# Quantum X Labs Inc.: Form 10-K for the period ended Dec 31, 2021

- Company: [Quantum X Labs Inc.](/companies/qxl.md) (CIK 797542)
- Form: 10-K
- Filed: 2022-03-17
- Accepted by EDGAR: Mar 17, 2022, 16:05 ET
- Period: 2021-12-31
- Accession: 0001493152-22-007150
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/797542/000149315222007150/form10-k.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/797542/000149315222007150/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 12 months, 2021-01-01 to 2021-12-31 | $41.0k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Gross profit | 12 months, 2021-01-01 to 2021-12-31 | $41.0k | us-gaap:GrossProfit |
| Research and development | 12 months, 2021-01-01 to 2021-12-31 | $64.0k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 12 months, 2021-01-01 to 2021-12-31 | −$354.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 12 months, 2021-01-01 to 2021-12-31 | $2.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 12 months, 2021-01-01 to 2021-12-31 | −$386.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 12 months, 2021-01-01 to 2021-12-31 | $0.01 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 12 months, 2021-01-01 to 2021-12-31 | −$74.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2021-12-31 | $74.0k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-12-31 | $156.0k | us-gaap:AssetsCurrent |
| Total assets | at 2021-12-31 | $156.0k | us-gaap:Assets |
| Current liabilities | at 2021-12-31 | $2.4m | us-gaap:LiabilitiesCurrent |
| Short-term borrowings | at 2021-12-31 | $69.0k | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2021-12-31 | −$2.3m | us-gaap:StockholdersEquity |

## Business

As filed, 14,822 characters.

#### Overview and recent developments

Viewbix Inc. (f/k/a Virtual Crypto Technologies, Inc., f/k/a Emerald Medical Applications Corp.) (the “Registrant”, “Viewbix” or 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”).

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 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 and supporting the purchase and/or sale of cryptocurrencies through ATMs, tablets, personal computers (“PCs”) and/or mobile devices. On February 12, 2018, the Registrant filed a definitive information statement to change its name from Emerald Medical Applications Corp. to Virtual Crypto Technologies, Inc. to reflect its new operations and business focus, and, effective as of March 7, 2018, the Financial Industry Regulatory Authority (“FINRA”) approved the Registrant’s name change and its trading symbol was changed from “MRLA” to “VRCP” on the OTCQB.

#### Transaction with Gix Internet Ltd.

On February 7, 2019, the Registrant entered into a share exchange agreement (the “Share Exchange Agreement”) with Gix Internet Ltd., formerly known as Algomizer Ltd. (TASE:GIX), a company organized under the laws of the State of Israel (“Gix Internet” or “Parent Company”), pursuant to which on July 25, 2019 (the “Closing Date”) Gix Internet assigned, transferred and delivered its 99.83% holdings in Viewbix Ltd. (“Viewbix Israel”) to the Company in exchange for shares of restricted 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 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 Gix Internet 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.

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, (i) the Company issued 20,281,085 shares of its Common Stock to Gix Internet 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 Gix Internet to purchase shares of 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.

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

On January 27, 2020, VCT Israel was sold to a third party for NIS 50,000 ($14,459).

#### Merger with Gix Media Ltd.

On December 5, 2021, the Company entered into a certain Agreement and Plan of Merger (the “Merger Agreement”) with Gix Media Ltd., an Israeli company and the majority-owned subsidiary of Gix Internet, in the field of MarTech (Marketing Technology) solutions, primarily search and content monetization (“Gix Media”) and Vmedia Merger Sub Ltd., an Israeli company and wholly-owned subsidiary of the Company (“Merger Sub”), pursuant to which, following the Merger (as defined herein), and upon satisfaction of additional closing conditions, Merger Sub will merge with and into Gix Media, with Gix Media being the surviving entity and wholly-owned subsidiary of the Company (the “Gix Merger”).

Subject to the terms and conditions of the Merger Agreement, at the Merger Effective Date (as defined in the Merger Agreement) all outstanding ordinary shares of Gix Media, having no par value (the “Gix Media Shares”) will be converted into shares of Common Stock, such that immediately following the Gix Merger, holders of Gix Media Shares will hold 90% of the Company’s capital stock on a fully diluted basis. The Merger Agreement also contains customary representations, warranties and covenants made by each of the Company, Gix Media and Merger Sub.

Following the Gix Merger, the board of directors of the Company is expected to consist of six (6) directors and will be comprised of four (4) new directors to be appointed by Gix Media, who will join the Company’s two currently-serving directors, Amihay Hadad and Alon Dayan.

On December 21, 2021, the shareholders of each of Gix Media and Merger Sub approved the Merger Agreement. Consummation of the Gix Merger is subject to certain additional closing conditions, including, among other things, (i) the Company filing an amendment to its certificate of incorporation to change the Company’s name to “Gix Media, Inc.”, (ii) obtaining approval from certain third parties, including the approval of Bank Leumi due to certain liens registered in its favor against ordinary shares of Gix Media; (iii) conversion of the Company’s outstanding convertible instruments into restricted shares of Common Stock and (iv) obtaining a tax pre-ruling from the Israeli Tax Authority relating to the Agreement.

In connection with Gix Merger, on February 13, 2022, the requisite majority of the Company’s stockholders approved certain amendments to the Company’s certificate of incorporation, including, but not limited to (i) a name change from “Viewbix Inc.” to “Gix Media, Inc.”, (ii) a reverse stock split of the Company’s common Stock at a ratio of 1-for-28 (the “Planned Reverse Split”), (iii) a staggered board structure, and (iv) certain other provisions therein. The Company intends to effect the foregoing amended and restated certificate of incorporation upon the closing of the Gix Merger. Additionally, on February 25, 2022, the Company filed a Schedule 14C Information Statement with the SEC, whereby it reported the foregoing approvals by the requisite majority of the Company’s stockholders.

#### Viewbix Business Overview

Viewbix is an interactive video technology and data platform that provides its client with deep insights into their video marketing performance as well as the effectiveness of its messaging. Viewbix allows companies to add a layer of interactive content on top of a video that allows viewers to engage and interact with the video. The platform measures exactly when a viewer takes an action while watching a video and collects and reports the results to the client.

Viewbix developed the interactive video platform based on a 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 allows the client to analyze user viewing habits and optimize in real-time throughout the campaign, while increasing the effectiveness of online and live video marketing.

Viewbix has adapted its technology platform to work on most nonproprietary platforms on the Internet, including, but not limited to, online video campaigns, brand and image videos, online tutorials, live and real-time video streaming (e.g. music concerts and sporting events), video presentations, and more. Using the Viewbix platform, video creators can integrate advances features into their videos, specifically the inclusion of “click” buttons that trigger a particular action, into a given video, like the insertion of a smart form for retrieving the contact information of the viewer. Viewbix then collects all the data around the cross section of the viewing data and engagement data and offers its clients the opportunity to download and analyze the results. Viewbix also offers a full service option where the Viewbix account managers will analyze the data and report results and suggestions to its clients.

Notwithstanding the foregoing, the Company initiated certain cost reduction measures during fiscal year-ended December 31, 2020. On January 1, 2020, each of the Company’s former Chief Executive Officer and Chief Operating Officer tendered their resignations from their respective positions. Moreover, due to the Company’s failure to meet predetermined sales targets set forth in the Share Exchange Agreement, the Company determined to reduce the size of its sales team and, likewise, the R&D team was replaced with a more cost-effective consultant. These decisions, and future decisions related to cost-reduction measures, may impact the Company’s ability to sell and support its products in the future and, accordingly, may materially impact the Company’s business operations.

#### Industry Overview

Video marketing remains one of the fastest growing industries, and, accordingly is increasingly crowded with competition. According to a study published by Cisco, by 2022 online videos will represent 82% of online consumer traffic. Globally, three trillion minutes (or five million years) of video content will cross the Internet each month by 2022, which is the equivalent of 1.1 million minutes of video streamed or downloaded every second.

According to an additional study published by Statista, ad spending is expected to show an annual growth rate of 11%, resulting in a projected market volume of $162,242 million by 2026. In the video advertising segment, it is expected that $136,486 million will be generated through mobile in 2026.

#### Competition

While there are many companies that offer hosting and streaming services, Viewbix focuses on providing expanded value to its clients that reaches beyond the hosting and streaming platforms. Viewbix has several direct competitors, including Hapyak, which operates primarily via websites, and Innovid, which focuses on advertisements. Additionally, video hosting companies, such as Wistia and Vidyard, both offer certain interactive elements similar to Viewbix. However, Viewbix’s proprietary component is its focus on interactivity and deep data, whose results can thereafter be analyzed and applied.

#### Intellectual Property and Other Proprietary Rights

Our commercial success depends, in part, on obtaining and maintaining patent and other intellectual property protection, in the United States and internationally, for the technologies used in our products. We cannot be sure that any of our patents will be commercially useful in protecting our technology. Our commercial success also depends in part on our non-infringement of the patents or proprietary rights of third parties. The patent positions can be highly uncertain and involve complex and evolving legal and factual questions.

We have four patents that have been granted to us in the U.S. which we consider material to our business and operating success, including the following:

- U.S. Patent No. 10,467,684: the granted patent relates to novel techniques implemented by Viewbix which enables businesses to configure their video players to incorporate interactivity functions, such as call-to-actions, into their video publishing and delivery workflows;
- U.S. Patent No. 8,706,562: the granted patent relates to video e-commerce networking, modules and methods used to configure a video or playlist that is delivered to viewers where the content displayed in the video player is dynamic and can be automatically customized based on the publisher site;
- U.S. Patent No. 8,706,558: the granted patent relates video e-commerce networking, modules and methods to display a video or playlist that is delivered to a viewer where the content displayed in the video player is dynamic and automatically customized based on the publisher site; and
- U.S. Patent No. 9,792,645: the granted patent provides a unique method to facilitate video interactions between a publisher and end users, and measures the data produced through that interaction.

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We also protect our proprietary technology and processes, in part, by confidentiality and invention assignment agreements with our employees, consultants, scientific advisors and other contractors. These agreements may be breached, and we may not have adequate remedies for any breach. We also rely on trade secrets to protect our product candidates. However, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants, scientific advisors or other contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

#### Product Development

Viewbix focuses its R&D efforts on the expansion of its interactive live capabilities by collecting the engagement data for each session and relating back to a live stream, which is aimed to enhance clients’ feedback on its stream for both real time and future stream optimizations.

#### Employees

As of December 31, 2021, Viewbix has two employees in management and finance in Israel. Additionally, Viewbix retains the services of two R&D service providers.

## Risk factors

As filed, 49,197 characters.

*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 Stock. 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.*

### Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. These risks include, among others, the following:

- We initiated certain cost-reduction measures during the previous fiscal year, which could have long-term adverse effects on our business and we may not realize the operational or financial benefits from such actions;
- The COVID-19 pandemic may adversely affect our business, financial condition, liquidity and results of operations;
- Our success depends, in part, upon the continued demand of video as an integral part of corporate marketing and internal communications plans and the continued growth and acceptance of videos as effective alternatives to traditional online and offline marketing products and services;
- Due to our evolving business model and rapid changes in the Internet and the nature of services, it is difficult to accurately predict our future performance and may be difficult to increase revenue or profitability;
- Our customers may reduce or terminate their business relationship with us at any time. If customers representing a significant portion of our revenue reduce or terminate their relationship with us, it could have a material adverse effect on our business, results of operations and financial condition;
- Large and established internet and technology companies, such as Google and Facebook, play a substantial role in the digital advertising market and may significantly impair our ability to operate in this industry;
- The advertising/marketing industry is highly competitive. If we cannot compete effectively in this market, our revenues are likely to decline;

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- If we cannot enforce and protect our intellectual property rights, our business could be adversely affected;
- We may in the future be, subject to claims of intellectual property infringement that could adversely affect our business;
- Patent terms may be inadequate to protect our competitive position for an adequate amount of time;
- We may not be able to protect our systems, technology and infrastructure from cyberattacks;
- Our business depends on our ability to collect and use data, and any limitation on the collection and use of this data could significantly diminish the value of our platform and cause us to lose customers and revenue;
- Shares of Common Stock issuable upon the conversion of warrants may substantially increase the number of shares of Common Stock available for sale in the public market and depress the price of our Common Stock;
- Our Planned Reverse Split may not result in a proportional increase in the per share price of our Common Stock;
- We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights;
- 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 have never paid cash dividends and do not anticipate doing so in the foreseeable future;
- 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;
- Since our Common Stock is thinly traded, sale of your holding may take a considerable amount of time;
- Shares of Common Stock eligible for future sale may adversely affect the market;
- If we fail to maintain effective internal controls over financial reporting, the price of our Common Stock may be adversely affected;
- 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;
- Our annual and quarterly results may fluctuate, which may cause substantial fluctuations in our Common Stock price;
- 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;
- Political, economic and military instability in Israel may impede our ability to operate and harm our financial results; and
- Exchange rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings.

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### Risks Associated with Our Business and Industry

***We initiated certain cost-reduction measures during the previous fiscal year, which could have long-term adverse effects on our business and we may not realize the operational or financial benefits from such actions.***

We initiated certain cost-reduction measures during the previous fiscal year, and we may engage in similar activities in the future. This decision may distract management, could slow improvements in our platform and limit our ability to attract customers. It remains unclear how and to what extent this decision will impact our future business and operating success.

***The COVID-19 pandemic may negatively impact the global economy in a significant manner for an extended period of time, and also adversely affect our business and operating result***s.

The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, placed constraints on the operations of businesses, decreased consumer mobility and activity, and caused significant economic volatility in the United States, Israel and international capital markets. The COVID-19 pandemic has caused an economic recession, high unemployment rates and other disruptions, both in the United States, Israel and the rest of the world. The COVID-19 pandemic has not yet currently adversely affected our business, however, any of these impacts, including the prolonged continuation of these impacts, could in the future, adversely affect our business and operating results and heighten many of the other risks described in these “Risk Factors.”

***Our success depends, in part, upon the continued demand of video as an integral part of corporate marketing and internal communications plans and the continued growth and acceptance of videos as effective alternatives to traditional online and offline marketing products and services.***

We provide a platform that allows companies to understand what messages are resonating with their video viewers and how to leverage that data to enrich and empower a more effective video experience. Our revenues are derived from the sale of our platform. If the demand for video advertising does not continue to grow or customers do not embrace our platform, this could have a material adverse effect on our business and financial condition.

Our success also depends, in part, on our ability to compete for a share of available video advertising/marketing expenditures as more traditional offline and emerging media companies continue to enter the online advertising/marketing market, as well as on the continued growth and acceptance of online advertising generally. If for any reason online advertising is not perceived as effective (relative to traditional advertising), web browsers, software programs and/or other applications that limit or prevent advertising from being displayed become commonplace and/or the industry fails to effectively manage click fraud, the market for online advertising will be negatively impacted. Any lack of growth in the market for online advertising/marketing (particularly for paid listings) could adversely affect our business, financial condition and results of operations.

***Due to our evolving business model and rapid changes in the Internet and the nature of services, it is difficult to accurately predict our future performance and may be difficult to increase revenue or profitability.***

We developed our platform based on a SaaS business model. We do not have an extensive history of ongoing operations in using our business model from which to predict our future performance, and making such predictions, particularly with regard to the effect of our efforts to aggressively increase the distribution and profitability is very complex and challenging. If we are unable to continuously improve our platform, this could have a negative effect on our competitiveness and ability to service and attract customers. If we are unsuccessful in doing so in a timely fashion, we may not be able to achieve revenue growth or increase our profitability.

***Our customers may reduce or terminate their business relationship with us at any time. If customers representing a significant portion of our revenue reduce or terminate their relationship with us, it could have a material adverse effect on our business, results of operations and financial condition.***

We generally engage with two types of customers: small companies who change from time to time and a number of large companies with whom the engagement is for shorter periods of time. We do not enter into long-term contracts with our customers, and such customers do business with us on a non-exclusive basis. Accordingly, our business is highly vulnerable to adverse economic conditions, market evolution and development of new or more compelling offerings by our competitors, which could either lead to reduced advertising spend generally or motivate our current or potential customers to migrate to our competitors. Any reduction in spending by, or loss of, existing or potential customers would negatively impact our revenue and operating results.

Furthermore, the discretionary, non-exclusive nature of our relationships with customers subjects us to increased pricing pressure. Although we believe our rates are competitive, our competitors may be able to offer more favorable pricing or other advantageous terms. As a result, we may be compelled to reduce our rates or offer other incentives in order to maintain our current customers and attract new customers. If a significant number of customers are able to compel us to charge lower rates or provide rate concessions or incentives, there is no assurance that we would be able to compensate for such price reductions or conserve our profit margins.

### Risks Related to our Competition

***Large and established internet and technology companies, such as Google and Facebook, play a substantial role in the digital advertising market and may significantly impair our ability to operate in this industry.***

Google is a substantial player in the digital advertising market along with other players such as Microsoft. In addition, a small number of social network companies, such as Facebook, account for a large portion of digital advertising budgets. The high concentration of power among Google, Facebook and some other large market participants causes us to be subject to any unilateral changes they may make with respect to advertising on their respective platforms, which may be more lucrative than alternative methods of advertising or partnerships with other publishers that are not subject to such changes. Furthermore, we could have limited ability to respond to, and adjust for, changes implemented by large market participants.

These companies, along with other large and established Internet and technology companies, may also leverage their power to make changes to their web browsers, operating systems, platforms, networks or other products or services in a way that impacts the entire digital advertising marketplace.

***The advertising/marketing industry is highly competitive. If we cannot compete effectively in this market, our revenues are likely to decline.***

We face intense competition in the marketplace. We operate in a dynamic market that is subject to rapid development and introduction of new technologies, products and solutions, changing branding objectives, evolving customer demands and industry guidelines, all of which affect our ability to remain competitive. There are a large number of companies and advertising technology companies that offer products or services similar to ours and that compete with us for finite advertising budgets. There is also a large number of niche companies that are competitive with us, as they provide a subset of the services that we provide. Some of our existing and potential competitors may be better established, benefit from greater name recognition, may offer solutions and technologies that we do not offer or that are more evolved than ours, and may have significantly more financial, technical, sales and marketing resources than we do. In addition, some competitors, particularly those with a larger and more diversified revenue base and a broader offering, may have greater flexibility than we do to compete aggressively on the basis of price and other contract terms as well as respond to market changes. Additionally, companies that do not currently compete with us in this space may change their services to be competitive if there is a revenue opportunity, and new or stronger competitors may emerge through consolidations or acquisitions. If our platform is not perceived as competitively differentiated or we fail to develop adequately to meet market evolution, we could lose customers and market share or be compelled to reduce our prices and harm our operational results.

### Risks Related to our Intellectual Property

***If we cannot enforce and protect our intellectual property rights, our business could be adversely affected.***

We rely on patents, copyright, trademark, domain name and trade secret laws in the United States and similar laws in other countries, as well as licenses and other agreements with our employees, and other parties, to establish and maintain our intellectual property rights in the technology, products and services used in our operations. These laws and agreements may not guarantee that our intellectual property rights will be protected and our intellectual property rights could be challenged or invalidated. Amendments to or interpretations of U.S. patent laws or new rulings around U.S. patent laws may adversely impact our ability to protect our new technologies, content, products and services and to defend against claims of patent infringement. In addition, such intellectual property rights may not be sufficient to permit us to take advantage of current industry trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of offerings, decreased traffic and associated revenue or otherwise adversely affect our business.

***We may in the future be, subject to claims of intellectual property infringement that could adversely affect our business.***

Many companies (including patent holding companies) and individuals own patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As we develop and offer our platform through various distribution channels we may experience an increase in the number of intellectual property claims against us. These claims, whether meritorious or not, may result in litigation, may be time-consuming and costly to resolve, and may require expensive changes in our methods of doing business. These intellectual property infringement claims may require us to enter into royalty or licensing agreements on unfavorable terms or to incur substantial monetary liability. Additionally, these claims may result in our being enjoined preliminarily or permanently from further use of certain intellectual property or may require us to cease or significantly alter certain of our operations.

Some of our commercial agreements may require us to indemnify third parties against intellectual property infringement claims, which may require us to use substantial resources to defend against or settle such claims or, potentially, to pay damages. These third parties may also discontinue the use of our platform, as a result of injunctions or otherwise, which could result in loss of revenues and adversely impact our business. Additionally, we may be exposed to liability or substantially increased costs if a commercial partner does not honor its contractual obligation to indemnify us for intellectual property infringement claims made by third parties or if any amounts received are not adequate to cover our liabilities or the costs associated with defense of such claims. The occurrence of any of these events could adversely affect our business.

***Patent terms may be inadequate to protect our competitive position for an adequate amount of time.***

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional or international patent application filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our products are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

### Risks Related to Cyber and Data Collection

***We may not be able to protect our systems, technology and infrastructure from cyberattacks.***

We may be under attack by perpetrators of malicious technology-related events, such as the use of botnets, malware or other destructive or disruptive software, distributed denial of service attacks, phishing, attempts to misappropriate user information and other similar malicious activities. The incidence of events of this nature (or any combination thereof) is on the rise worldwide. While we continuously develop and maintain systems designed to detect and prevent events of this nature from impacting our platform, we have invested (and continue to invest) heavily in these efforts. These efforts are costly and require ongoing monitoring and updating as technologies change and efforts to overcome preventative security measures become more sophisticated.

Any event of this nature that we experience could damage our systems, technology and infrastructure, prevent us from providing our services, compromise the integrity of our services, damage our reputation and/or be costly to remedy, as well as subject us to investigations by regulatory authorities, fines and/or litigation that could result in liability to third parties.

***Our business depends on our ability to collect and use data, and any limitation on the collection and use of this data could significantly diminish the value of our platform and cause us to lose customers and revenue.***

Our platform receives, collects, stores, processes, transfers and uses certain data about how viewers engaged with videos and helps companies to leverage that data to become a better story teller and optimize the videos. Our ability to access and utilize such data is crucial.

Our ability to either collect or use data could be restricted by new laws or regulations. We are subject to numerous federal, state, local, and international laws, directives and regulations regarding privacy, data protection, and data security and the collection, storing, sharing, use, processing, transfer, disclosure and protection of personal information and other data, the scope of which are changing, subject to differing interpretations, and may be inconsistent among jurisdictions or conflict with other legal and regulatory requirements. We are also subject to certain contractual obligations to third parties related to privacy, data protection and data security. We strive to comply with our applicable policies and applicable laws, regulations, contractual obligations and other legal obligations relating to privacy, data protection and data security to the extent possible. However, the regulatory framework for privacy, data protection and data security worldwide is, and is likely to remain for the foreseeable future, uncertain and complex, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that we do not anticipate or that is inconsistent from one jurisdiction to another and may conflict with other legal obligations or our practices. Further, any significant change to applicable laws, regulations or industry practices regarding the collection, use, retention, security or disclosure of data, or their interpretation, or any changes regarding the manner in which the consent of users or other data subjects for the collection, use, retention or disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process user data or develop new services and features.

If we were found in violation of any applicable laws or regulations relating to privacy, data protection or security, our business may be materially and adversely affected and we would likely have to change our business practices and potentially the services and features available through our platform. In addition, these laws and regulations could impose significant costs on us and could constrain our ability to use and process data in manners that may be commercially desirable. In addition, if a breach of data security were to occur or to be alleged to have occurred, if any violation of laws and regulations relating to privacy, data protection or data security were to be alleged, or if we had any actual or alleged defect in our safeguards or practices relating to privacy, data protection, or data security, our solutions may be perceived as less desirable and our business, prospects, financial condition and results of operations could be materially and adversely affected.

We also expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions. For example, the European Union’s (“EU”), data protection landscape is currently unstable, resulting in possible significant operational costs for internal compliance and risks to our business. The EU has adopted the General Data Protection Regulation (“GDPR”), which became effective in May 2018, and contains numerous requirements and changes from previously existing EU laws, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. Among other requirements, the GDPR regulates the transfer of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States. Failure to comply with the GDPR could result in penalties for noncompliance.

In addition to the GDPR, the European Commission has another draft regulation in the approval process that focuses on a person’s right to conduct a private life. The proposed legislation, known as the Regulation of Privacy and Electronic Communications (“ePrivacy Regulation”), would replace the current the current ePrivacy Directive. Originally planned to be adopted and implemented at the same time as the GDPR, the ePrivacy Regulation is still being negotiated.

Additionally, in June 2018, California passed the California Consumer Privacy Act (“CCPA”), which provides new data privacy rights for consumers and new operational requirements for companies. Specifically, the CCPA provides that covered companies must provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information. The CCPA became operative January 1, 2020. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. We cannot fully predict the impact of the CCPA on our business or operations, but it may require us to modify our data practices and policies and to incur substantial costs and expenses in an effort to comply. Some observers have noted the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business. Further in March 2017, the United Kingdom (“U.K.”) formally notified the European Council of its intention to leave the EU pursuant to Article 50 of the Treaty on European Union (“Brexit”). The U.K. ceased to be an EU Member State on January 31, 2020, but enacted, a Data Protection Act substantially implementing the GDPR, effective in May 2018, which was further amended to align more substantially with the GDPR following Brexit. It is unclear how U.K. data protection laws or regulations will develop in the medium to longer term and how data transfers to and from the U.K. will be regulated. In addition, some countries are considering or have enacted legislation requiring local storage and processing of data that could increase the cost and complexity of delivering our services.

In addition, failure to comply with the Israeli Privacy Protection Law 1981, and its regulations as well as the guidelines of the Israeli Privacy Protection Authority, may expose us to administrative fines, civil claims (including class actions) and in certain cases criminal liability. Current pending legislation may result in a change of the current enforcement measures and sanctions.

Any failure or perceived failure by us to comply with our posted privacy policies, our privacy-related obligations to users or other third parties, or any other legal obligations or regulatory requirements relating to privacy, data protection or data security may result in governmental investigations or enforcement actions, litigation, claims or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation and business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, other obligations and policies that are applicable to the businesses of our users may limit the adoption and use of, and reduce the overall demand for, our platform. Additionally, if third parties we work with violate applicable laws, regulations or contractual obligations, such violations may put our users’ data at risk, could result in governmental investigations or enforcement actions, fines, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our users to lose trust in us and otherwise materially and adversely affect our reputation and business. Further, public scrutiny of, or complaints about, technology companies or their data handling or data protection practices, even if unrelated to our business, industry or operations, may lead to increased scrutiny of technology companies, including us, and may cause government agencies to enact additional regulatory requirements, or to modify their enforcement or investigation activities, which may increase our costs and risks.

### Risks Related to Our Common Stock

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

As of December 31, 2021, we had outstanding: (i) Class J Warrants exercisable to purchase 3,649,318 shares of Common Stock at an exercise price of $0.48 per share of Common Stock; and (ii) Class K Warrants exercisable to purchase 3,649,318 shares of Common Stock, at an exercise price of $0.80 per share of Common Stock.

To the extent any of these warrants are exercised and any additional warrants are issued and subsequently exercised, there will be further dilution to our stockholders. Until the warrants expire, these warrant holders will have an opportunity to profit from any increase in the market price of our Common Stock 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 of Common Stock 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.

***Our Planned Reverse Split may not result in a proportional increase in the per share price of our Common Stock.***

We intend to effect the Planned Reverse Split with the primary intent of increasing the price of our Common Stock in order to meet the initial listing requirements of the Nasdaq Capital Market. The effect of the Planned Reverse Split on the market price for our Common Stock cannot be accurately predicted. In particular, we cannot assure you that the proportionate increase in the price of our common stock immediately after the Planned Reverse Split from the price for shares of our Common Stock immediately before the Planned Reverse Split will be maintained for us to meet the initial listing requirements of the Nasdaq Capital Market or that the such market prices will be maintained for a substantial period of time. It is not uncommon for the market price of a company’s common stock to decline in the period following a reverse stock split. If the market price of our Common Stock declines following the Planned Reverse Split, the percentage decline may be greater than would occur in the absence of the Planned Reverse Split. The market price of our Common Stock may also be affected by other factors which may be unrelated to the Planned Reverse Split or the number of shares outstanding.

Moreover, because some investors may view the Planned Reverse Split negatively, we cannot assure you that the Planned Reverse Split will not adversely impact the market price of our Common Stock. Accordingly, our total market capitalization after the Planned Reverse Split may be lower than the market capitalization before the Planned Reverse Split.

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

We have offered and sold our Common Stock 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. 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 U.S. Securities and Exchange Commission (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, of which, as of December 31, 2021, 34,753,669 shares of Common Stock were outstanding. Additional shares of Common Stock 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 of Common Stock may adversely affect the market price of our Common Stock.

Our Certificate of Incorporation authorizes 10,000,000 shares of preferred stock, par value $0.0001 per share of which none were issued and outstanding as of December 31, 2021. 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 stockholders.

***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 SEC 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:

- That a broker or dealer approve a person’s account for transactions in penny stocks; and
- The broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

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

- Obtain financial information and investment experience objectives of the person; and
- Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

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

- Sets forth the basis on which the broker or dealer made the suitability determination; and
- That the broker or dealer received a signed, written agreement from the investor prior to the transaction.

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 Common 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.

***Since our Common 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 of Common Stock 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 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.

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

We identified a material weakness in our period and our financial reporting process. Our internal control over financial reporting may have material 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 material 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 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 and Chief Financial Officer, which currently is the same individual, determines 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 of Common Stock will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.

***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 Delaware General Corporation Law (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.

### Risks Related to our Operations in Israel

***Political, economic and military instability in Israel may impede our ability to operate and harm our financial results.***

Our offices and management team are located in the Tel-Aviv metropolitan area, Israel. Accordingly, political, economic, and military conditions in Israel and the surrounding region may directly affect our business and operations. In recent years, Israel has been engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large portions of southern Lebanon, and with Iranian-backed military forces in Syria. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.

In addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial condition and results of operations.

***Exchange rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings.***

Our reporting and functional currency is the U.S. dollar. Our revenues are currently primarily payable in U.S. dollars and we expect our future revenues to be denominated primarily in U.S. dollars and Euros. However, certain amount of our expenses are in NIS and as a result, we are exposed to the currency fluctuation risks relating to the recording of our expenses in U.S. dollars. We may, in the future, decide to enter into currency hedging transactions. These measures, however, may not adequately protect us from material adverse effects.

## Legal proceedings

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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.

In June 2017, a lawsuit was filed with the Regional Labor Court in Tel Aviv (the “Tel Aviv Court”) against Emerald Israel, and other defendants, claiming certain damages in the total amount of approximately $225,000, under the assertion of wrongful termination by Emerald Israel. We filed our response with the Tel Aviv Court in October of 2017. The dispute was initially heard by the Tel Aviv Court on February 13, 2020. In a supplemental hearing on February 11, 2021, the plaintiff provided a certified confirmation of payment of approximately $14,668 by the National Insurance Institute of Israel for one month’s prior notice of termination, redemption of 16.8 days of vacation and severance pay. On June 3, 2021, and after the plaintiff and the defendants filed their summaries, the lawsuit against Emerald Israel was dismissed.

## Management's discussion and analysis

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#### 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.*

#### Organizational Background

The Registrant was incorporated in the State of Ohio in 1989 under a predecessor name, Zaxis International, Inc. On August 25, 1995, Zaxis International, Inc. 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 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 January 29, 2018, the Company ceased the DermaCompare operations of Emerald Israel and on May 2, 2018, the District Court of Lod, Israel issued a winding-up order for Emerald Israel and appointed an Israeli attorney to serve as special executor for Emerald Israel.

#### Virtual Crypto Technologies Ltd.

On January 17, 2018, the Company formed 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. On January 27, 2020, VCT Israel was sold to a third party for NIS 50,000 ($14,459).

#### Transaction with Gix (the “Recapitalization Transaction”)

On February 7, 2019, the Company entered into the Share Exchange Agreement with Gix Internet, pursuant to which on Closing Date, Gix Internet assigned, transferred and delivered its 99.83% holdings in Viewbix Israel to the Company in exchange for 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 Internet 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 Internet 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 Internet, whereby (a) 3,649,318 of such warrants to purchase shares of Common Stock were issued with an exercise price of $0.48, and (b) 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 Internet Ltd.

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 during the year ended December 31, 2021 as compared to the year ended December 31, 2020

Revenues for the year ended December 31, 2021 was $41 thousand as compared to $96 thousand for the year end December 31, 2020. The reason for the decrease during the fiscal year ended December 31, 2021 is due to the Company’s cost-reduction measures implemented beginning on January 1, 2021.

Cost of revenues for the year ended December 31, 2021 was $0 which is a slight decrease to $5 thousand for the year end December 31, 2020.

Research and development costs for the year ended December 31, 2021 was $64 thousand as compared to $108 thousand for the year end December 31, 2020. The reason for the decrease during the fiscal year ended December 31, 2021 is due to the Company’s cost-reduction measures implemented beginning on January 1, 2020, though despite these measures, the Company hired the services of an R&D team during the fiscal year ended December 31, 2021.

Sales and marketing expenses for the year ended December 31, 2021 was $2 thousand as compared to $8 thousand for the year end December 31, 2020. The reason for the decrease during the year ended December 31, 2021 is due to the Company’s cost-reduction measures implemented beginning on January 1, 2020.

General and Administration expenses for the year ended December 31, 2021 was $304 thousand as compared to $437 thousand for the year end December 31, 2020. The reason for the decrease in 2021 is due to certain cost reduction measures initiated by the Company as of the beginning of January 2020.

Our net financial expense was $30 thousand for the year ended December 31, 2021, compared to net financial income of $13 thousand for the year end December 31, 2020. The reason for the increase in financial expenses in 2021 is due to the loan agreement with Pure Capital and other lenders entered into on December 18, 2020, which interest expenses were recognized in the year ended December 31, 2021.

Our taxes on income was $2 thousand for the year ended December 31, 2021 and for the year ended December 31, 2020.

#### Liquidity and Capital Resources

As of December 31, 2021, we had current assets of $156 thousand consisting of $74 thousand in cash and cash equivalents, $8 thousand in trade receivables, $30 thousand in other accounts receivables and, $44 thousand in prepaid expenses.

As of December 31, 2021, we had $2,436 thousand in current liabilities consisting of $9 in trade payables, $242 in other accounts payable and accrued liabilities, $69 Short term loan, and $2,116 payable to our Parent Company.

As of December 31, 2020, we had current assets of $225 thousand consisting of $148 thousand in cash and cash equivalents and restricted cash, $15 thousand in trade receivables, $20 thousand in other receivables and $42 thousand in prepaid expenses. We had $2,303 thousand in current liabilities, which consisted of $177 in accounts payable and accrued liabilities and $22 trade payable, $50 Short term loan, and $2,054 payable to our Parent Company.

We had a negative working capital of $2,280 thousand and $2,078 thousand as of December 31, 2021 and December 31, 2020, respectively.

Our total liabilities as of December 31, 2021 were $2,436 thousand compared to $2,303 thousand as of December 31, 2020.

During the fiscal year ended December 31, 2021, we had negative cash flow from operations of $74 thousand which was mainly the result of a net loss of $386 thousand, offset by decrease in working capital of $312 thousand.

During the fiscal year ended December 31, 2020, we had negative cash flow from operations of $53 thousand which was mainly the result of a net loss of $443 thousand, depreciation expense of $5 thousand, offset by gains from the sale of a subsidiary and decrease in working capital of $385 thousand.

During the fiscal year ended December 31, 2021, we had no cash flow from investing activities as compared to a positive cash flow effect from investing activities of $13 thousand as during the year ended December 31, 2020.

During the fiscal year ended December 31, 2021, we had no cash flow from financing activities as compared to a positive cash flow from financing activities of $99 thousand during the fiscal year ended December 31, 2020, which related to the Loan Agreement and issuance of shares we have made during the fiscal year ended December 31, 2020. In January 2022, the repayment date under the Loan Agreement was extended per the Investors’ request. The Investors also expressed their intention to convert the remaining sum of the Principal Amount to shares of our Common Stock, however, if we are required to repay the Principal Amount in cash, we will be able to receive cash flow for the repayment from our Parent Company. The Gix Loan along with any accrued interest is due on December 31, 2022, unless extended upon mutual consent of the Company and Gix Internet.

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, collaborations, and funds from its Parent Company. 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 shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. 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 $386 thousand in net losses for the year ended December 31, 2021, has $2,280 thousand shareholders’ deficit as of December 31, 2021 and $2,078 thousand in total shareholders’ deficit as of December 31, 2020 and $74 thousand negative cash flows from operations for the year ended December 31, 2021, and $53 thousand negative cash flows from operations for the year ended December 31, 2020. 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.

#### 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, 2021 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.

#### Contractual Obligations and Commitments

As of December 31, 2021, and 2020, we did not have any contractual obligations.

#### Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our consolidated financial statements and disclosures requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenue and expenses during the reporting periods. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.

Our significant accounting policies are described in more detail in the notes to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

## Controls and procedures

As filed, 4,713 characters.

#### Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2021, the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, due to the material weakness discussed below, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of December 31, 2021.

#### Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management evaluated the design and operating effectiveness of internal control over financial reporting based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO 2013”). Based on this evaluation, management concluded that our internal control over financial reporting as of December 31, 2021 was not effective due to the material weakness described below.

In connection with the preparation of our consolidated financial statements as of and for the year ended December 31, 2021 and December 31, 2020, we have identified a material weakness in our internal control over financial reporting. The material weakness was identified in the period-end financial reporting process, and is associated with our history as a private company and a material weakness is a deficiency or combination of deficiencies in our internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis. This deficiency could result in additional misstatements to our consolidated financial statements that would be material and would not be prevented or detected on a timely basis.

We are evaluating and implementing additional procedures in order to remediate this material weakness, however, we cannot assure you that these or other measures will fully remediate the material weakness in a timely manner.

#### Attestation Report of the Registered Public Accounting Firm

This annual report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company, as a non-accelerated filer, to provide only management’s report in this annual report on Form 10-K.

#### 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 fourth quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Mar 17, 2022.
Source: SEC EDGAR, the filing index for accession 0001493152-22-007150. Last ingested by Listed: Oct 24, 2026, 14:57 ET. No prices; not investment advice.