ITEM
1. DESCRIPTION OF BUSINESS
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:
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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; |
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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; |
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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 |
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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. |
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.
ITEM
1A. RISK FACTORS
The
shares of our Common Stock are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who
can afford to lose their entire amount invested in the Common Stock. Accordingly, prospective investors should carefully consider, along
with other matters referred to herein, the following risk factors in evaluating our business before purchasing any shares of Common 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:
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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; |
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The
COVID-19 pandemic may adversely affect our business, financial condition, liquidity and results of operations; |
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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; |
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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; |
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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; |
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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; |
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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; |
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We
may in the future be, subject to claims of intellectual property infringement that could adversely affect our business; |
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Patent
terms may be inadequate to protect our competitive position for an adequate amount of time; |
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We
may not be able to protect our systems, technology and infrastructure from cyberattacks; |
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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; |
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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; |
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Our
Planned Reverse Split may not result in a proportional increase in the per share price of our Common Stock; |
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We
are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights; |
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The
availability of a large number of authorized but unissued shares of Common Stock may, upon their issuance, lead to dilution of existing
stockholders; |
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We
have never paid cash dividends and do not anticipate doing so in the foreseeable future; |
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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; |
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Since
our Common Stock is thinly traded, sale of your holding may take a considerable amount of time; |
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Shares
of Common Stock eligible for future sale may adversely affect the market; |
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If
we fail to maintain effective internal controls over financial reporting, the price of our Common Stock may be adversely affected; |
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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; |
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Our
annual and quarterly results may fluctuate, which may cause substantial fluctuations in our Common Stock price; |
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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; |
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Political,
economic and military instability in Israel may impede our ability to operate and harm our financial results; and |
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Exchange
rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings. |
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 results.
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:
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That
a broker or dealer approve a person’s account for transactions in penny stocks; and |
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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:
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Obtain
financial information and investment experience objectives of the person; and |
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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:
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Sets
forth the basis on which the broker or dealer made the suitability determination; and |
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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.