general and administrative expenses were impacted by two different factors. First, our general and administrative expenses during the three months ended June 30, 2020 increased due to the consolidation of the additional subsidiaries as a result of the consummation of the Share Exchange Agreement, which generated certain general and administrative expenses. Furthermore, in contrast to the three month period during the prior year, during the three months ended June 30, 2020, the Company incurred various fees and expenses related to its status as a public company, including certain compliance and consultancy related fees and expenses. Second, beginning on January 1, 2020, we announced and began implementing certain cost reduction measures. The combination of these two factors slightly decreased the Company’s general and administrative expenses.

Our financial income was $32 thousand for the three months ended June 30, 2020, compared to financial expenses of $15 thousand during the same period in the prior year. The reason for the financial increase in the three months ended June 30, 2020 is due to the US dollar exchange rate decrease during the three months ended June 30, 2020 as compared the same period in the prior year.

Our tax on income was $0 thousand for the three months ended June 30, 2020, as compared to $4 thousand during the same period in the prior year. The reason for the decrease in the three months ended June 30, 2020 is due to the fact that during the same period in the prior year the Company recognized one-time tax expenses for prior years.

Results of Operations During the Six Months Ended June 30, 2020 as Compared to the Six Months Ended June 30, 2019

Our revenues were $70 thousand for the six months ended June 30, 2020, compared to $76 thousand during the same period in the prior year. The reason for the decrease in the six months ended June 30, 2020 is due to the fact that beginning on January 1, 2020, the Company announced and began implementing certain cost reduction measures.

Our cost of revenues were $4 thousand for the six months ended June 30, 2020, which is a slight increase compared to $3 thousand during the same period in the prior year.

Our research and development expenses were $59 thousand for the six months ended June 30, 2020, as compared to $88 thousand during the same period in the prior year. The reason for the decrease in the six months ended June 30, 2020 is due to the fact that beginning on January 1, 2020, the Company announced and began implementing certain cost reduction measures.

Our selling and marketing expenses were $7 thousand for the six months ended June 30, 2020, as compared to $142 thousand during the same period in the prior year. The reason for the decrease in the six months ended June 30, 2020 is due to the fact that beginning on January 1, 2020, the Company announced and began implementing certain cost reduction measures.

Our general and administrative expenses increased to $269 thousand for the six months ended June 30, 2020 as compared to $232 thousand during the same period in the prior year. Our general and administrative expenses were impacted by two different factors. First, our general and administrative expenses in the six months ended June 30, 2020 increased due to the consolidation of the additional subsidiaries as a result of the consummation of the Share Exchange Agreement, which generated certain general and administrative expenses., Also in contrast to the six months ended Jun 30, 2019, during the six months ended June 30, 2020, the Company incurred various fees and expenses related to its status as a public company, including certain compliance and consultancy related fees and expenses.. The reason for the decrease in the six months ended June 30, 2020 is due to the fact that beginning on January 1, 2020, the Company announced and began implementing certain cost reduction measures. The combination of these two factors increased the Company’s general and administrative expenses.

Our financial income was $4 thousand for the six months ended June 30, 2020, compared to financial expenses of $39 thousand during the same period in the prior year. The reason for the financial decrease in the six months ended June 30, 2020 is due to the US dollar exchange rate increase during the six months ended June 30, 2020 as compared the same period in the prior year.

Our tax on income was $2 thousand for the six months ended June 30, 2020, as compared to $23 thousand during the same period in the prior year. The reason for the decrease in the three months ended June 30, 2020 is due to the fact that during the same period in the prior year the Company recognized a one-time tax expense related to prior years.

Liquidity and Capital Resources

Our balance sheet as of June 30, 2020 reflects current assets of $97 thousand, consisting of $79 thousand cash and cash equivalents and other receivables of $18. We also have $2,057 thousand in current liabilities, consisting of $204 thousand in other accounts payables and payable to Gix of $1,853 thousand. As of December 31, 2019, we had current assets of $225 thousand mainly consisting of $87 thousand in cash, other receivables of $136 thousand and restricted cash of $2. As of December 31, 2019, we had $1,923 thousand in current liabilities consisting of $312 thousand in trade payables and other accounts payables and $1,611 thousand payable to Gix.

We had negative working capital of $1,960 thousand as of June 30, 2020, as compared to negative working capital of $1,698 thousand on December 31, 2019. Our total liabilities as of June 30, 2020 were $2,057 thousand, as compared to $1,923 thousand on December 31, 2019.

During the three months ended June 30, 2020, we had negative cash flow from operations of $31 thousand, which was the result of a net loss of $93 thousand, an increase in payables to Gix in the amount of $58 thousand, decrease in trade payables and other payables of $28 thousand and increase in prepaid expenses and other receivables of $32 thousand.

During the six months ended June 30, 2019, we had negative cash flow from operations of $21 thousand, which was the result of a net loss of $267 thousand, increase in payables to Gix in the amount of $244 thousand and decrease in trade payables and other payables of $115 thousand and increase in prepaid expenses and other receivables of $120 thousand.

There are no limitations in the Company’s Certificate of Incorporation on the Company’s ability to borrow funds or raise funds through the issuance of shares of its common stock to affect a business combination. The Company’s limited resources and lack of having cash-generating business operations may make it difficult to borrow funds or raise capital. The Company’s limitations to borrow funds or raise funds through the issuance of restricted capital stock required to effect or facilitate a business combination may have a material adverse effect on the Company’s financial condition and future prospects, including the ability to complete a business combination.

Until such time as the Company can generate substantial revenues, the Company expects to finance its cash needs through a combination of the sale of its equity and/or convertible debt securities, debt financing and strategic alliances and collaborations. The Company does not have any committed external source of funds. To the extent that the Company raises additional capital through the sale of its equity and/or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. To the extent that debt financing ultimately proves to be available, any borrowing will subject us to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest, including debt of an acquired business. If the Company raises funds through additional collaborations or strategic alliances with third parties, we may have to relinquish valuable rights to our future revenue streams and/or distribution arrangements. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. If the Company is unable to raise additional funds through equity and/or debt financings when needed or on attractive terms, the Company may be required to delay, limit, reduce or terminate the operations of some or all of its business segments.

Going Concern:

The Company has incurred $267 in net losses for the six months ended June 30, 2020, has $1,960 stockholders’ deficit as of June 30, 2020 and $1,693 in total stockholders’ deficit as of December 31, 2019. Management expects the Company to continue to generate substantial operating losses and to continue to fund its operations primarily through utilization of its current financial resources and through additional raises of capital.

Such conditions raise substantial doubts about the Company’s ability to continue as a going concern. Management’s plan includes raising funds from outside potential investors. However, there is no assurance such funding will be available to the Company or that it will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives. These financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of June 30, 2020, the Company’s chief executive officer and chief financial officer, which is currently the same individual, conducted an evaluation (the “Evaluation”) regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the Evaluation, as required by Rules 13a-15 or 15d-15, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were ineffective as of the end of June 30, 2020, and pursuant to the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) because of certain material weaknesses.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations, except as set forth below. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company, threatened against or affecting the Company, our common stock, our officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect, other than as set forth below.

On August 7, 2019, Viewbix Ltd. was named as a co-defendant in a civil lawsuit filed with the Jerusalem District Court (the “Jerusalem Court”) by three shareholders of Viewbix Ltd. (in this section, the “Shareholders”), alleging that they were entitled to receive certain preferred shares in Viewbix Ltd., pursuant to a certain 2007 loan agreement by and between Viewbix Ltd. and the petitioning Shareholders, following the sale of Viewbix Ltd. shares to Gix (the “Conversion”). The Shareholders sought declaratory recourse from the Jerusalem Court, pursuant to which the Shareholders demanded, inter alia, shares in Gix on a post-Conversion basis or in a form of alternative compensation. On February 27, 2020, the parties presented their respective arguments before the Jerusalem Court, and the Jerusalem Court determined that the Company is entitled to file a motion for dismissal of the claims by the Shareholders by March 31, 2020, which has subsequently been postponed to August 9, 2020. Notwithstanding the foregoing, the parties remain actively engaged in ongoing settlement negotiations.

ITEM 1A. RISK FACTORS

Except as set forth below, there have been no material changes from the information set forth in “Item 1A. Risk Factors” in the Form 10-K filed with the SEC on March 20, 2020.

The COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, may materially and adversely affect our business and operations.

The COVID-19 pandemic originated in Wuhan, China, in late 2019 and quickly thereafter spread to multiple countries, including the United States, Israel and many countries in Europe. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. While COVID-19 is still spreading and the final implications of the pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. At this time, the pandemic has caused states of emergency to be declared in various countries, travel restrictions imposed globally, quarantines established in certain jurisdictions and various institutions and companies being closed. We are actively monitoring the pandemic and we are taking any necessary measures to respond to the situation in cooperation with the various stakeholders.

Due to the uncertainty surrounding the COVID-19 pandemic, we will continue to assess the situation, including government-imposed restrictions, market by market. It is not possible at this time to estimate the full impact that the COVID-19 pandemic could have on our business, the continued spread of COVID-19, and any additional measures taken by governments, health officials or by us in response to such spread, could have on our business, results of operations and financial condition. The COVID-19 pandemic and mitigation measures have also negatively impacted global economic conditions, which, in turn, could adversely affect our business, results of operations and financial condition. The extent to which the COVID-19 outbreak continues to impact our financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity, longevity and impact of the COVID-19 pandemic on economic activity

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) The following documents are filed as exhibits to this Quarterly Report or incorporated by reference herein.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.