Viewbix Inc. - Quarter Report: 2020 March (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 March 31, 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 March 31, 2020, the Registrant had 31,201,669 shares of common stock issued and outstanding.

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

March 31, 2020

CONTENTS

VIEWBIX 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.

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. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

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

(*) 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.

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

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

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

VIEWBIX INC.

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

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

(*) 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.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

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

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

VIEWBIX 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Organizational Background

Viewbix Inc. (formerly known as Virtual Crypto Technologies, Inc.) (the “Company””) was incorporated in the State of Ohio in 1989 under a predecessor name, Zaxis International, Inc. (“Zaxis”). On August 25, 1995, Zaxis merged with a subsidiary of The InFerGene Company, a Delaware corporation, which entity changed its name to Zaxis International, Inc. and the Company was reincorporated in Delaware under the name of Zaxis International, Inc. On December 30, 2014, Zaxis entered into an agreement with Emerald Medical Applications Ltd., a private limited liability company organized under the laws of the State of Israel (“Emerald Israel”).

Emerald Medical Applications Ltd.

On March 16, 2015, Zaxis and Emerald Israel executed a share exchange agreement, which closed on July 14, 2015, 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. On January 29, 2018, the Company ceased the DermaCompare operations of its former subsidiary.

On May 2, 2018, the District Court of Lod, Israel issued a winding-up order for Emerald Israel and appointed an Israeli attorney as special executor for Emerald Israel.

Virtual Crypto Technologies Ltd.

On January 17, 2018, the Company formed a new wholly-owned subsidiary under the laws of the State of Israel, Virtual Crypto Technologies Ltd. (the “VCT Israel”), to develop and market software and hardware products facilitating, allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, personal computers (“PCs”) and/or mobile devices.

VCT Israel ceased its business operation During the beginning of Q1 2020. On January 27, 2020, VCT Israel was sold to a third party for NIS 50 ($14). The effective closing date of the transaction was February 12, 2020. The gain from the sale of the company was $8.

Transaction with Algomizer Ltd. (the “Recapitalization Transaction”)

On February 7, 2019, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Algomizer Ltd. (TASE:ALMO), a company organized under the laws of the State of Israel (“Algomizer”), pursuant to which on July 25, 2019 (the “Closing Date”), Algomizer assigned, transferred and delivered its 99.83% holdings in Viewbix Ltd. (“Viewbix Israel”) to the Company in exchange for shares of restricted common stock of the Company, 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 the 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 will issue to Algomizer an additional 1,642,193 shares of restricted common stock of the Company representing 5% of the Fully Diluted Share Capital immediately following the Closing Date.

VIEWBIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

On July 24, 2019, 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 and, effective 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, the Company (i) issued 20,281,085 shares of its common stock to Algomizer in exchange for consideration consisting of consideration for its 99.83% holdings in Viewbix Israel, and (ii) 3,434,889 shares of its common stock to holders of convertible notes, which were issued by the Company prior to the Reverse Recapitalization, and which were converted upon the Closing Date. The shares of common stock were issued under Regulation S. The Company also issued a total of 7,298,636 warrants to Algomizer to purchase the Company’s common stock, whereby (i) 3,649,318 of such warrants were issued with an exercise price of $0.48, and (ii) 3,649,318 of such warrants were issued with an exercise price of $0.80.

As a result of the Recapitalization Transaction, Viewbix Israel became a subsidiary of the Company. As the shareholders of Viewbix Israel received the largest ownership interest in the Company, Viewbix Israel was determined to be the “accounting acquirer” in the Recapitalization Transaction. As a result, the historical financial statements of the Company were replaced with the historical financial statements of Viewbix Israel. 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.

The Company and its subsidiaries are collectively referred to as the “Company”. Viewbix Israel was incorporated on February 2006 in Israel. The Company has developed an interactive video platform based on Software as a Service (“SaaS”) business model with interactive elements, and the ability to collect and analyze information about each interactive action performed during the viewing of the video clip. The interactive elements and information gathered, allowing the advertiser to analyze user viewing habits and optimize real-time throughout the campaign while increasing the effectiveness of online and live video advertising.

On January 1, 2020, the Company announced certain cost reduction measures due the Company not achieving certain revenues goals.

Going Concern

The Company has incurred $174 in net loss for the period ended March 31, 2020, has $1,867 stockholders’ deficit as of March 31, 2020 and $1,863 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.

VIEWBIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Basis of Presentation and Principles of Consolidation:

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary and were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)

All intercompany accounts and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2019 and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 20, 2020 (the “2019 Annual Report”). The results for any interim period are not necessarily indicative of results for any future period.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position and results of operations for the interim periods presented .The results for the three months ended March 31, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.

As of March 31, 2020, there have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2019 Annual Report.

Composition:

VIEWBIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Composition:

Composition:

VIEWBIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Composition:

Ordinary Shares:

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.

Preferred shares (relating to Viewbix Ltd prior to the Recapitalization Transaction):

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.

Redemption

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

VIEWBIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Share Exchange

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 Algomizer 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

Warrants

The following table summarizes information of outstanding warrants as of March 31, 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 Algomizer 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 August 2019, a law suit was filed against the Company and, the parent company. Algomizer claiming that the applicants were entitled to receive shares of the Company as part of the consideration in the Company’s acquisition by Algomizer. 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. The understanding of the Company and its legal advisers 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 $100,000, 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 March 31, 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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Composition:

Viewbix Israel are taxed according to Israeli tax laws. The Israeli corporate tax rate is 23% in the years2019 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:

As of March 31, 2020, the Company has provided valuation allowances of $6,931 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.

VIEWBIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

As of March 31, 2020 Viewbix Israel incurred operating losses in Israel of approximately $13,237 which may be carried forward and offset against taxable income in the future for an indefinite period.

As of March 31, 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.

Composition:

VIEWBIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Balances:

As part of the agreement with Algomizer, the parties agreed to have the Company’s operations outsourced to Algomizer 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 Algomizer 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 $1,795 as of March 31, 2020.

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 March 31, 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”). This management’s 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. These factors include those contained in section captioned “Risk Factors” of the Company’s 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 Algomizer Ltd. (TASE:ALMO), a company organized under the laws of the State of Israel (“Algomizer”), pursuant to which on July 25, 2019 (the “Closing Date”), Algomizer 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 Algomizer 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 Algomizer 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 Algomizer, 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 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 March 31, 2020 as Compared to the Three Months Ended March 31, 2019

Our revenues were $37 thousand for the three months ended March 31, 2020, with a slight increase compared to $34 thousand during the same period in the prior year.

Our cost of revenues were $4 thousand for the three months ended March 31, 2020, with a slight increase as compared to $2 thousand during the same period in the prior year.

Our research and development expenses were $59 thousand for the three months ended March 31, 2020, as compared to $36 thousand during the same period in the prior year. The reason for the increase in the three months ended March 31, 2020 is due to the fact that certain expenses during the same period in the prior year were incurred and paid for by Algomizer in accordance with the Share Exchange Agreement.

Our selling and marketing expenses were $7 thousand for the three months ended March 31, 2020, as compared to $80 thousand during the same period in the prior year. The reason for the decrease in the three months ended March 31, 2020 is due to the fact that on January 1, 2020, the Company announced a certain cost reduction measures.

Our general and administrative expenses increased to $175 thousand for the three months ended March 31, 2020 as compared to $121 thousand during the same period in the prior year. The reason for the increase in the three months ended March 31, 2020 is 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 March 31, 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.

Our financial income was $28 thousand for the three months ended March 31, 2020, compared to financial expenses of $24 thousand during the same period in the prior year. The reason for the financial income in the three months ended March 31, 2020 is due to the US dollar exchange rate increase during the three months ended March 31, 2020 as compared to a decrease during the same period in the prior year.

Our tax on income was $2 thousand for the three months ended March 31, 2020, as compared to $20 thousand during the same period in the prior year. The reason for the decrease in the three months ended March 31, 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.

Liquidity and Capital Resources

Our balance sheet as of March 31, 2020 reflects current assets of $160 thousand, consisting of $110 thousand cash and cash equivalents and other receivables of $50. We also have $2,027 thousand in current liabilities, consisting of $232 thousand in other accounts payables and payable to Algomizer of $1,795 thousand. As of December 31, 2019, we had current assets of $225 thousand mainly consisting of $87 thousand in cash, other receivables of $138 thousand and restricted cash of $2. As of December 31, 2019, we had $1,923 thousand in current liabilities consisting of $312 thousand in other accounts payables and $1,611 thousand payable to Algomizer.

We had negative working capital of $1,867 thousand as of March 31, 2020, as compared to negative working capital of $1,693 thousand on December 31, 2019. Our total liabilities as of March 31, 2020 were $2,027 thousand, as compared to $1,923 thousand on December 31, 2019.

During the period ended March 31, 2020, we had positive cash flow from operations of $10 thousand, which was the result of a net loss of $174 thousand, an increase in payable to Algomizer in the amount of $186 thousand, decrease in other payables of $55 thousand and decrease in prepaid expenses and other receivables of $88 thousand.

During the period ended March 31, 2019, we had negative cash flow from operations of $36 thousand, which was the result of a net loss of $249 thousand, increase in payable to Algomizer in the amount of $146 thousand and decrease in trade payables of $71 thousand and increase in prepaid expenses and other receivables of $14 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 $174 in net losses for the three months ended March 31, 2020, has $1,867 stockholders’ deficit as of March 31, 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 March 31, 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 March 31, 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 March 31, 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 Algomizer Ltd. (the “Conversion”). The Shareholders sought declaratory recourse from the Jerusalem Court, pursuant to which the Shareholders demanded, inter alia, shares in Algomizer Ltd. 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 May 30, 2020.

In June 2017, a lawsuit was filed with the Tel Aviv District Court (the “Tel Aviv Court”) against Emerald Israel, and other defendants, claiming certain damages in the total amount of approximately $100,000, under the assertion of wrongful termination by Emerald Israel. We believe 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, 2020, which has subsequently been postponed to September 29, 2020.

In December 2017, a liquidation request was filed with the Tel Aviv Court by a group of former employees of Emerald Israel (the “Employees”), which included claims of insolvency and the failure to make timely payments to the Employees. On December 20, 2017, at a hearing before the Tel Aviv Court, Emerald Israel was ordered to settle its pension debts to the Employees under the applicable Israeli law within 21 days and settle its other debts with the Employees within 60 days, the failure of which would require the winding up of the Company. On May 2, 2018, the Tel Aviv Court gave an order to liquidate Emerald Israel and appointed a special executor for this purpose. The amounts claimed by the Employees is less than $96,000 and will be awarded by the special executor upon the sale of Emerald Israel’s assets.

ITEM 1A. RISK FACTORS

Not applicable.

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.