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 September 30,
2019 and 2018, and the related statements of comprehensive loss, statement of changes in stockholders’ equity
(deficit) and statements of cash flows for the three and nine months periods then ended, and the related notes thereto
contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”).
The interim financial statements and this Management’s Discussion and Analysis
of Financial Condition and Results of Operations should be read together with our audited financial statements and accompanying
notes for the year ended December 31, 2018 included in Item 9.01(ii) of our Report on Form 8-K/A filed on September 23, 2019.
In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Operating results are not necessarily indicative of results that may occur
for the full fiscal year or any other future period. The term “Viewbix Israel” refers to Viewbix Ltd, prior
to the consummation of the Recapitalization Transaction. Unless otherwise indicated, references to the terms the “Viewbix”,
the “Company”, “we”, “our” and “us” refer to Viewbix Ltd, prior to the consummation
of the Recapitalization Transaction and Viewbix Inc. (formerly known as Virtual Crypto Technologies, Inc), upon the consummation
of the Recapitalization Transaction described herein. The
term “VRCP” refers to Viewbix Inc. (formerly known as Virtual Crypto Technologies, Inc) prior to the Recapitalization
Transaction.
Overview
and background
On
January 17, 2018, Viewbix Inc. (formerly known as Virtual Crypto Technologies, Inc.) (“we”, “us”, “our”,
the “Registrant” or the “Company”) formed Virtual Crypto Technologies Ltd. as a wholly-owned subsidiary
under the laws of the State of Israel (“Virtual Crypto Israel”) and appointed Mr. Alon Dayan, who has served as the
Registrant’s Chief Executive Officer since September 30, 2018 and has been a member of the Company’s Board of Directors
since March 14, 2018, as CEO of Virtual Crypto Israel. Virtual Crypto Israel was formed to develop and market software and hardware
products facilitating, allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile
devices (the “Products”).
During
the year ended December 31, 2018 and through the Closing Date of the Share Exchange Agreement (as defined below), the Company
continued its development of the Products.
Recent
Developments
Share
Exchange Agreement
On February 7, 2019, we entered into a share
exchange agreement (the “Share Exchange Agreement”) with Algomizer Ltd., an Israeli Corporation (“Algomizer”),
pursuant to which on the Closing Date, as defined below, Algomizer assigned, transferred and delivered its 99.83% holdings in
Viewbix Ltd., an Israeli corporation (“Viewbix Israel”), to us 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, excluding certain warrants to purchase
shares of common stock, which will expire in 2020 and with an exercise price representing a valuation equal to $30,000,000 (“Fully
Diluted Share Capital”). In addition, upon the earlier of: (a) the launch of a live video product to an American consumer
in the U.S by Viewbix Israel, or (b) the launch of an interactive television product to an American consumer in the U.S. by Viewbix
Israel, we will issue to Algomizer additional shares of restricted common stock of the Company representing 5% of the Fully Diluted
Share Capital (the foregoing the “Recapitalization Transaction”).
Furthermore,
on the Closing Date, we issued to Algomizer: (i) warrants to purchase shares of restricted common stock with an exercise price
representing a valuation for the Company of $15,000,000 on Fully Diluted Share Capital basis, representing 10% of the Fully Diluted
Share Capital immediately following the Closing Date, which warrants will be exercisable for a period of ten (10) years, and (ii)
warrants to purchase shares of restricted common stock with an exercise price representing a valuation for the Company of $25,000,000
on Fully Diluted Share Capital basis, representing 10% of the Fully Diluted Share Capital immediately following the Closing Date,
which latter warrants will be exercisable for a period of ten (10) years.
The
closing of the Share Exchange Agreement was conditioned upon us filing an amendment to our certificate of incorporation to change
the Company’s name to Viewbix Inc. (the “Name Change”), effecting a reverse split of our shares of common stock
at a ratio of 1:15 (the “Reverse Stock Split”), converting our outstanding convertible notes into shares of restricted
common stock, and Algomizer obtaining a tax pre-ruling from the Israeli Tax Authority relating to the Share Exchange Agreement
(“Israeli Tax Ruling”).
On
February 26, 2019, stockholders holding a majority of our outstanding shares of common stock approved an amendment to our
certificate of incorporation in order to effect the Reverse Stock Split. The Reverse Stock Split became effective on May 20, 2019,
upon which each fifteen (15) shares of our common stock were automatically converted, without any further action by our stockholders,
into one share of common stock. No fractional shares were issued as the result of the reverse stock split. Instead, each stockholder
was entitled to receive one share of common stock in lieu of the fractional share that would have resulted from the reverse stock
split. All stock information in this Quarterly Report have been restated retroactively to reflect the effect of the Reverse Stock
Split. 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.
On
July 24, 2019, the Registrant filed a separate Certificate of Amendment to its Certificate of Incorporation with the Secretary
of State of Delaware to effect the Name Change, thereby reflecting our 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
July 25, 2019 (the “Closing Date”), the Company completed the transaction and issued 20,281,085 shares of its common
stock to Algomizer in consideration for 99.83% holdings in Viewbix Israel, and 3,434,889 shares of its common stock to holders
of convertible notes of 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 have an exercise price of $0.48, and (ii) 3,649,318 of such warrants have an exercise price of $0.80.
Viewbix
Israel, through its ViewBix Studio, provides its clients with a video engagement platform designed to add enhanced branding and
interactive elements – from call-to-action buttons to email captures – to digital videos. ViewBix Studio is simple,
intuitive and requires no coding experience, thereby enabling clients to enhance videos and publish them across any platform,
for any device in just minutes. Videos enhanced by Viewbix Israel are compatible with existing ad serving, measurement and analytics
platforms and easily work within existing agency or client processes for launching advertising campaigns. Beyond adding interactions
to video, Viewbix Israel uses second-by-second measurement of engagements to uncover contextual insights as to what, when and
how users are engaging or responding to brand messaging.
On July 25, 2019, Mr. Eyal Ben Ami notified
the Company of his resignation from the Company’s board of directors which became effective immediately prior
to the Closing. Mr. Ben Ami’s resignation was not a result of any disagreement with the Company on any matter relating to
the Company’s operations, policies or practices.
On July 25, 2019, Mr. Alon Dayan, the Company’s
then serving chief executive officer, and Mr. Gadi Levin, the Company’s then serving chief financial officer,
each tendered their resignations from their respective positions effective immediately prior to and contingent upon the Closing.
Mr. Dayan continued to serve the Company as a member of the Company’s board of directors and Mr. Levin transitioned
to the role of senior accounting consultant.
On July 25, 2019, Mr. Noam Band, 48, was appointed to the Company’s board of directors,
where he assumed the role of chairman of the board of directors. Since 2013, Mr. Band has served as Algomizer’s chief
executive officer and chairman of its board of directors. Mr. Band holds both a B.A. in economics and an MBA from the Hebrew University
in Jerusalem.
On
July 25, 2019, Mr. Jonathan Stefansky, 47, was elected to the Company’s board of directors and appointed as the Company’s
chief executive officer. Mr. Stefansky previously co-founded Viewbix Israel and currently serves as its chief executive officer.
Mr. Stefansky holds a B.A. in management information systems from Yeshiva University, New York, and an MBA from Baruch College’s
Zicklin School of Business, New York.
On
July 25, 2019, Mr. Amihay Hadad, 42, was appointed by the Company’s board of directors to serve as the Company’s chief
financial officer. From 2011 until 2018, Mr. Hadad served as the chief financial officer of Yedioth Internet and thereafter was
appointed as chief financial officer of Algomizer. Mr. Hadad holds both a B.A. and an MBA from the College of Management Academic
Studies in Rishon LeZion, Israel, and an M.A. in law from Bar-Ilan University, Israel. Mr. Hadad is also a certified public accountant
in Israel.
On
July 25, 2019, Mr. Hillel Scheinfeld, 48, was appointed by the Company’s board of directors to serve as the Company’s
chief operating officer. Mr. Scheinfeld co-founded Viewbix Israel in 2007, and thereafter served as its chief operating officer.
Mr. Scheinfeld holds a B.S. in finance from Yeshiva University, New York.
There
are no arrangements or understandings between Mr. Band, Mr. Stefansky, Mr. Hadad or Mr. Scheinfeld, respectively, and any other
persons, pursuant to which each of them was selected as a director or officer of the Company. There are no additional current
or proposed transactions between the Company and Mr. Band, Mr. Stefansky, Mr. Hadad or Mr. Scheinfeld, respectively, or any of
their immediate family members that would require disclosure under Item 404(a) of Regulation S-K.
Pursuant
to the Israeli Tax Ruling, the Registrant ceased the options of Virtual Crypto Israel upon the Closing Date of the Share Exchange
Agreement.
No
new compensatory arrangements were entered into in connection with the aforementioned leadership changes.
The
appointment of the new directors came into effect ten (10) days subsequent to the Closing Date.
Results
of Operations
Results
of Operations During the Three Months Ended September 30, 2019 as Compared to the Three Months Ended September 30, 2018
Our
revenues were $63 thousand for the three months ended September 30, 2019, as compared to $44 thousand during the same period in
the prior year. The increase is due to a number of new customers who signed agreements during the third quarter of 2019.
Our
cost of revenues were $1 thousand for the three months ended September 30, 2019, as compared to $9 thousand during the same period
in the prior year. The decrease is due to a change in the company’s business strategy, with the new strategy focused mainly
on marketing and advertising.
Our research and development expenses were
$82 thousand for the three months ended September 30, 2019, as compared to $93 thousand during the same period in the prior
year. The decrease is due the fact that certain expenses in 2019 were incurred and paid for by Algomizer in accordance
with the Algomizer Agreement.
Our selling and marketing expenses were $57
thousand for the three months ended September 30, 2019, as compared to $64 thousand during the same period in the prior
year. The decrease is due the fact that certain expenses in 2019 were incurred and paid for by Algomizer in accordance with
the Algomizer Agreement.
Our general and administrative expenses increased
to $190 thousand for the three months ended September 30, 2019 as compared to $53 thousand during the same period in
the prior year. The increase is due to consultants’ expenses related to the Share Exchange Agreement and the fact that
certain expenses in 2019 were incurred and paid for by Algomizer in accordance with the Algomizer Agreement and the consolidation
of the additional subsidiaries, which incurred certain general and administrative expenses, following the Recapitalization Transaction.
Results
of operations during the nine months ended September 30, 2019, as compared to the nine months ended September 30,
2018
Our
revenues were $139 thousand for the nine months ended September 30, 2019, as compared to $193 thousand during the same
period in the prior year. The decrease is due to one of our customers reducing their budget for the use of our product in 2019
as compared to 2018.
Our
cost of revenues were $4 thousand for the nine months ended September 30, 2019, as compared to $65 thousand during the
same period in the prior year. The decrease is due to a change in the company’s business strategy, with the new strategy
focused mainly on marketing and advertising.
Our
research and development expenses were $170 thousand for the nine months ended September 30, 2019, as compared to $193
thousand during the same period in the prior year. The decrease is due the fact that certain expenses in 2019 were incurred
and paid for by Algomizer in accordance with the Algomizer Agreement.
Our selling and marketing expenses were $199
thousand for the nine months ended September 30, 2019, as compared to $144 thousand during the same period in the
prior year. The increase is due to a change in the company’s business strategy, with the new strategy focused mainly on
marketing and advertising, and the hiring of an additional l marketing employee.
Our general and administrative expenses increase to $422 thousand for the nine months
ended September 30, 2019, as compared to $101 thousand during the same period in the prior year. The increase is due
to consultants’ expenses related to the Share Exchange Agreement and the consolidation of the additional subsidiaries,
which incurred certain general and administrative expenses, following the Recapitalization Transaction.
Liquidity
and Capital Resources
Our
balance sheet as of September 30, 2019 reflects current assets of $230 thousand consisting of cash and cash equivalents of $166
thousand and other accounts receivable of $64 thousand. We also have $1,546 thousand in current liabilities consisting of $43
thousand in trade payables, $167 thousand in accounts payable and accrued liabilities and $1,336 thousand in payables to a related
party.
As
of December 31, 2018, we had current assets of $153 thousand consisting of cash and cash equivalents and restricted cash of $53
thousand, trade receivables of $15, prepaid expenses of $7 thousand and other accounts receivable of $78 thousand. We also have
$833 thousand in current liabilities consisting of $19 thousand in trade payables, $25 thousand in accounts payable and accrued
liabilities and $789 thousand in payables to a related party.
We
had negative working capital of $1,316 thousand as of September 30, 2019, as compared to negative working capital of $680 thousand
at December 31, 2018. Our total liabilities as of September 30, 2019 were $1,546, as compared to $833 thousand at December 31,
2018.
During
the nine month period ended September 30, 2019, we had negative cash flow from operating activities of $60 thousand, which
was the result of a net loss of $735 thousand, decrease in accounts receivable and prepaid expenses of $19 thousand, increase
in other receivables of $37 thousand, increase in other accounts payable of $58 thousand, an increase in trade payables
of $13 thousand and an increase in amounts owing to related parties of $547 thousand and depreciation expanses of $1.
During
the nine month period ended September 30, 2018, we had positive cash flow from operating activities of $48 thousand, which
was the result of a net loss of $311 thousand, decrease in accounts receivable and prepaid expenses of $28 thousand,
decrease in other accounts payable of $62 thousand, an decrease in trade payables of $46 thousand and an increase in amounts
owing to related parties of $437 thousand and depreciation expanses of $2.
During
the nine month period ended September 30, 2019 we had negative cash effects from investing activities as compared to no effect
in the prior period. The current period related to the net purchase of property and equipment.
During
the nine month period ended September 30, 2018, we had no cash flow effect from investing activities.
During the nine month period ended September
30, 2019, we had positive cash flow from financing activities of $174 thousand which related to the cash acquired in connection
with the Recapitalization Transaction. During the same period in 2018, there were no cash flow effects from financing activities.
During the nine month period ended September
30, 2018, we had no cash flow effect from financing activities.
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 $735 in net losses for the nine months ended September 30, 2019, has $1,311 stockholders’ deficit as
of September 30, 2019 and $721 in total stockholders’ deficit as of December 31, 2018 and $60 in negative cash flows from
operations for the nine months ended September 30, 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.