10-K 1 form10-k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2017

Commission file number 0-15476

VIRTUAL CRYPTO TECHNOLOGIES, INC.

(Exact Name Of Registrant As Specified In Its Charter)

Delaware |  | 68-0080601
(State of Incorporation) |  | (I.R.S. Employer Identification No.)
40 Wall Street, 28th Floor, New York, NY |  | 10005
(Address of Principal Executive Offices) |  | (ZIP Code)

Registrant’s Telephone Number, Including Area Code: (212) 400-7198

Securities Registered Pursuant to Section 12(g) of The Act: Common Stock, $0.0001

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

On June 30, 2017, the aggregate market value of the 6,729,687 shares of common stock held by non-affiliates of the registrant was approximately $26,920 based on the closing price of $0.04 of the Registrant’s common stock on June 30, 2017. On April __, 2018, the Registrant had 59,206,415 shares of common stock outstanding.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company.

Large accelerated filer | [ ] | Accelerated filer | [ ] | Non-Accelerated filer | [ ] | Smaller reporting company | [X]

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

TABLE OF CONTENTS

Item |  | Description |  | Page
PART I |  |
ITEM 1. |  | DESCRIPTION OF BUSINESS |  | 3
ITEM 1A. |  | RISK FACTORS |  | 5
ITEM 1B. |  | UNRESOLVED STAFF COMMENTS |  | 12
ITEM 2. |  | PROPERTIES |  | 12
ITEM 3. |  | LEGAL PROCEEDINGS |  | 12
ITEM 4. |  | MINE SAFETY DISCLOSURES |  | 13
PART II |  |
ITEM 5. |  | MARKET FOR REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY |  | 13
ITEM 6. |  | SELECTED FINANCIAL DATA |  | 17
ITEM 7. |  | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND PLAN OF OPERATION |  | 18
ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |  | 20
ITEM 8. |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |  | 21
ITEM 9. |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |  | 40
ITEM 9A. |  | CONTROLS AND PROCEDURES |  | 40
ITEM 9B. |  | OTHER INFORMATION |  | 40
PART III |  |
ITEM 10. |  | DIRECTORS EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |  | 40
ITEM 11. |  | EXECUTIVE COMPENSATION |  | 42
ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS |  | 43
ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |  | 43
ITEM 14. |  | PRINCIPAL ACCOUNTING FEES AND SERVICES |  | 43
PART IV |  |
ITEM 15. |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |  | 44

Cautionary Statement regarding Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Registrant has based these forward-looking statements on its current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about the Registrant that may cause its actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in this Annual Report on Form 10-K and in the Registrant’s other Securities and Exchange Commission filings.

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Overview and recent developments

On January 29, 2018, Virtual Crypto Technologies, Inc., f/k/a Emerald Medical Applications Corp. (the “Registrant”) transferred the management shares of the Registrant’s former Israeli subsidiary, Emerald Medical Applications Ltd. (“Emerald IL”) owned by the Registrant to Attorney Eviatar Knoller, Esq., with offices at 20 Lincoln, Tel Aviv-Jaffa 6713412, as trustee (the “Trustee”). The purpose of the transfer of the management shares to the Trustee, pursuant to resolution of the Registrant’s Board of Directors dated January 29, 2018, was to enable the Trustee to liquidate the management shares and/or the assets of Emerald IL to satisfy its debts.

The operations of its former subsidiary never generated any revenues, at September 30, 2017 had an accumulated deficit of $16,462,502, and was unable to raise capital to fund its ongoing operations and satisfy its financial obligations to former employees. As a result, the former employees of Emerald IL commenced an action in a court of competent jurisdiction in Israel to liquidate Emerald IL and use any assets to satisfy the debts owed to the former employees. Effective March 8, 2018, Emerald IL ceased to be a wholly-owned subsidiary and a part of the Registrant.

The Registrant previously disclosed in its Form 10-Q for the period-ended September 30, 2017, under Note 9-Subsequent Events, that it was considering the advisability of establishing another wholly-owned Israeli subsidiary engaging in operations that should be more readily able to generate revenues and positive cash flow from operations than Emerald IL, which failed to generate any revenues.

On January 17, 2018, the Registrant formed Virtual Crypto Technologies Ltd as a new wholly-owned subsidiary under the laws of the State of Israel (“Virtual Crypto Israel”) and reported the appointment of Mr. Alon Dayan as CEO of the new subsidiary. 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”).

The Registrant filed a Form 8-K on January 24, 2018, reporting that through Virtual Crypto Israel, it entered into a binding term sheet (the “Chiron Term Sheet”) with Chiron Refineries Ltd. (“Chiron”), a public company listed on the Tel-Aviv Stock Exchange (TASE: CHR). Pursuant to the Chiron Term Sheet, a copy of which is attached as Exhibit 10.__ hereto, the Registrant’s subsidiary, Virtual Crypto Israel, shall: (i) appoint a wholly-owned subsidiary of Chiron, under incorporation under the laws of the Turkish Republic of Northern Cyprus, as the exclusive distributor of Virtual Crypto Israel’s Products in the territory of the Republic of Turkey, including the territory of Turkish Republic of Northern Cyprus (the “Territory”); and (ii) the distributor shall have the right to appoint sub-distributors within the Territory. The appointment of the Chiron subsidiary as distributor is subject to the payment by the distributor of $250,000 as an appointment fee, of which $150,000 shall be deemed an advance payment by the distributor made on account of future purchases of our Products.

The Registrant filed a Definitive Information Statement on February 12, 2018 with respect to its name change from Emerald Medical Applications Corp. to Virtual Crypto Technologies, Inc. to reflect its new operations and business focus and effective on March 7, 2018, FINRA approved the Registrant’s name change and its trading symbol was changed from MRLA to VRCP on the OTCQB.

The disclosure in this annual report relates to our business activities during the fiscal year ended December 31, 2017. Additional disclosure has been included in this annual report related to recent developments and subsequent events that occurred after the fiscal year ended December 31, 2017.

Specifically, during the period commencing January 16, 2018 through March 23, 2018, the Registrant raised $1.9 million in equity capital (the “Equity Raise”) through the offering of units (the “Unit Offering”) at a price of $0.07 per Unit, each Unit consisting of one share of the Registrant’s restricted common stock, par value $0.0001 (the “Shares”) and one common stock purchase warrant (the “Warrants”) exercisable for a period of 24 months to purchase one additional Share at an exercise price of $0.14. The proceeds of the Equity Raise are being utilized by the Registrant to fund the operations of Virtual Crypto Israel including, but not limited to the costs associated with the development of the Products. Reference is made to the disclosure under Item 5. “Market For Registrant’s Common Stock, Related Stockholder Matters And Issuer Purchase Of Equity” and under Note 11-Subsequent Events, related to proceeds under the sub-captions “Issuance of convertible notes in 2018” and the “Equity raise from the sale of units in 2018.”

The Unit Offering, which is continuing, was made by the Registrant: (i) principally pursuant to the exemption provided by Regulation S promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Act”); and (ii) to a lesser extent pursuant to Regulation D promulgated by the SEC under the Act; and (iii) and only to “accredited investors” as that term is defined in Rule 501 of Regulation D promulgated by the SEC under the Act. With respect to the Unit Offering made pursuant to Regulation S, the Units were offered in offshore transactions to persons who are not “U.S. Persons” as that term is defined in Rule 902 of Regulation S promulgated by the SEC under the Act.

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Our Former DermaCompare Business. Our former wholly-owned subsidiary, Emerald Medical Applications Ltd. (“Emerald IL”), was organized as a privately-owned company under the laws of the State of Israel on February 17, 2010, as a digital health startup company engaged in the development, sale and service of imaging solutions utilizing its proprietary DermaCompare software that it developed for use in derma imaging and analytics (“DermaCompare”). The Registrant believed that DermaCompare software represented an advancement in skin cancer screening that should have enabled physicians to more readily identify and monitor changes in their patients’ skin characteristics.

The Registrant believed that Emerald IL’s DermaCompare solution would allow dermatologists and other medical care professionals, using a set of 25 total body photography (“TBP”), to capture sets of skin lesion images with, among other devices, digital cameras and camera-equipped smart phones, which images could then be transmitted online and are remotely analyzed by professionals using our DermaCompare software.

Our sales and marketing plan was to sell services for Emerald IL’s DermaCompare imaging software to: NHSs, HMOs, health insurance companies, hospitals and medical clinics through distributers, health care channel partners or directly through independent salespersons and/or web purchase to dermatologists and other physicians (GPs) that we expected to purchase licenses based on the number of potential numbers of patients.

In furtherance of our business plan, Emerald IL entered into a series of agreements with unaffiliated third parties for the distribution of its DermaCompare Technology, as follows:

1. On August 12, 2013, Emerald IL entered into an exclusive distribution with Derma Italy Sri, organized under the laws of the Italy (“Derma Italy”), pursuant to which Derma Italy was granted exclusive distribution rights in Italy;

2. On December 1, 2013, Emerald IL entered into a distribution agreement with S. Bokhorst - Creatiekracht, organized under the laws of the Netherlands, pursuant to which S. Bokhorst was granted exclusive distribution in the Netherlands;

3. On February 6, 2014, Emerald IL entered into a distribution agreement with Medical Edge Pty Ltd, organized under the laws of Australia (“Medical Edge”), pursuant to which Medical Edge was granted exclusive distribution rights in the markets of Australia, New Zealand and Oceania;

4. On January 14, 2015, Emerald IL entered into a Project Agreement with Realize S.A. and Ubitech, entities engaged in IT related to medical technology in Greece, and MEDISP and MPUoP, academic and research institutes in Greece (collectively, the “Greek Partners”). Emerald IL and the Greek Partners reported that they anticipated imminent grants from the Office of Chief Scientist of the State of Israel and the General Secretariat for Research and Technology of Greece, respectively, the proceeds of which were to be used for development of enhanced smartphone applications for diagnosis of early stage Melanoma. The development of the Mark1, bi literal plan was finished successfully and approved by the Office of the Chief Scientist of Israel in February 2017.

Notwithstanding our belief that DermaCompare represented a significant advance on existing technologies, there were a number of potential difficulties that we faced, including the following:

| ● | We may not be able to raise sufficient additional funds to fully implement our business plan;
| ● | Competitors may develop alternatives that render our DermaCompare software solution redundant or unnecessary;
| ● | We may not obtain and maintain sufficient protection of our intellectual property;
| ● | Our DermaCompare software may be shown to have characteristics that indicate it may be ineffective;
| ● | Our DermaCompare may not be accepted by physicians including dermatologists and the medical community in general; and
| ● | Strict government regulations and inappropriate reimbursement policies, especially in emerging economies, may hinder the growth of the dermatology device market.

Notwithstanding the beliefs of the Registrant’s former management that Emerald IL would be able to successfully market its DermaCompare Products, the Registrant never generated any revenues from the operations of Emerald IL nor was it able to raise additional capital after its issuance of convertible notes to institution investors during the 2nd and 3rd fiscal quarters of 2016.

As a result, on September 1, 2017, the Registrant filed a Form 8-K reporting that it had entered into a settlement agreement with two of the institutional investors pursuant to which the Registrant agreed to the amendment and revision of the terms of the convertible notes (the “Notes”) and the warrants (the “Warrants”) originally dated June 20, 2016. The institutional investors had alleged that the Registrant was in default and in order to cure any alleged defaults, the Registrant agreed that the Notes, which had originally provided for a maturity date of June 19, 2017 and were in the original principal amounts of $400,000 and $40,000, respectively, were extended until June 19, 2019, in consideration for which the Registrant agreed to an increase in the principal amounts to of the Notes to $551,600 and $55,160, respectively, with an adjusted conversion price of $0.14. In addition, the Registrant agreed that the Warrants issued on June 20, 2016 be adjusted to provide for the exercise of a total of 11,331,252 shares at $0.14 compared to the exercise of 2,200,000 shares each at the adjusted conversion price of $0.14 in the original Warrants. The new Notes and Warrants were filed as exhibits to the Form 8-K filed on September 1, 2017.

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During 2017, the Registrant filed several Forms 8-K with disclosure under Item 5.02 reporting terminations and/or resignations of members of its management and Board of Directors. After the year-ended December 31, 2017, the only member of Registrant’s Board of Directors that had been a director in 2017 was Mr. Yair Fudim, formerly an independent director since April 2015. On February 15, 2018, the Registrant filed a Form 8-K reporting the resignation of Mr. Ahmed Alimi as Chairman and CEO and the appointment of Mr. Fudim as Chairman and CEO. This change in the Registrant’s Board of Directors was in connection with the cessation of the operations of Emerald IL and the commencement of operations of Virtual Crypto Israel.

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 Stocks. 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. Prospective investors should also carefully consider the fact that several of the risk factors related to our former DermaCompare business are no longer applicable and that there are new risk factors applicable to our new business operations.

Risks Associated with Our Business

We recently discontinued our former operations related to our patented DermaCompare technology designed for early detection of skin cancer.

At the end of January 2018, we transferred the ordinary shares of our former Israeli subsidiary, Emerald Medical Applications Ltd. (“Emerald IL”) to a trustee for the purpose liquidating Emerald IL’s shares and/or the assets of Emerald IL to satisfy its debts. The operations of Emerald IL never generated any revenues and the Registrant was unable to raise capital to fund its ongoing operations and satisfy its financial obligations to former employees.

We have only recently commenced operations in the business of developing and marketing software and hardware products facilitating, allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices and, as a result, have no history of operations in such business.

On January 17, 2018, we organized Virtual Crypto Technologies Ltd. as a new, wholly-owned Israeli subsidiary (Virtual Crypto IL 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”). We only recently commenced these new business activities and have virtually no history of operations in developing and marketing the Products.

Our historical financial information does not reflect our new business activities nor our recent agreement to distribute our Products.

As a result, our historic operations do not provide any basis for an evaluation of our business or our current business operations or focus. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations in new and developing fields such manufacturing and marketing Products for the purchase and sale of cryptocurrencies through ATMs, tablets, PCs and mobile devices. We may expect to incur additional net losses over the next several years as we seek to develop our operations in the field of supporting the purchase and sale of cryptocurrencies using our Products. The amount of future losses and when, if ever, we will achieve profitability are uncertain. If we are unsuccessful at executing on our business plan, our business, prospects, and results of operations may be materially adversely affected.

We have an evolving business model.

As blockchain technologies and cryptocurrencies become more widely available and utilized, we expect the services and products associated with them to evolve and, as a result our Products will have to continue to evolve. Very recently, the Securities and Exchange Commission (the “SEC”) issued a Report that promoters that use initial coin offerings or token sales to raise capital may be engaged in the offer and sale of securities in violation of the Securities Act of 1933, as amended (the “Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). While we are not involved, nor will we engage in the business of initial coin offerings or token sales, any adverse impact on the cryptocurrency industry that may occur as a result of the recent SEC Report or other potential regulatory actions may adversely impact our ability to successfully market our Products. From time to time we may modify aspects of our business model rand our Products and there can be no assurance that these or any other modifications will be successful or will not result in harm to the business.

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Our new management team has limited experience in the field of manufacturing and marketing our new Products, which are still in development, to support the cryptocurrency market.

Our management only recently determined to shift our primary corporate focus towards the manufacture and sale of software and hardware Products facilitating, allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices. Our management has relatively limited experience in supporting purchase and/or sale of cryptocurrencies and the blockchain technology industry generally. While we intend to expand our management team and staff with individuals with more experience in this industry and will closely scrutinize any individuals we engage, we cannot assure you that well-qualified individuals will be available to us or that our assessment of individuals we retain will prove to be correct. These individuals may be unfamiliar with the requirements of being involved in a public company which could cause us to have to expend time and resources helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.

The further development and acceptance of cryptocurrency trading, of which there can be no assurance, represents a new and rapidly changing industry.

We will be dependent upon our ability to manufacture and market our Products in a timely manner if we hope to succeed in serving this new and rapidly developing industry. We will be subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of cryptocurrencies and our ability to manufacture products in a timely manner and within the limits of our capital resources may adversely affect an investment in our common stock.

The use of our Products to purchase and sell cryptocurrencies to, among other things, buy and sell goods and services and/or the acquisition of cryptocurrencies as an investment, is part of a new and rapidly evolving industry. There can be no assurance that our Products will be accepted by this new and likely demanding market that employs the use of a computer-generated mathematical and/or cryptographic protocol. The growth of this industry, in general, is subject to a high degree of uncertainty. The factors affecting the further development of this industry, include, but are not limited to:

| ● | continued worldwide growth in the adoption and use of cryptocurrencies and the acceptance of our Products;
| ● | changes in consumer demographics and public tastes and preferences that can limit demand for our Products;
| ● | the maintenance and development of hardware and software for our Products;
| ● | the availability and popularity of other forms or methods of buying and selling cryptocurrencies;
| ● | general economic conditions and the regulatory environment relating to cryptocurrencies; and
| ● | negative consumer perception of cryptocurrencies specifically and cryptocurrencies generally.

A decline in the popularity or acceptance of cryptocurrencies would harm our ability to market our Products and, as a result, could adversely impact our ability to generate revenues and profits, if any.

Currently, there is relatively small use of cryptocurrencies in the retail and commercial marketplace in comparison to relatively large use by speculators; as a result, we expect that the market for our Products may develop slowly, if at all.

Cryptocurrencies have only recently become accepted as a means of payment for goods and services by certain major retail and commercial outlets and use of cryptocurrencies by consumers to pay such retail and commercial outlets remains limited. As a result, the demand for our Products may be expected to develop slowly, if at all. As a result, we reasonably anticipate that we will not generate positive cash flow from operations for the foreseeable and there can be no assurance that we will generate profits.

If we do not keep pace with technological changes, our Products, if and when developed, may not become competitive and/or our competitors may develop and market similar products that receive greater market acceptance.

The market for blockchain technology is characterized by rapid technological change, frequent product and service innovation and evolving industry standards. As a result, our Products must be able to keep pace with this rapidly developing and competitive marketplace. There can be no assurance that we will be able to manufacture our Products successfully or, if we can manufacture Products that achieve market acceptance, that we will be able to fulfill demand if such demand exceeds our production capabilities. We expect that we will be dependent on third party manufacturers for the foreseeable future but at present have no firm arrangements for the manufacture of our Products. If we are unable to provide enhancements and new features for our Products and any future product offerings that achieve market acceptance or that keep pace with these technological developments, our business could be adversely affected.

It may be illegal now, or in the future, to acquire, own, hold, sell or use cryptocurrencies and, as a result, the potential use and demand for our Products could be materially adversely affected.

Although currently cryptocurrencies generally are not regulated or are lightly regulated in most countries, including the United States, one or more countries may take regulatory actions in the future that could severely restrict the right to acquire, own, hold, sell or use cryptocurrencies which would adversely impact demand for our Products and/or limit their acceptance by potential users, including locations where we expect to place our Products. Such restrictions may adversely affect the Company. Such circumstances would have a material adverse effect on the ability of the Company to continue as a going concern or to pursue this segment at all, which would have a material adverse effect on the business, prospects or operations of the Company and potentially the value of any cryptocurrencies the Company holds or expects to acquire for its own account and harm investors.

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We will be dependent upon our ability to continue to raise equity and/or debt financing at acceptable terms.

The audited financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments that might result if we cease to continue as a going concern. We believe that in order to continue as a going concern, including the costs of being a public company, we will need approximately $60,000 per year simply to cover the administrative, legal and accounting fees. We have funded these losses primarily through the sale of restricted shares of our Common Stock and the issuance of convertible notes, which have subsequently been converted into restricted shares of Common Stock.

Based on our financial statements for the years ended December 31, 2017 and 2016, our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern. To date we have not generated any revenue.

Notwithstanding our capital raise from the sale of our equity securities following the formation of Virtual Crypto IL to the present, there can be no assurance that we will have adequate capital resources or be able to continue to raise equity and/or debt capital to fund planned operations or that any additional funds will be available to us when needed or at all, or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our plan of operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

We cannot be certain that our business strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.

Our former DermaCompare operation never achieved market acceptance nor were any revenues ever generated. The failure of such acceptance caused us to cease our DermaCompare operation and divest our DermaCompare subsidiary in January 2018.

Our revenues were expected to come from the sale of the DermaCompare product. As a result, we continued to incur operating losses until our new management and Board of Directors determined to divest the DermaCompare subsidiary. We are now dependent upon our ability to successfully manufacture, via third-party agreements, to develop and market our planned Products implementing software and hardware facilitating, allowing and supporting the purchase and/or sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices (collectively, our “Products”)

Our new Products will be dependent upon software still in development; Software failures, breakdowns in the operations of our servers and communications systems or the failure to implement system enhancements could harm our business.

Our success depends on the efficient and uninterrupted operation of our servers and communications system, all of which are still in early stages of development. A failure of our network or data gathering procedures could impede the processing of data, delivery of databases and services, client data and day-to-day management of our business and could result in the corruption or loss of data. While we plan that all of our operations will have disaster recovery plans in place, such plans, when in place, might not adequately protect us and any failure could irreparably damage any efforts for establishing a successful market presence. In addition, any failure by our computer environment to provide our required data communications capacity could result in interruptions in our service, which could be expected to prevent us from achieving any market acceptance for our new Products.

Additionally, significant delays in the planned delivery of system enhancements, improvements and inadequate performance of the systems once they are completed could damage our reputation and harm our business. Long-term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities and acts of terrorism, particularly involving cities in which we have offices, could adversely affect our businesses. Although, we plan to carry property and business interruption insurance for our business operations, our coverage might not be adequate to compensate us for all losses that may occur.

We face risks related to the storage of customers’ and their end users’ confidential and proprietary information.

Our Products are being designed to maintain the confidentiality and security of our customers’ and their end users’ confidential and proprietary data that are stored on our server systems, which may include sensitive personal data. However, any accidental or willful security breaches or other unauthorized access to these data could expose us to liability for the loss of such information, time-consuming and expensive litigation and other possible liabilities as well as negative publicity. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are difficult to recognize and react to. We may be unable to anticipate these techniques or implement adequate preventative or reactionary measures.

Compliance with changing regulations concerning corporate governance and public disclosure may result in additional expenses.

In recent years, there have been several changes in laws, rules, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and various other new regulations promulgated by the SEC and rules promulgated by the national securities exchanges.

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The Dodd-Frank Act, enacted in July 2010, expands federal regulation of corporate governance matters and imposes requirements on publicly-held companies, including us, to, among other things, provide stockholders with a periodic advisory vote on executive compensation and also adds compensation committee reforms and enhanced pay-for-performance disclosures. While some provisions of the Dodd-Frank Act were effective upon enactment, others will be implemented upon the SEC’s adoption of related rules and regulations. The scope and timing of the adoption of such rules and regulations is uncertain and accordingly, the cost of compliance with the Dodd-Frank Act is also uncertain.

In addition, Sarbanes-Oxley specifically requires, among other things, that we maintain effective internal control over financial reporting and disclosure of controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of Sarbanes-Oxley Act (“Section 404”), and our independent registered public accounting firm is required to attest to our internal control over financial reporting.

Our testing, or the subsequent testing by our independent registered public accounting firm may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 will require that we incur substantial accounting expenses and expend significant management efforts. We currently have limited internal audit capabilities and will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

These and other new or changed laws, rules, regulations and standards are, or will be, subject to varying interpretations in many cases due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Further, compliance with new and existing laws, rules, regulations and standards may make it more difficult and expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. Members of our board of directors and our principal executive officer and principal financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors and executive officers, which could harm our business. We continually evaluate and monitor regulatory developments and cannot estimate the timing or magnitude of additional costs we may incur as a result.

We will need to increase the size of our organization and may experience difficulties in managing growth, if any.

At present, we are a small company. We expect to experience a period of expansion in infrastructure and overhead and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate new managers. Our future financial performance and its ability to compete effectively will depend, in part, on its ability to manage any future growth effectively.

The loss of key personnel could adversely affect our business. We may not be able to hire and retain qualified personnel to support our growth.

The Company’s success depends to a significant extent upon the efforts of its CEO, and other key senior employees and other key personnel. The loss of the services of such personnel could adversely affect our business and our ability to implement our growth plan. We cannot assure you that the services of the members of our management team will continue to be available to us, or that we will be able to find a suitable replacement for any of them. We do not have key man insurance on any members of our management team. If any member of our management team were to die and we are unable to replace either or both of them for a prolonged period of time, we may be unable to carry out our long-term business plan and our future prospect for growth, and our business, may be harmed.

Our success is dependent upon our ability to attract, train, manage and retain sales, marketing and other qualified personnel. There is substantial competition for qualified personnel, and an inability to recruit or retain qualified personnel may impact our ability to implement our strategy to grow our business.

If we are unable to adopt, implement and maintain equity compensation arrangements that provide sufficient incentives, we may be unable to hire and retain employees and attract qualified candidates in the future. If we are unable to hire and retain employees, including qualified technical personnel, and attract additional qualified candidates, our business and results of operations could be adversely affected.

8

Our future sales in international markets will subject us to foreign currency exchange and other risks and costs which could harm our business.

We expect that a substantial portion of our future revenues will be derived from outside Israel. We will be subject to the effects of exchange rate fluctuations. Our functional currency is the Israel Shekel. For the preparation of our consolidated financial statements, the financial results are translated into U.S. dollars using average exchange rates during the applicable period. If the U.S. dollar appreciates against the Shekel, as applicable, the revenues we recognize from sales will be adversely impacted. Foreign exchange gains or losses as a result of exchange rate fluctuations in any given period could harm our operating results and negatively impact our revenues. Additionally, if the effective price of our products were to increase as a result of fluctuations in foreign currency exchange rates, demand for our DermaCompare products could decline and adversely affect our results of operations and financial condition.

We intend not to use hedging strategies to help offset the effect of fluctuations in foreign currency exchange rates. Movements in foreign currency exchange rates could impact our financial results positively or negatively in one period and not another, making it more difficult to compare our financial results from period to period.

We may not be able to successfully expand our business through acquisitions.

We review corporate and product line acquisition candidates as a part of our growth strategy. If we decided to undertake an acquisition, we may not be able to successfully integrate it in order to realize the full benefit of such acquisition. Factors which may affect our ability to grow successfully through acquisitions include:

| ● | inability to identify suitable targets given the relatively narrow scope of our business;
| ● | inability to obtain acquisition or additional working capital financing due to our financial condition;
| ● | difficulties and expenses in connection with integrating the acquired companies and achieving the expected benefits;
| ● | diversion of management’s attention from current operations;
| ● | the possibility that we may be adversely affected by risk factors facing the acquired companies;
| ● | acquisitions could be dilutive to earnings, or in the event of acquisitions made through the issuance of our common shares to the shareholders of the acquired company, dilutive to our existing shareholders;
| ● | potential losses resulting from undiscovered liabilities of acquired companies not covered by the indemnification we may obtain from the seller; and
| ● | loss of key employees of the acquired companies.

Risks Related to Our Common Stock

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

As of December 31, 2017, we had outstanding: (i) Class A Warrants exercisable to purchase 6,334,626 shares of Common Stock at an exercise price of between $0.14-$0.80 per Share for one years; (ii) Class B Warrants exercisable to purchase 5,400,478 Shares at an exercise price of $0.14 per Share on a cashless basis for a period of five years; and (iii) Class E Warrants exercisable to purchase 900,000 Shares, at an exercise price of $0.0001 per Share.

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

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 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.

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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 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, $0.0001 par value per share, of which, as of April 16, 2018, 59,206,415 shares of Common Stock were outstanding. Additional shares 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 may adversely affect the market price of our Common Stock.

Our Certificate of Incorporation authorizes 10,000,000 shares of preferred stock, $0.0001 par value per share of which none were issued and outstanding as of the date of this registration statement. 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 shareholders.

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 Securities and Exchange Commission 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 Commission 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 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.

10

Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may limit a shareholder’s ability to buy and sell our Common Stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Our 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 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 Securities 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.

Our internal control over financial reporting may have 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 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 evolving and 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 or Chief Financial Officer determine 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 will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.

11

Our share price could be volatile, and our trading volume may fluctuate substantially

The price of our common shares has been and may in the future continue to be extremely volatile, with the sale price fluctuating from a low of $0.1 to a high of $2.24 since 2012. Many factors could have a significant impact on the future price of our common shares, including:

| ● | our inability to raise additional capital to fund our operations;
| ● | our failure to successfully implement our business objectives and strategic growth plans;
| ● | compliance with ongoing regulatory requirements;
| ● | market acceptance of our product;
| ● | changes in government regulations;
| ● | general economic conditions and other external factors; and
| ● | actual or anticipated fluctuations in our quarterly financial and operating results; and the degree of trading liquidity in our common shares.

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 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

After the year-ended December 31, 2017: (i) the Registrant’s subsidiary, Virtual Crypto IL, leased offices facilities from an unaffiliated third-party at 10 Ha’amal Street, Rosh Ha’ain, Israel 4809234 consisting of approximately 600 square feet of office space, for $1,475 per month; and (ii) the Registrant was provided use of an office at 40 Wall Street, 28th Floor, New York, NY 10005, at a cost of $100 per month from an unaffiliated third party. The Registrant believes that its present facilities are sufficient for the foreseeable future.

ITEM 3. LEGAL PROCEEDING

On December 12, 2016, the Registrant filed a Form 8-K reporting that at a meeting of its Board of Directors held on November 18, 2016, at which meeting the majority of the Registrant’s Board of Directors authorized the termination of Lior Wayn as CEO/president of the Registrant and of its wholly-owned Israeli subsidiary, Emerald IL. The termination of Mr. Wayn as an executive officer of the Registrant and Emerald IL was “for cause” as described more fully in the Form 8-K, which is incorporated by reference herein. In addition, the Form 8-K further reported that in connection with, Mr. Wayn’s termination as an executive officer, Mr. Wayn was removed as a director of the Registrant in accordance with the provisions of Section 141(k) of the Delaware General Corporation Law based upon the written consent of the holders of the majority of the Registrant’s shares of common stock at November 16, 2016.

12

In April 2017, a lawsuit was filed with the Tel Aviv court by Mr. Wayn claiming certain damages to the total amount of $100,000, under the assertion of wrongful dismissal by the Registrant and Emerald IL. The Registrant believes these claims to be unsubstantiated and wholly without merit and intends to defend itself against these claims. The Company believes that he will not be successful in his claim. Nevertheless, the outcome of the proceeding will not materially affect the Registrant.

In December 2017, a liquidation request was filed with the Tel Aviv District Court by a group of former employees of Emerald IL, under the assertion of delay of pay and insolvency. On December 20, 2017, at a hearing before the court, it was ordered that the Emerald IL shall settle its pension debts to the former employees under applicable Israeli law within 21 days and settle its other debts to them in 60 days, the failure of which would result in a winding-up order (the equivalent of a liquidation) could be given. Based on the collaboration of Emerald IL and its former employees and the fact that the Company was in negotiation with third-parties for the infusion of equity capital and has started negotiating the sale of certain assets, the Company’s legal advisors believe that the liquidation claim will be dismissed by the court. The amounts being claimed by the former employees was less than $96,000 and are included in current liabilities at December 31, 2017.

On January 29, 2018, the “Registrant”) transferred the ordinary shares of the Registrant’s former Israeli subsidiary, Emerald IL to Attorney Eviatar Knoller, Esq., with offices at 20 Lincoln, Tel Aviv-Jaffa 6713412, as trustee (the “Trustee”). The purpose of the transfer of the management shares to the Trustee, pursuant to resolution of the Registrant’s Board of Directors, was to enable the Trustee to liquidate the management shares and/or the assets of Emerald IL to satisfy its debts and satisfy its financial obligations to former employees. As a result, the former employees of Emerald IL commenced an action in a court of competent jurisdiction in Israel to liquidate Emerald IL and use any assets to satisfy the debts owed to the former employees. Effective March 8, 2018, Emerald IL ceased to be a wholly-owned subsidiary and a part of the Registrant.

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY

Market Information

Our common stock is currently quoted on the OTCQB market under the symbol VCRP. For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. The below prices, adjusted for a one-for-four (1:4) reverse split effective March 20, 2015, represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

|  | Fiscal 2017 |  |  | Fiscal 2016 |  |  | Fiscal 2015 |
|  | High |  |  | Low |  |  | High |  |  | Low |  |  | High |  |  | Low |
First Quarter ended March 31 |  | $ | 0.51 |  |  | $ | 0.07 |  |  | $ | 1.75 |  |  | $ | 0.55 |  |  | $ | 0.20 |  |  | $ | 0.11 |
Second Quarter ended June 30 |  | $ | 0.28 |  |  | $ | 0.04 |  |  | $ | 0.77 |  |  | $ | 0.55 |  |  | $ | 2.24 |  |  | $ | 0.45 |
Third Quarter ended September 30 |  | $ | 0.07 |  |  | $ | 0.01 |  |  | $ | 0.74 |  |  | $ | 0.30 |  |  | $ | 2.24 |  |  | $ | 1.00 |
Fourth Quarter ended December 31 |  | $ | 0.07 |  |  | $ | 0.02 |  |  | $ | 0.40 |  |  | $ | 0.16 |  |  | $ | 1.25 |  |  | $ | 1.00 |

Holders of Common Stock

Our transfer agent is Transfer Online, 512 SE Salmon Street, Portland, OR 97214-3444, Phone: (503) 227-2950.

Dividends

Holders of common stock are entitled to dividends if declared by the Board of Directors, out of funds legally available therefore. We have never declared cash dividends on our common stock and our Board of Directors does not anticipate paying cash dividends in the foreseeable future as it intends to retain future earnings to finance the growth of our businesses.

Rule 144 Shares

As of the date of this Registration Statement, we do not have any significant number of shares of our Common Stock that are currently available for sale to the public in accordance with the volume and trading limitations of Rule 144.

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Outstanding Warrants

The following table summarizes information of outstanding warrants as of December 31, 2017:

|  | Warrants |  |  | Warrant Term |  |  | Exercise Price |  |  | Exercisable |
Investors - Class A Warrants |  |  | 6,334,626 |  |  |  | 1 years |  |  | $ | 0.14-.080 |  |  |  | 6,334,626 |
Investors - Class B Warrants |  |  | 5,400,478 |  |  |  | 5 years |  |  | $ | 0.14 |  |  |  | 5,400,478 |
Investor - Class E Warrants |  |  | 900,000 |  |  |  |  | (1) |  | $ | 0.0001 |  |  |  | 900,000 |

(1) During 2015, a total of 2,700,000 Class E Warrants were issued by the Company to Lior Wayn pursuant to the terms of the Share Exchange Agreement and were exercisable in three equal tranches of 900,000 Shares each (the “Tranches”) at an exercise price of $0.0001 per Share, subject to and within 45 days of the Company achieving the milestones defined in the Share Exchange Agreement. On December 16, 2016, the Company terminated of Lior Way’s employment agreements with the Company and Emerald Israel., and his removal as an executive officer and director. During 2017, Mr. Wayn transferred, sold and assigned his 5,212,878 shares of the Company’s common stock and 900,000 Class E Warrants that were fully-vested to an entity controlled by Mr. Alimi Ahmed, then a member of the Company’s Board of Directors. Effective as of December 31, 2016, the remaining 1,800,000 Class E Warrants that had been issued to Mr. Wayn Warrants were canceled.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes information of outstanding options as of December 31, 2017:

|  | Number of securities to be issued upon exercise of outstanding options, warrants and rights |  |  | Weighted-average exercise price of outstanding options, warrants and rights |  |  | Number of securities remaining available for future issuance |
Plan Category |  |  |  |  |  |  |  |  |
Equity compensation plans approved by security holders 2014 Equity Incentive Plan |  |  | 5,076,483 |  |  | $ | 0.2 |  |  |  | - |

Sale of Unregistered Securities

During the last three years, the Registrant issued the following restricted shares which were not registered under the Act

Sale of Unregistered Securities in 2015

On June 18, 2015 and July 21, 2015, after the Company ceased to be a shell company, the Company issued and sold unregistered securities, as set forth in the table below, in private offering of a total of 2,925,000 units at a price of $0.40. Each Unit consisted of one Share and one Class A Warrant exercisable to purchase one additional Share of Common Stock at a price of $0.80 (the “Units”). The sales were made without registration under the Act in reliance upon the exemptions provided in Section 4(2) of the Act and Reg S.

Name of Subscriber |  | Bases for Issuance |  | Date of Issuance |  |  | Price Per Unit |  |  | Shares Issued |
Short Trade Ltd (1) |  | Subscription Agreement |  |  | 06/18/2015 |  |  | $ | 0.40 |  |  |  | 625,000 |
Prop Trade Ltd (2) |  | Subscription Agreement |  |  | 06/18/2015 |  |  | $ | 0.40 |  |  |  | 375,000 |
Dr. Ben Zion Weiner |  | Subscription Agreement |  |  | 06/18/2015 |  |  | $ | 0.40 |  |  |  | 125,000 |
RP Holdings (1992) Ltd. (3) |  | Subscription Agreement |  |  | 06/18/2015 |  |  | $ | 0.40 |  |  |  | 125,000 |
Dr. Tank Siak Khim |  | Subscription Agreement |  |  | 06/18/2015 |  |  | $ | 0.40 |  |  |  | 250,000 |
Yoel Yogev |  | Subscription Agreement |  |  | 06/18/2015 |  |  | $ | 0.40 |  |  |  | 200,000 |
Universal Link Ltd (4) |  | Subscription Agreement |  |  | 06/18/2015 |  |  | $ | 0.40 |  |  |  | 175,000 |
Avigdor Hakmon |  | Subscription Agreement |  |  | 06/18/2015 |  |  | $ | 0.40 |  |  |  | 62,500 |
Dr. Shmuel Pasternak |  | Subscription Agreement |  |  | 06/18/2015 |  |  | $ | 0.40 |  |  |  | 62,500 |
Liat Sidi |  | Subscription Agreement |  |  | 07/21/2015 |  |  | $ | 0.40 |  |  |  | 25,000 |
Tzvi Aharonson |  | Subscription Agreement |  |  | 07/21/2015 |  |  | $ | 0.40 |  |  |  | 137,500 |
Estery Giloz Ran |  | Subscription Agreement |  |  | 07/21/2015 |  |  | $ | 0.40 |  |  |  | 312,500 |
Malca Maimon |  | Subscription Agreement |  |  | 07/21/2015 |  |  | $ | 0.40 |  |  |  | 87,500 |
Ohad Cohen |  | Subscription Agreement |  |  | 07/21/2015 |  |  | $ | 0.40 |  |  |  | 150,000 |
Nissim Simhon |  | Subscription Agreement |  |  | 07/21/2015 |  |  | $ | 0.40 |  |  |  | 50,000 |
NE Solution Ltd (5) |  | Subscription Agreement |  |  | 07/21/2015 |  |  | $ | 0.40 |  |  |  | 162,500 |
|  | Total |  |  |  |  |  | $ | 1,169,961 |  |  |  | 2,925,000 |

(1) Short Trade Ltd is controlled by Mr. Shlomo Noyman, a resident of Israel.

(2) Prop Trade Ltd is controlled by Mr. Andrew Philip Dings, a resident of Singapore.

(3) RP Holdings (1992) Ltd. is controlled by Mr. Rubin Zimerman, a resident of Israel.

(4) Universal Link Ltd is controlled by Mr. Ahmad Alimi, a resident of Israel.

(5) NE Solution Ltd is controlled by Mr. Lee Yang Tong, a resident of Singapore.

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In July 2015, the persons listed in the table below, each a lender to Emerald on or before November 2014, converted their debt owed by Emerald into Units, each consisting of one restricted Share and one Class A Warrant, at a conversion price of $0.32. Each of the lenders was a resident of Israel and the issuance was without registration under the Act in reliance upon the exemptions provided in Section 4(2) of the Act and Reg S.

Name of Note Holder |  | Bases of Issuance |  |  | $ Debt Converted |  |  | Shares Issued |
David Masasa |  |  | Conversion of Debt |  |  |  | 8,788 |  |  |  | 27,463 |
Liron Carmel |  |  | Conversion of Debt |  |  |  | 19,521 |  |  |  | 61,003 |
Yoseph Cohen |  |  | Conversion of Debt |  |  |  | 15,632 |  |  |  | 48,850 |
Tzvi Aharonson |  |  | Conversion of Debt |  |  |  | 43,969 |  |  |  | 137,403 |
|  |  | Total |  |  | $ | 87,910 |  |  |  | 274,719 |

On July 21, 2015, the Registrant issued 140,000 restricted Shares to Shira Brand Shiffer, a resident of Israel, at a price of $0.107 per Share, with no warrants attached. The issuance to Shira Brand Shiffer, without registration under the Act, was made in reliance upon Section 4(2) of the Act and Reg S.

On July 16, 2015, the Registrant issued 517,900 restricted shares of Common Stock to Meyda Consulting Ltd, an entity organized under the laws of Israel controlled by Eliyahu Kirstein, a resident of Israel. The issuance of these shares was in consideration for services and was made without registration under the Act in reliance upon the exemptions provided in Section 4(2) of the Act and Reg S.

On July 16, 2015, the Registrant issued Class B Warrants and Class C Unit Warrants to the following entities for bona fide services to the Registrant. The issuances of these Warrants were in consideration for services and was made without registration under the Act in reliance upon the exemptions provided in Section 4(2) of the Act and Reg S.

|  | Basis of Issuance |  |  | Class B Warrant Issued |  |  | Class C Unit Warrants Issued |  |  | Total Warrants Issued |
Yaad Consulting Ltd. (1) |  |  | Services |  |  |  | 625,000 |  |  | $ | 634,063 |  |  |  | 1,259,063 |
LA Pure Capital Ltd. (2) |  |  | Services |  |  |  | 375,000 |  |  | $ | 380,467 |  |  |  | 755,467 |
Amir Uziel Economic Consultant Ltd. (3) |  |  | Services |  |  |  | 625,000 |  |  | $ | 634,061 |  |  |  | 1,259,061 |
Capitalink Ltd. (4) |  |  | Services |  |  |  | 625,000 |  |  | $ | 634,061 |  |  |  | 1,259,061 |

(1) The control person of Yaad Consulting Ltd is Itschak Shrem, a resident of Israel.

(2) The control person of LA Pure Capital Ltd is Kfir Silberman, a resident of Israel.

(3) The control person of Amir Uziel Economic Consultant Ltd. is Amir Uziel, a resident of Israel.

(4) The control person of Capitalink Ltd is Lavi Krasney, a resident of Israel.

During November 2015, the Registrant issued and sold unregistered Shares as set forth on the table below:

Name of Issuee |  | Date of Issuance |  |  | Number of Shares |  |  | Consideration |  |  | Bases for Issuance
Shirat Hahayim |  |  | 11/17/2015 |  |  |  | 250,000 |  |  |  | $0.40 per share |  |  | Subscription Agreement (1)
Lyons Capital LLC. (2) |  |  | 11/05/2015 |  |  |  | 250,000 |  |  |  | Valued at $1.00 per share |  |  | Services
David Treves |  |  | 11/16/2015 |  |  |  | 12,334 |  |  |  | Valued at $1.00 per share |  |  | Services
Pnina Rosenblum |  |  | 11/09/2015 |  |  |  | 5,750 |  |  |  | Valued at $1.00 per share |  |  | Services
Total Shares Issued |  |  |  |  |  |  | 518,084 |  |  |  |  |  |  |

(1) The issuance was pursuant to a Unit Subscription Agreement each consisting of 1 Share and 1 Class A Warrant exercisable for a period of 24 months to purchase 1 additional Share at $0.80.

(2) Lyons Capital LLC is organized under the laws of Florida and its control person, Jason Lyons, is a resident of Florida.

15

The issuance and sale of Shares to Shirat Hahayim and Pnina Rosenblum, residents of the State of Israel, and David Treves, resident of Australia, without registration under the Act, was made in reliance upon the exemptions provided in Section 4(2) of the Act and Regulation S promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Act. The issuance of Shares to Lyons Capital LLC, without registration under the Act, was in reliance upon Section 4(2) and Regulation D promulgated by the SEC under the Act.

Sale of Unregistered Securities in 2016:

Name of Issuee |  | Date of Issuance |  |  | Number of Shares |  |  | Consideration |  |  | Bases for Issuance
Yair Fudim |  |  | 02/18/2016 |  |  |  | 482,000 |  |  |  | Valued at $0.9995 per share |  |  | Services
Estery Giloz Ran |  |  | 02/18/2016 |  |  |  | 482,000 |  |  |  | Valued at $0.9995 per share |  |  | Services
Baruch Kfir |  |  | 02/18/2016 |  |  |  | 231,000 |  |  |  | Valued at $0.9995 per share |  |  | Services
Legend Securities Inc |  |  | 03/17/2016 |  |  |  | 50,000 |  |  |  | Valued at $0.65per share |  |  | Services
JFS Investments PR LLC |  |  | 01/26/2016 |  |  |  | 125,000 |  |  |  | Valued at $1.75 per share |  |  | Services
Garden state securities Inc |  |  | 05/04/2016 |  |  |  | 150,000 |  |  |  | Valued at $0.70 per share |  |  | Services
JFS Investments PR LLC |  |  | 05/10/2016 |  |  |  | 41,667 |  |  |  | Valued at $0.71 per share |  |  | Services
Kodiak Capital Group LLC |  |  | 05/18/2016 |  |  |  | 150,000 |  |  |  | Valued at $0.68 per share |  |  | Services
Alpha Capital Anstalt |  |  | 06/26/2016 |  |  |  | 125,000 |  |  |  | Valued at $0.70 per share |  |  | Services
Legend Securities Inc |  |  | 06/28/2016 |  |  |  | 50,000 |  |  |  | Valued at $0.70 per share |  |  | Services
JFS Investments PR LLC |  |  | 06/30/2016 |  |  |  | 333,333 |  |  |  | Valued at $0.68 per share |  |  | Services
VAR Growth Corporation |  |  | 07/01/2016 |  |  |  | 300,000 |  |  |  | Valued at $0.71 per share |  |  | Services
David Treves |  |  | 07/27/2016 |  |  |  | 6,767 |  |  |  | Valued at $0.53 per share |  |  | Services
Firstfire Global Opportunities Fund LLC |  |  | 08/04/2016 |  |  |  | 31,250 |  |  |  | Valued at $0.49 per share |  |  | Services
Guy Shalom |  |  | 10/11/2016 |  |  |  | 119,000 |  |  |  | $0.40 per share |  |  | Investment
Total Shares Issued |  |  |  |  |  |  | 2,677,017 |  |  |  |  |  |  |

16

During 2016, the Registrant issued Class A Warrants and Class B Unit Warrants to the following entities for bona fide services to the Registrant. The issuances of these Warrants were in consideration for convertible note payable and was made without registration under the Act in reliance upon the exemptions provided in Section 4(2) of the Act and Reg S.

Name of Subscriber |  | Bases for Issuance |  | Date of Issuance |  |  | Price Per Unit |  |  | Class A Warrant Issued |  |  | Class B Warrant Issued |
Ilan Malca |  | Subscription Agreement |  |  | 05/24/2016 |  |  | $ | 0.40 |  |  |  | 100,000 |  |  |  | - |
Alpha Capital Anstalt |  | Subscription Agreement |  |  | 05/30/2016 |  |  | $ | 0.40 |  |  |  | 1,000,000 |  |  |  | 1,000,000 |
Maz Partners LP |  | Subscription Agreement |  |  | 03/31/2016 |  |  | $ | 0.40 |  |  |  | 200,000 |  |  |  | - |
Chi Squared Capital Inc |  | Subscription Agreement |  |  | 05/30/2016 |  |  | $ | 0.40 |  |  |  | 100,000 |  |  |  | 100,000 |
Firstfire Global Opportunities Fund LLC |  | Subscription Agreement |  |  | 07/07/2016 |  |  | $ | 0.40 |  |  |  | 250,000 |  |  |  | 250,000 |
Guy Shalom |  | Investment Agreement |  |  | 10/11/2016 |  |  | $ | 0.40 |  |  |  | 119,000 |  |  |  | - |
Total Warrants Issued |  |  |  |  |  |  |  |  |  |  |  |  | 1,769,000 |  |  |  | 1,350,000 |

Sale of Unregistered Securities in 2017:

On February 24, 2017, Publicis Groupe 90 (“Publicis 90”) invested 500,000 Euros or approximately U$526,000 and the Registrant accepted a Reg S Subscription Agreement from Publicis 90 in consideration for the issuance to Publicis 90 of 1,315,563 restricted shares of the Registrant’s common stock at a subscription price of $0.40 per share. The issuance was made in reliance upon the exemptions provided in Section 4(2) of the Securities Act of 1933, as amended (the “Act”) and Regulation S promulgated by the SEC under the Act.

On April 25, 2017, a holder of a convertible note in the principal amount of $100,000 converted $10,400 into 74,572, shares based on an adjusted conversion price of $0.14. The conversion price was adjusted on March 22, 2017 pursuant to the provisions of the 2016 Secured Convertible Note Agreement.

On June 12, 2017, certain warrant holders holding 1,100,000 Class A Warrants and 1,100,000 Class B Warrants, elected to exercise certain warrants on a cashless basis. In accordance with the 2016 Secured Convertible Note Agreement the Class A warrants and Class B warrants were increased to 5,665,626 each, based on an adjusted share price of $0.14 per share and 3,451,490 Class B Warrants were converted to 1,096,395 shares at $0.14 per share. The exercise price and amount of shares issued were adjusted on March 22, 2017.

On June 12, 2017, the Company completed the issuance of 125,000 shares of the Company’s common stock to Alpha Anstalt Capital (“Alpha”) pursuant to the Company’s agreement with Alpha in the prior year.

In July and August 2017, the Company issued 571,429 units to two accredited investors for $0.14 per unit in total amount of $80,000. Each unit consist (i) 571,429 restricted shares at a price of $0.14 per share, (ii) 571,429 warrants exercisable for a one-year period in exercise price of $0.14, and (iii) 571,429 warrants exercisable for a two-year. As of December 31, 2017, the Company had not issued the shares to the accredited investors.

ITEM 6. SELECTED FINANCIAL DATA

None.

17

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND PLAN OF OPERATION

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 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.

Plan of Operations

On January 23, 2018, the Registrant, through its newly organized, wholly-owned Israeli subsidiary, Virtual Crypto Technologies Ltd. (the “Subsidiary”), entered into a binding term sheet (the “Term Sheet”) with Chiron Refineries Ltd. (“Chiron”), a public company listed on the Tel-Aviv Stock Exchange (TASE: CHR). Pursuant to the Term Sheet, the Registrant’s Subsidiary shall: (i) appoint a wholly-owned subsidiary of Chiron, under incorporation under the laws of the Turkish Republic of Northern Cyprus, as the exclusive distributor (the “Distributor”) of our Subsidiary’s products (as defined below) in the territory of the Republic of Turkey, including the territory of Turkish Republic of Northern Cyprus (the “Territory”); and (ii) the Distributor shall have the right to appoint sub-distributors within the Territory.

Virtual Crypto Technologies Ltd. was formed on January 17, 2018, 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”).

On January 29, 2018, Virtual Crypto Technologies, Inc., f/k/a Emerald Medical Applications Corp. (the “Registrant”) transferred the management shares of the Registrant’s former Israeli subsidiary, Emerald Medical Applications Ltd. (“Emerald IL”) owned by the Registrant to Attorney Eviatar Knoller, Esq., with offices at 20 Lincoln, Tel Aviv-Jaffa 6713412, as trustee (the “Trustee”). The purpose of the transfer of the management shares to the Trustee, pursuant to resolution of the Registrant’s Board of Directors dated January 29, 2018, was to enable the Trustee to liquidate the management shares and/or the assets of Emerald IL to satisfy its debts.

The operations of its former subsidiary never generated any revenues and was unable to raise capital to fund its ongoing operations and satisfy its financial obligations to former employees. As a result, the former employees of Emerald IL commenced an action in a court of competent jurisdiction in Israel to liquidate Emerald IL and use any assets to satisfy the debts owed to the former employees. Effective March 8, 2018, Emerald IL ceased to be a wholly-owned subsidiary and a part of the Registrant.

On January 17, 2018, the Registrant formed Virtual Crypto Technologies Ltd as a new wholly-owned subsidiary under the laws of the State of Israel (“Virtual Crypto Israel”).

Our Business Operations during 2017

We were a digital health startup company engaged in the development, sale and service of imaging solutions utilizing our proprietary DermaCompare software that we developed for use in derma imaging and analytics (our “DermaCompare” or “Product”). We believed that the DermaCompare software represents an advancement in skin cancer screening that should enable physicians to more readily identify and monitor changes in their patients’ skin characteristics.

Our DermaCompare solution allowed dermatologists and other medical care professionals, using a set of 25 total body photography (“TBP”), to capture sets of skin lesion images with, among other devices, digital cameras, camera-equipped smart phones or tablets. These images are then transmitted online and are remotely analyzed by professionals using our DermaCompare software.

The DermaCompare imaging software has 2 main modules:

| ● | A SaaS cloud-based Dr. Module that can be launched on any desktop computer connected to the Internet; or
| ● | Mobile APP for mass population uses can be installed on smart phones or tablets with iOS or Android operating systems.

Our sales and marketing plan was to sell licenses for our DermaCompare imaging software to: NHSs, HMOs, health insurance companies, hospitals and medical clinics through distributers, health care channel partners or directly through independent salespersons and/or web purchase to dermatologists and other physicians (GPs) that we expect to purchase licenses based on the number of potential numbers of patients.

18

We have entered into a series of agreements with unaffiliated third parties for the distribution of its DermaCompare Technology, as follows:

1. | On August 12, 2013, Emerald entered into an exclusive distribution with Derma Italy Sri, organized under the laws of the Italy (“Derma Italy”), pursuant to which Derma Italy was granted exclusive distribution rights in Italy;
2. | On December 1, 2013, Emerald entered into a distribution agreement with S. Bokhorst - Creatiekracht, organized under the laws of the Netherlands, pursuant to which S. Bokhorst was granted exclusive distribution in the Netherlands;
3. | On February 6, 2014, Emerald entered into a distribution agreement with Medical Edge Pty Ltd, organized under the laws of Australia (“Medical Edge”), pursuant to which Medical Edge was granted exclusive distribution rights in the markets of Australia, New Zealand and Oceania;
4. | On January 14, 2015, Emerald entered into a Project Agreement with Realize S.A. and Ubitech, entities engaged in IT related to medical technology in Greece, and MEDISP and MPUoP, academic and research institutes in Greece (collectively, the “Greek Partners”). Emerald and the Greek Partners anticipate imminent grants from the Office of Chief Scientist of the State of Israel and the General Secretariat for Research and Technology of Greece, respectively, the proceeds of which will be used for development of enhanced smartphone applications for diagnosis of early stage Melanoma.

Results of Operations during the year ended December 31, 2017 as compared to the year ended December 31, 2016

We have had no revenues for the years ended December 31, 2016 and 2015. We had operating expenses related to research and development and general and administrative expenses

During the year ended December 31, 2017, we incurred $1,573,906 in net loss due to $354,809 research and development expenses and $911,581 in general and administrative expenses, $313,984 in financing expenses.

During the year ended December 31, 2016, we incurred $6,145,197 in net loss due to $1,644,868 research and development expenses and $3,749,867 in general and administrative expenses, $750,462 in financing expenses.

Liquidity and Capital Resources

On December 31, 2017, we have had current assets of $15,181 consisting of $2,959 in cash and other receivables of $12,222. We had fixed assets, net of $14,290. We had $1,011,941 in current liabilities consisting of $445,653 in accounts payable and accrued liabilities, $82,331 in accounts payable to related party, $98,476 employee payable, $67,846 in accrued interest, and short-term portion of convertible notes of $317,635.

On December 31, 2016, we have had current assets of $13,842 consisting of $4,486 in cash and other receivables of $9,356. We had fixed assets, net of $31,803. We had $958,197 in current liabilities consisting of $258,795 in accounts payable and accrued liabilities, $125,962 in accounts payable to related party, $101,341 employee payable, $32,768 in accrued interest, short-term note payable of $29,743 and $409,588 in convertible note payable.

We had negative working capital of $1,003,228 and $944,355 as of December 31, 2017 and December 31, 2016, respectively. The Company is assessing a number of options to increase its working capital to better sustain its operations. During the first quarter of 2018 we raised $1.9 million through the issuances of convertible loans and addition equity financings. Our total liabilities as of December 31, 2017 were $1,624,574 compared to $958,197 at December 31, 2016.

During the year ended December 31, 2017, we had negative cash flow from operations of $619,734 which was mainly the result of a net loss of $1,573,906, $2,866 increase in other receivables, $40,339 increase in amounts due from related party and offset by, $183,993 increase in accounts payable and accrued liabilities and $360,598 interest and amortization of discount on convertible debt.

During the year ended December 31, 2016, we had negative cash flow from operations of $818,533 which was mainly the result of a net loss of $6,145,197, $16,441 decrease in other receivables and offset by $4,714,117 in non-cash compensation, $122,991 increase in accounts payable and accrued liabilities, $75,729 increase in employee payable, $122,482 increase in amounts due from related party, $12,422 depreciation expense, and $409,588 amortization of debt discount.

During the year ended December 31, 2016, we offset our negative cash flow from operations by $47,600 proceeds from sale of common stock (net of issuance expenses), and $695,000 issuance of short-term convertible payable. In addition, investing activities resulted in proceeds of $23,105 due to purchase of property and equipment.

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 effected. 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.

19

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, 2017 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.

Off-Balance Sheet Arrangements

As of December 31, 2017, and 2016, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

Contractual Obligations and Commitments

As of December 31, 2017, and 2016, we did not have any contractual obligations.

Critical Accounting Policies

Our significant accounting policies are described in the notes to our financial statements for the year ended December 31, 2017 and are included elsewhere in this annual report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.

20

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm | 22
Financial Statements for the Years Ended December 31, 2017 and 2016 |
Balance Sheets | 23
Statements of Operations |
Statements of Comprehensive Income (Loss) | 24
Statements of Cash Flows | 25
Statement of Stockholders’ Deficit | 26
Notes to Financial Statements | 27

21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp.) and its subsidiary (the "Company") as of December 31, 2017 and 2016 and the related consolidated statements of comprehensive loss, shareholders' deficit and cash flows for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company's lack of revenues and substantial operating losses raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of' these uncertainties.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Brightman Almagor Zohar & Co.

Certified Public Accountants

Member of Deloitte Touche Tohmatsu Limited

Tel Aviv, Israel

April 17, 2018

We have served as the Company's auditor since 2016

22

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Balance Sheets

As of December 31, 2017, and 2016

|  | December 31, 2017 |  |  | December 31, 2016 |
Assets |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 2,959 |  |  | $ | 4,486 |
Other receivables (Note 2) |  |  | 12,222 |  |  |  | 9,356 |
Total current assets |  |  | 15,181 |  |  |  | 13,842 |
Restricted cash |  |  | 59 |  |  |  | 11,925 |
Fixed assets, net of accumulated depreciation of $26,120 at December 31, 2017 and $8,607 at December 31, 2016 |  |  | 14,290 |  |  |  | 31,803 |
Total assets |  | $ | 29,530 |  |  | $ | 57,570 |
Liabilities and Stockholders’ Equity (Deficit) |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Accounts payable and accrued liabilities (Note 3) |  | $ | 445,653 |  |  | $ | 198,795 |
Accounts payable - related party (Note 7) |  |  | 82,331 |  |  |  | 125,962 |
Employee payable |  |  | 98,476 |  |  |  | 161,341 |
Accrued interest payable (Note 5) |  |  | 67,846 |  |  |  | 32,768 |
Short term portion of convertible notes (Note 5) |  |  | 317,635 |  |  |  | 439,331 |
Derivative Liability (Note 5) |  |  | - |  |  |  | (**)336,272 |
Total current liabilities |  |  | 1,011,941 |  |  |  | 1,294.469 |
Convertible notes (Note 5) |  |  | 606,165 |  |  |  | - |
Total liabilities |  |  | 1,618,106 |  |  |  | 1,294,469 |
Stockholders’ deficit |  |  |  |  |  |  |  |
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 529 and none issued at December 31, 2017 and December 31, 2016, respectively. |  |  | (*) |  |  |  | - |
Common stock, $0.0001 par value; 490,000,000 shares authorized; 22,543,008 and 19,962,728 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively. (Note 6) |  |  | 2,255 |  |  |  | 1,994 |
Accumulated other comprehensive income |  |  | (19,337 | ) |  |  | (19,337 | )
Additional paid-in capital (Note 6) |  |  | 14,968,925 |  |  |  | 13,826,957 |
Receipt on account of shares (Note 6) |  |  | 80,000 |  |  |  | - |
Accumulated deficit |  |  | (16,620,419 | ) |  |  | (**)(15,046,513) |
Total stockholders’ deficit |  |  | (1,588,576 | ) |  |  | (1,236,899 | )
Total liabilities and stockholders’ deficit |  | $ | 29,530 |  |  | $ | 57,570 |

(*) less than $1

(**) Restated – see Note 10.

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

23

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Statements of Comprehensive Loss

For the Twelve Months Ended December 31, 2017 and 2016

|  | Twelve months |  |  | Twelve months |
|  | ended |  |  | ended |
|  | December 31, 2017 |  |  | December 31, 2016 |
Revenues |  | $ | - |  |  | $ | - |
Expenses: |  |  |  |  |  |  |  |
Research and development |  |  | (354,809 | ) |  |  | (1,644,868 | )
General and administrative expenses |  |  | (911,581 | ) |  |  | (3,749,867 | )
Total operating expenses |  |  | (1,266,390 | ) |  |  | (5,394,735 | )
Loss from operations |  |  | (1,266,390 | ) |  |  | (5,394,735 | )
Finance income (expense): |  |  |  |  |  |  |  |
Finance expense |  |  | (307,516 | ) |  |  | (*)(750,462 | )
Net loss attributable to shareholders of the company |  | $ | (1,573,906 | ) |  | $ | (*)(6,145,197 | )
Net loss attributable to shareholders of preferred stock |  |  | (39,491 | ) |  |  |  |
Net loss used in the calculation of basic and diluted loss per share |  | $ | (1,534,415 | ) |  | $ | (*)(6,145,197 | )
Basic and diluted net loss per share |  |  | (0.07 | ) |  |  | (*)(0.32 | )
Weighted average shares outstanding - basic and diluted |  |  | 21,780,899 |  |  |  | 18,966,032 |

(*) Restated – see Note 10.

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

24

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Statements of Cash Flows

For the Twelve Months Ended December 31, 2017 and 2016

|  | Twelve months |  |  | Twelve months |
|  | ended |  |  | ended |
|  | December 31, 2017 |  |  | December 31, 2016 |
Operating Activities: |  |  |  |  |  |  |  |
Net loss |  | $ | (1,573,906 | ) |  |  | $ (*)(6,145,197) |
Depreciation expense |  |  | 17,513 |  |  |  | 12,422 |
Interest and amortization of discount on convertible notes |  |  | 350,208 |  |  |  | 369,588 |
Shares issued for services |  |  | - |  |  |  | 2,263,304 |
Change in derivative liability |  |  | (336,272 | ) |  |  | 309,873 |
Share based compensation |  |  | 76,616 |  |  |  | 2,028,803 |
Non cash finance, general and administrative expenses arising from settlement with debt and warrant holders |  |  | 659,960 |  |  |  | - |
Increase in accounts payable and accrued liabilities |  |  | 183,993 |  |  |  | 123,869 |
Decrease in amounts due from related party |  |  | (40,339 | ) |  |  | 122,482 |
Decrease in accrued interest |  |  | 35,078 |  |  |  | 13,483 |
Increase in other receivables |  |  | (2,866 | ) |  |  | 16,441 | )
Net cash used in operating activities |  |  | (630,015 | ) |  |  | (858,533 | )
Investing Activities: |  |  |  |  |  |  |  |
Decrease (increase) in restricted cash |  |  | 11,866 |  |  |  | (11,925 | )
Purchase of fixed assets |  |  | - |  |  |  | (23,105 | )
Net cash provided by (used in) investing activities |  |  | 11,866 |  |  |  | (35,030 | )
Financing Activities: |  |  |  |  |  |  |  |
Issuance of common stock (net of issuance expenses) |  |  | 536,613 |  |  |  | 47,600 |
Issuance of short-term convertible notes |  |  | - |  |  |  | 735,000 |
Receipt on account of stock |  |  | 80,000 |  |  |  |  |
Net cash provided by financing activities |  |  | 616,613 |  |  |  | 782,600 |
Effect of exchange rates on cash and cash equivalents |  |  |  |  |  |  |  |
Net increase (decrease) in cash |  |  | (1,527 | ) |  |  | (110,963 | )
Cash and cash equivalents - beginning of period |  |  | 4,486 |  |  |  | 115,449 |
Cash and cash equivalents - end of period |  | $ | 2,959 |  |  | $ | 4,486 |
Non-cash transactions: |  |  |  |  |  |  |  |
Issuance of Preference Shares in connection with settlement with debt and warrant holders |  | $ | 529,000 |  |  | $ | - |
Settlement agreement with debt and warrant holders accounted for as extinguishment and re issuance of debt: |  |  |  |  |  |  |  |
Extinguishment of convertible note |  |  | (470,200 | ) |  |  |  |
Re issuance of convertible note |  |  | 606,160 |  |  |  | - |

(*) Restated – see Note 10.

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

25

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Statement of Changes in Stockholders’ Deficit

For the Years December 31, 2017 and 2016

|  | Common |  |  | Preferred |  |  | Additional Paid-in |  |  | Receipt on Account of |  |  | Other Comprehensive |  |  | Accumulated |  |  | Total stockholders’ |
|  | Shares |  |  | Amount |  |  | Stock |  |  | Amount |  |  | Capital |  |  | Shares |  |  | Income |  |  | Deficit |  |  | deficit |
Balance as of December 31, 2016 |  |  | 19,931,478 |  |  | $ | 1,994 |  |  |  | - |  |  | $ | - |  |  | $ | 13,826,957 |  |  | $ | - |  |  | $ | (19,337 | ) |  | $ | (**)(15,046,513) |  |  | $ | (1,236,899 | )
Common stock issued for cash |  |  | 1,315,563 |  |  |  | 132 |  |  |  | - |  |  |  | - |  |  |  | 526,081 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 526,213 |
Cashless exercise of Warrants |  |  | 1,096,395 |  |  |  | 110 |  |  |  | - |  |  |  | - |  |  |  | (110) |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Conversion of Convertible Note to shares |  |  | 74,572 |  |  |  | 7 |  |  |  | - |  |  |  | - |  |  |  | 10,393 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10,400 |
Issuance of Ordinary Shares |  |  | 125,000 |  |  |  | 12 |  |  |  | - |  |  |  | - |  |  |  | (12 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Issuance of Preferred Stock |  |  |  |  |  |  |  |  |  |  | 529 |  |  |  | (*) |  |  |  | 529,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 529,000 |
Receipt on Account of Shares |  |  |  |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 80,000 |  |  |  | - |  |  |  | - |  |  |  | 80,000 |
Share based compensation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 76,616 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 76,616 |
Net loss for the year |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,573,906 | ) |  |  | (1,573,906 | )
Balance as of December 31, 2017 |  |  | 22,543,008 |  |  | $ | 2,255 |  |  |  | 529 |  |  | $ | - |  |  | $ | 14,968,925 |  |  | $ | 80,000 |  |  | $ | (19,337 | ) |  | $ | (16,620,419 | ) |  | $ | (1,588,576 | )

(*) less than $1

(**) Restated – see Note 10.

26

Virtual Crypto Technologies Inc (Formerly Emerald Medical Applications Corp)

Notes to Financial Statements
December 31, 2017

Note 1. The Company and Significant Accounting Policies.

Organizational Background:

Emerald Medical Applications Corp (the “Company” or “Registrant”), 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 as Zaxis. On December 30, 2014, Zaxis entered into a Memorandum of Understanding with Emerald Medical Applications Ltd., which was then a private limited liability company incorporated under the laws of the State of Israel (“Emerald Israel” or “Emerald”). On March 16, 2015, Zaxis and Emerald Israel executed the Share Exchange Agreement, which closed on July 14, 2015. The Share Exchange Agreement was accounted for as a reverse recapitalization. As a result, the historical financial statements of the Registrant were replaced with the historical financial statements of Emerald Israel.

The Company and its subsidiary, Emerald, are collectively referred to as the “Company”.

Emerald, a wholly-owned subsidiary of the Registrant effective July 14, 2015, was organized as a privately-owned company under the laws of the State of Israel on February 17, 2010. Emerald is a mobile digital-health startup company engaged in the development, sale and service of imaging solutions utilizing its proprietary DermaCompare software that it developed for use in derma imaging and analytics (“DermaCompare”). Emerald believes that its proprietary DermaCompare software represents an advancement in skin cancer screening that should enable physicians to more readily identify and monitor changes in their patients’ skin characteristics.

Emerald’s DermaCompare solution allows dermatologists and other medical care professionals, using a set of 25 total body photography (“TBP”), to capture sets of skin lesion images with, among other devices, digital cameras, camera-equipped smart phones or tablets. These TBP images are then transmitted online and are remotely analyzed by professionals using our DermaCompare software.

Beginning in July 2017, the Company commenced a process of outsourcing the development and maintenance of our patented DermaCompare imaging solution to a major Israeli software company, which company has been involved in the continued development of our technology. The purpose for this outsourcing was to conserve the Company’s capital resources. Certain key external consultants and medical professionals continue to assist and serve the Company as we advance the implementation of our marketing plan. As of December 31, 2017, and the date of this report, the Company has no employees on its payroll. However, certain liabilities with respect to payroll and severance payments remain outstanding.

On January 29, 2018, the Company ceased its DermaCompare operations and is currently in the process of liquidating Emerald Israel. The Company commenced a new business operation in January 2018 under its newly-formed Israeli subsidiary, Virtual Crypto Technologies Ltd. To fund the new operations and to satisfy its existing debts, the Company raised approximately $1.9 million in the first quarter of 2018. Refer to subsequent event note 11.

Going Concern:

The Company has incurred significant operating losses and negative cash flows from operating activities in relation to its DermaCompare operations, since incorporation. The Company raised approximately $1.9 million in the first quarter of 2018, however, it will be required to obtain additional liquidity resources in order to support the commercialization of its new operations and maintain its research and development activities. The Company is addressing its liquidity needs by seeking additional funding from public and/or private sources. There are no assurances, however, that the Company will be able to obtain an adequate level of financial resources that are required for the short and long-term requirements.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. Such adjustments would have been required as of December 31 2017 had the Company not successfully completed the $1.9 million funding in the first quarter of 2018. Since the Company's balance sheet as of December 31 2017 is substantially comprised of financial instruments with carrying values that approximate liquidation values (cash and cash equivalents, short term accounts payable and accrued expenses, debt and related accrued interest presented at repayment amounts as well as derivative warrant liabilities with immaterial carrying and fair values), other than the reclassification of long term liabilities to short term, such adjustments would have been immaterial as of December 31 2017.

Significant Accounting Policies

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

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Cash and Cash Equivalents:

For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents. There were no cash equivalents as of December 31, 2017 and December 31, 2016.

Other Receivables

The Company treats VAT refunds claimed, resulting from excess VAT paid over VAT received, as other receivables.

Currency Translation and other Comprehensive Income

The functional currency of the Virtual Crypto Technologies Inc. is the U.S dollar (“dollar”) since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future. Transactions and balances denominated in dollars are presented at their original amounts. Transactions and balances denominated in foreign currencies have been re-measured to dollars in accordance with the provisions of ASC 830-10, “Foreign Currency Translation”. All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.

Fixed assets:

New property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 6 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock:

We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This guidance addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.

Fair Value of Financial Instruments:

FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At December 31, 2017 and 2016, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.

The Company measures its derivative warrant liabilities at fair value at each period. The Company adopted the FASB standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows.

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Accounting For Convertible Debt Instruments

We account for convertible debt instruments, which do not meet the definition of a derivative financial instrument per FASB ASC 815, Accounting for Derivative Financial Instruments, in accordance with FASB ASC 470-20, Debt with Conversion and Other Options. This guidance addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. Discount on the debt component resulting from allocation of proceeds to the equity component is amortized in the profit and loss statement as finance expense.

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Allocation of proceeds into equity and debt components of convertible notes issued together with other detachable financial instruments is performed, in relation to the proceeds allocated to the convertible notes, based on the relative fair value of such convertible notes and the other detachable financial instruments issued.

Share-based compensation

The Company applies ASC 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors (including employee stock options under the Company’s stock plans) based on estimated fair values.

ASC 718-10 requires companies to estimate the fair value of equity-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s statement of operations.

The Company recognizes compensation expenses for the value of non-employee awards based on the straight-line method over the requisite service period of each award, net of estimated forfeitures.

The Company estimates the fair value of stock options granted as equity awards using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the time from the grant date until the options are exercised or expire). Expected volatility is estimated based on volatility of similar companies in the technology sector. The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected option term is calculated for options granted to employees and directors using the “simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the options granted and the results of operations of the Company.

Earnings per Common Share

Basic net loss per share is computed by dividing net loss, as adjusted to include the weighted average number of common shares outstanding during the year. Common shares and preferred shares contingently issuable for little or no cash are included in basic net loss per share on an as issued basis.

Diluted net loss per share is computed by dividing net loss, as adjusted to include preferred shares dividend participation rights of preferred shares outstanding during the year as well as of preferred shares that would have been outstanding if all potentially dilutive preferred shares had been issued, by the weighted average number of common shares outstanding during the year, plus the number of common shares that would have been outstanding if all potentially dilutive common shares had been issued, using the treasury stock method, in accordance with ASC 260-10 “Earnings per Share”.

All outstanding stock options and warrants have been excluded from the calculation of the diluted loss per share for the years ended December 31, 2017 and December 31, 2016, since all such securities have an anti-dilutive effect.

Research and development expenses, net:

Research and development expenses are charged to the statement of operations as incurred. Grants for funding of approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from the research and development expenses.

Income Taxes:

We have adopted FASB ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

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Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset. Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.

Uncertain Tax Positions:

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of FASB ASC 740-10, Accounting for Uncertain Income Tax Positions, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Recent Accounting Pronouncements

The Company assesses the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board on its financial statements. Following are newly issued standards or material updates to the Company’s previous assessments from its Annual Report on Form 10-K for the fiscal year ended December 31, 2016:

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of the promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective with respect to the Company beginning in the first quarter of 2018; early adoption is prohibited. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. As the Company has not incurred revenues to date, it does not expect the new standard to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued a new lease accounting standard requiring the recognition of lease assets and liabilities on the balance sheet. This standard is effective beginning in the first quarter of 2019; early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. As the Company currently is not a party to any leasing arrangement, it does not expect the new standard to have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.” With respect to assets measured at amortized cost, such as held-to-maturity assets, the update requires presentation of the amortized cost net of a credit loss allowance. The update eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate can now reflect an entity’s current estimate of all future expected credit losses as opposed to the previous standard, when an entity only considered past events and current conditions. With respect to available for sale debt securities, the update requires that credit losses be presented as an allowance rather than as a write-down. The update is effective beginning in the first quarter of 2020; early adoption is permitted. As the Company has insignificant receivable balances, The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

30

In May 2017, the FASB issued “ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting,” which clarifies when a change to terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the vesting condition, fair value or the award classification is not the same both before and after a change to the terms and conditions of the award. The new guidance is effective on a prospective basis beginning on January 1, 2018 and early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, which includes Part I “Accounting for Certain Financial Instruments with Down Round Features” and Part II “Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-Controlling Interests With a Scope Exception”. The ASU makes limited changes to the Board’s guidance on classifying certain financial instruments as either liabilities or equity. The ASU’s objective is to improve (1) the accounting for instruments with “down-round” provisions and (2) the readability of the guidance in ASC 480 on distinguishing liabilities from equity by replacing the indefinite deferral of certain pending content with scope exceptions. This standard is effective beginning in the first quarter of 2019; early adoption is permitted. The Company early adopted the standard, retrospectively, for each prior period presented in these financial statements.

Note 2. Other Receivables.

As of December 31, 2017, and December 31, 2016, the Company had other receivables of $12,222 and $9,356, respectively, which represent VAT refunds claimed resulting from excess VAT paid over VAT received from the Israeli government.

Note 3. Accounts Payable and Accrued Liabilities.

As of December 31, 2017, and December 31, 2016 the Company had accounts payable and accrued liabilities of $445,653 and $198,795, respectively, which mainly represent accrued expenses such as accrued vacation and deferred salary (see Note 8 for further details).

Note 4. Employees Payable.

As of December 31, 2017, and 2016, the total amount owing to employees was $98,476 and $161,341. The amount owing as of December 31, 2017 includes amounts owing to employees in respect of the litigation against Emerald Israel. Reference is made to Note 8 below.

Note 5. Notes Payable

Notes payable and accrued interest as of December 31, 2017 and 2016 are as follows:

|  | December 31, 2017 |  |  | December 31, 2016 |
Principle |  | $ | 920,484 |  |  | $ | 745,860 |
Discount |  |  | - |  |  |  | (306,529) |
Accrued interest |  |  | 71,162 |  |  |  | 32,768 |
Total |  |  | 991,646 |  |  |  | 472,099 |

Issuances of convertibles notes during 2016 and 2017

On March 24, 2016, a convertible note payable and Class A warrants to purchase 187,500 common shares were issued to GoldMed Ltd for a consideration of $75,000 The note bears interest at 8% per annum and is convertible through March 23, 2017. The exercise price of the warrant is $0.80 and expires 12 months after issuance. The warrants and the beneficial conversion feature were valued at $75,000, which resulted in a $75,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On April 11, 2016, a convertible note payable and Class A warrants to purchase 200,000 common shares were issued to Maz Partner. The note bears interest at 8% per annum and is convertible through April 10, 2017. The exercise price of the warrant is $0.80 and expires 12 months after issuance. The warrants and the beneficial conversion feature were valued at $80,000, which resulted in a $80,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On June 20, 2016, a convertible note payable and Class A warrants to purchase 1,000,000 common shares and Class B warrants to purchase 1,000,000 common shares were issued to Alpha Anstalt Capital (“Alpha”). The note bears interest at 8% per annum and is convertible through June 19, 2017. The exercise price of the Class A warrants is $0.80 and expires 12 months after issuance and the exercise price of Class B warrants is $0.80 and expires 60 months after issuance. The warrants and the beneficial conversion feature were valued at $440,000, which resulted in a $440,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On June 30, 2016, a convertible note payable and Class A warrants to purchase 100,000 common shares were issued to Ilan Malka. The note bears interest at 8% per annum and is convertible through June 29, 2017. The exercise price of the warrant is $0.80. The warrants and the embedded beneficial conversion feature were valued at $40,000, which resulted in a $40,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note.

On July 7, 2016, a convertible note payable and Class A warrants to purchase 250,000 common shares and Class B warrants to purchase 250,000 were was issued to Firstfire Global Opportunities Fund LTC (“Firstfire”). The exercise price of the Class A warrants is $0.80 and expires 12 months after issuance and the exercise price of Class B warrants is $0.80 and expires 60 months after issuance. The warrants and the beneficial conversion feature were valued at $100,000, which resulted in a $100,000 discount recorded as a reduction of debt and an increase to additional paid in capital. The discount is amortized in finance expense over the term of the note. The note bears interest at 8% per annum and is convertible through July 6, 2017.

The terms of the convertibles note and warrants to Alpha Capital and Firstfire Global Opportunities Fund LTC

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The conversion price of the loans and the exercise price of Class A warrants and Class B warrants issued to Alpha and Firstfire, which had an exercise price of $0.80, were adjusted to $0.14, based on the Company’s share price on the 275th calendar day after the issuance date in accordance with the original provisions of the agreement. The exercise price is subject to certain adjustments, including down round protection.

In July 2016, the Company granted an option to Alpha and Chi Squared (the “Alpha Chi Option”) to purchase Notes for an aggregate of up to $385,000 (up to $350,000 for Alpha and up to $35,000 for Chi Squared Capital Inc.) (“Option Notes”) and Warrants (“Option Warrants”) substantially identical to the Notes and Warrants issued. The Company accounts for the Alpha Chi Option as derivative liabilities that are measured at their far value at each period end as further detailed below.

The above-referenced convertible notes were due during 2017. A settlement agreement was reached with Alpha and Chi Squared Capital Inc. on August 7, 2017, as described below, and agreements were reached with other convertible note holders in 2018 as detailed in Note 11, Subsequent Events.

Settlement Agreement

Effective August 7, 2017, the Company entered into the settlement agreement with Alpha and Chi Squared Capital Inc. as a result of the fact that Alpha and Chi Squared had taken the position that certain defaults may have occurred as a result of actions and/or inactions by the Company with respect to the Company’s obligations under convertible notes (the “Notes”) issued during 2016, which the Company did not deem to be defaults (the “Settlement Agreement”).

Pursuant to the Settlement Agreement, the Notes, which had originally provided for a maturity date of June 19, 2017 and were in the original principal amounts of $400,000 and $40,000, respectively, were extended until June 19, 2019, in consideration for which the Company agreed to an increase in the principal amounts to $551,600 and $55,160, respectively, both of which retain the adjusted conversion price of $0.14, calculated in accordance with the terms of the original Notes. Such conversion price is subject adjustments in the event of future financing at a price of less than $0.14 per share. As a further part of the settlement, the Company agreed to issue Alpha and Chi Squared a total of 528.82 newly authorized shares of Series A Convertible Preferred Stock having a stated value and liquidation preference of $1,000 per share, and are convertible into a total of 3,778,647 shares based upon a conversion price of $0.14 per share, subject to adjustment in the event of a future financing such that the amount of ordinary shares to be issued pursuant to conversion of Series A Convertible Preferred Stock will represent the value of $1,000, per 1 Series A Convertible Preferred Stock, based on a conversion price which is identical to the ordinary share price at which securities are offered in such future financing. The Series A Convertible Preferred Stock shall be entitled to receive dividends on the same basis as Ordinary Shares and shall have no voting rights.

As part of the Settlement Agreement, the Company extended the Alpha Chi Option to July 15, 2018.

The settlement was accounted for as extinguishment of the pre-settlement notes and re issuance of the Notes and Series A Convertible Preferred Stock. As a result of the Settlement Agreement, the Company recorded a charge to general and administrative expenses in the Statement of Operation Losses of $440,684 representing the penalties and liquidation damages portion of the above-mentioned provision, and $219,276 was charged to finance expenses in the Statement of Operating Losses. The Series A Convertible Preferred Stock were recorded in shareholders’ equity at their fair value at the effective date of the settlement. As the Company concluded the conversion feature embedded in the amended notes is not a beneficial conversion feature pursuant to the provisions of ASC 470-20 (“Debt with Conversion and Other Options”), the post amendment carrying amount of the convertible notes, which was based on the fair value of the convertible notes at the effective date of the settlement, was recorded in liabilities in its entirely.

The Company accounts for options to purchase convertible notes and warrants (refer to the Alpha Chi Option above) as derivative liabilities that are measured at their far value at each period end, in accordance with ASC 815 (“Derivatives and Hedging”).

The Company uses directly observable inputs as well as significant unobservable inputs in the valuation of these derivative liabilities (level 3 measurements). The inputs used in the valuation are risk free interest rate, expected volatility, expect option term, expected dividend yield and Company specific discount rate.

The fair value of the derivative liabilities at December 31, 2017, as well prior to and following the effective date of the aforementioned settlement, was immaterial. The fair value of the derivative liabilities as of December 31, 2016 was $336,272. Finance expense from revaluation of the derivative liabilities included in the Company’s statement of operations was $336,272 for the year ended December 31 2016 and finance income was $336,272 for the year ended December 31, 2017.

Non-convertible note

On July 8, 2014, the Company issued a convertible note to Axel Springer Plug & Play Accelerator GmbH in the amount of $29,719. Accrued interest as of December 31, 2017 amounted to $3,316. In terms of the original agreement, as of December 31, 2017 and 2016, the convertible note is no longer convertible.

Note 6. Stockholders’ Equity.

Shares of common stock confer upon their holders the right to receive notice to participate and vote in general meetings of shareholders of the Company, the right to receive dividends, if declared, and the right to receive a distribution of any surplus of assets upon liquidation of the Company.

Preferred shares confer upon their holders the right to receive dividends when paid to holders of common stock of the Company on an as-converted basis, and the right to receive a distribution of any surplus of assets upon liquidation of the Company before any distribution or payment shall be made to the holders of any common stock.

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The following table summarizes information of outstanding warrants issued to investors and consultants in exchange for their services as of December 31, 2017:

|  | Warrants |  |  | Warrant Term |  |  | Exercise Price |  |  | Exercisable |
Investors - Class A Warrants |  |  | 6,334,626 |  |  |  | 1 year |  |  | $ | 0.14-0.80 |  |  |  | 6,334,626 |
Investors - Class B Warrants |  |  | 5,400,478 |  |  |  | 5 years |  |  | $ | 0.14 |  |  |  | 5,400,478 |
Alimi Ahmed - Class E Warrants (1) |  |  | 900,000 |  |  |  |  | (1) |  | $ | 0.0001 |  |  |  | 900,000 |

(1) During 2015, a total of 2,700,000 Class E Warrants were issued by the Company to Lior Wayn pursuant to the terms of the Share Exchange Agreement and were exercisable in three equal tranches of 900,000 Shares each (the “Tranches”) at an exercise price of $0.0001 per Share, subject to and within 45 days of the Company achieving the milestones defined in the Share Exchange Agreement. On December 16, 2016, the Company terminated Lior Way’s employment agreements with the Company and Emerald Israel, and his removal as an executive officer and director. During 2017, Mr. Wayn transferred, sold and assigned his 5,212,878 shares of the Company’s common stock and 900,000 Class E Warrants that were fully-vested to an entity controlled by Mr. Alimi Ahmed, then a member of the Company’s Board of Directors. Effective as of December 31, 2016, the remaining 1,800,000 Class E Warrants that had been issued to Mr. Wayn were canceled.

Issuances of Common Stock and Warrants during 2016 and 2017

Certain warrants were issued together with convertible notes, as detailed in Note 6.

On January 26, 2016 and March 17, 2016, the Company issued 125,000 common shares to one service provider and 50,000 common shares to two service providers, respectively, for services valued at a total value of $251,250, arrived at using the stock price on date of grant of $1.75 and $0.65, respectively.

On February 18, 2016, the Company issued 1,195,000 shares to three acting directors, for services valued at a total value of $1,194,403, arrived at using the stock price on date of grant of $1.00.

On January 26, 2016, consultants that were previously issued 2,500,000 Class B Warrants exercisable for a two-year period to acquire one (1) share of Common Stock at a price of $0.40 per share, exercised the warrants on a cashless basis resulting in 1,928,572 shares issued with no additional related expense booked.

On May 5, 2016, the Company issued 150,000 shares to one service provider for services valued at a total value of $105,000, arrived at using the stock price on date of grant of $0.7.

On May 10, 2016, the Company issued 41,667 shares to one service provider for services valued at a total value of $29,584, arrived at using the stock price on date of grant of $0.71.

On May 18, 2016, the Company issued 150,000 shares to one service provider for services valued at a total value of $102,000, arrived at using the stock price on date of grant of $0.68.

On June 28, 2016, the Company issued 175,000 shares to three service providers for services valued at a total value of $122,500, arrived at using the stock price on date of grant of $0.7.

On June 30, 2016, the Company issued 333,333 shares to one service provider for services valued at a total value of $226,666, arrived at using the stock price on date of grant of $0.68.

On July 1, 2016, the Company issued 300,000 shares to one service provider for service valued at a total value of $213,000 arrived at using the stock price on date of grant of $0.71.

On July 1, 2016, the Company issued 6,767 shares to one service provider for service valued at a total value of $3,587 arrived at using the stock price on date of grant of $0.53.

On August 4, 2016, the Company issued 31,250 shares to one service provider for service valued at a total value of $15,313, arrived at using the stock price on date of grant of $0.49.

The total value of the services provided in respect of the above-mentioned share issuances between May 2016 and June 2016 were charged to general and administrative expenses in the Statement of Comprehensive Loss.

On November 10, 2016, the Company issued 119,000 units to Guy Shalom in total amount of $47,600. Each unit consist 119,000 Class A Warrants exercisable for a two-year period in exercise price of $0.80 and 119,000 common shares.

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On February 24, 2017, Publicis Groupe 90 (“Publicis 90”) invested 500,000 Euros or approximately U$526,000 and the Registrant accepted a Reg S Subscription Agreement from Publicis 90 in consideration for the issuance to Publicis 90 of 1,315,563 restricted shares of the Registrant’s common stock at a subscription price of $0.40 per share. The issuance was made in reliance upon the exemptions provided in Section 4(2) of the Securities Act of 1933, as amended (the “Act”) and Regulation S promulgated by the SEC under the Act.

On April 25, 2017, a holder of a convertible note in the principal amount of $100,000 issued in July 2016, converted $10,400 into 74,572, shares based on an adjusted conversion price of $0.14. The conversion price was adjusted on March 22, 2017 pursuant to the provisions of the 2016 Secured Convertible Note Agreement.

On June 12, 2017, certain warrant holders holding 1,100,000 Class A Warrants and 1,100,000 Class B Warrants, elected to exercise certain warrants on a cashless basis. In accordance with the 2016 Secured Convertible Note Agreement the Class A warrants and Class B warrants were increased to 5,665,626 each, based on an adjusted share price of $0.14 per share and 3,451,490 Class B Warrants were converted to 1,096,395 shares at $0.14 per share. The exercise price and amount of shares issued were adjusted on March 22, 2017.

On June 12, 2017, the Company completed the issuance of 125,000 shares of the Company’s common stock to Alpha pursuant to the Company’s agreement with Alpha in the prior year.

In July and August 2017, the Company received $80,000 in respect of 571,429 units to two accredited investors for $0.14 per unit. Each unit consist (i) 571,429 shares at a price of $0.14 per share, (ii) 571,429 Class H warrants exercisable for a one-year period in exercise price of $0.14, and (iii) 571,429 Class I warrants exercisable for a two-year period. As of December 31, 2017, the Company had not issued the shares or the warrants to the accredited investors as such, the proceeds were recorded as Receipts on Account of shares in the Company’s shareholders equity statement.

During 2017, Class A warrants issued during 2015 which were exercisable to acquire 4,149,719 shares, expired. During 2016, the Class C warrants issued during 2014, expired.

Recent Option Grants

During the fiscal year ended December 31, 2017, the Company had outstanding awards for stock options under its 2017 Stock Incentive Plan (the “Plan”).

The Plan, which was approved by the Board of Directors on December 1, 2017 and provides for the grant of up to 2 million shares to eligible participants bearing such terms and conditions, including but not limited to vesting provisions, exercise price(s) and other terms as the Board of Directors may reasonably determine from time to time, expires on November 30, 2023. Options granted under the Plan may be exercised on a cash or cashless basis, and the number of shares eligible for grant under the Plan may be increased, and the option exercise price(s) and vesting terms may the adjusted by, the Board of Directors, subject to provisions of the Plan and applicable laws and rules. Any options under the Plans that are canceled or forfeited before expiration become available for future grants. The Board of Directors of the Company administers the Company’s stock incentive compensation and equity-based plans.

On February 11, 2016, the Company’s board of directors approved a grant of 70,533 options to certain of its employees. Each option is exercisable to purchase a share of common stock at an exercise price equal to $0.01-$0.4 per share. As of December 31,2016, 47,133 options were fully-vested, and 31,500 options were canceled. As a result, the Company recognized share-based payment expenses in 2016 in the amount of $21,798.

On February 18, 2016, the Company’s board of directors approved a grant of 1,466,700 options to certain of its employees and consultants. Each option is exercisable to purchase a share of common stock at an exercise price equal to $0.01- $0.4 per share. As of December 31,2016, all the options were fully vested. As a result, the Company recognized share-based payment expenses in 2016 in the amount of $1,389,614.

On May 5, 2016, the Company’s board of directors approved a grant of 93,750 options to certain of consultants. Each option is exercisable to purchase a share of common stock at an exercise price equal to $0.001 per share. As of December 31, 2016, all the options were fully vested. As a result, the Company recognized share-based payment expenses in 2016 in the amount of $61,455.

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On October 1, 2016, the Company’s board of directors approved a grant of 2,514,500 options to certain of its executive, director and consultants. Each option is exercisable to purchase a share of common stock at an exercise price equal to $0.001- $0.40 per share. As of December 31, 2016, 1,111,500 options were fully vested and $450,000 thousands were canceled. As a result, the Company recognized share-based payment expenses in 2016 in the amount of $396,222.

On November 3, 2016, the Company’s board of directors approved a grant of 339,000 options to certain of its employees. Each option is exercisable to purchase a share of common stock at an exercise price equal to $0.2-$0.4 per share. As of December 31,2016, 139,000 options were fully vested. As a result, the Company recognized share-based payment expenses in 2016 in the amount of $40,747.

A summary of the Company’s activity related to options to employees, executives, directors and consultants and related information is as follows:

|  | For the year ended December 31, 2017 |  |  | For the year ended December 31, 2016 |
|  | Amount of options |  |  | Weighted average exercise price |  |  | Aggregate intrinsic value |  |  | Amount of options |  |  | Weighted average exercise price |  |  | Aggregate intrinsic value |
|  |  |  |  | $ |  |  | $ |  |  |  |  |  | $ |  |  | $ |
Outstanding at beginning of year |  |  | 4,193,397 |  |  |  | 0.11 |  |  |  |  |  |  |  | 561,280 |  |  |  | 0.0666 |  |  |  |  |
Granted |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 5,440,483 |  |  |  | 0.1336 |  |  |  |  |
Exercised |  |  | - |  |  |  | - |  |  |  |  |  |  |  | (697,086 | ) |  |  | - |  |  |  |  |
Cancelled |  |  | (4,130,397 | ) |  |  | (0.11 | ) |  |  |  |  |  |  | (550,000 | ) |  |  | (0.3956 | ) |  |  |  |
Outstanding at the end of year |  |  | 62,500 |  |  |  | 0.01 |  |  |  |  |  |  |  | 4,193,397 |  |  |  | 0.11 |  |  |  | 1,006,415 |
Vested and expected-to-vest at end of period |  |  | 62,500 |  |  |  | 0.01 |  |  |  | - |  |  |  | 3,288,062 |  |  |  | 0.11 |  |  |  | 789,134 |

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company’s common shares on December 31, 2017 and December 31, 2016 respectively and the exercise price, multiplied by the number of in-the-money stock options on those dates) that would have been received by the stock option holders had all stock option holders exercised their stock options on those dates.

The stock options outstanding as of December 31, 2017, and December 31, 2016, have been separated into exercise prices, as follows:

Exercise price |  | Stock options outstanding as of December 31, |  |  | Weighted average remaining contractual life – years as of December 31, |  |  | Stock options exercisable as of December 31, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
0.4 |  |  | - |  |  |  | 1,208,600 |  |  |  | - |  |  |  | 9.25 |  |  |  | - |  |  |  | 1,208,600 |
0.2 |  |  | - |  |  |  | 1,870,000 |  |  |  | - |  |  |  | 9 |  |  |  | - |  |  |  | 1,870,000 |
(*) |  |  | 62,500 |  |  |  | 1,114,797 |  |  |  | 8.25 |  |  |  | 9.25 |  |  |  | 62,500 |  |  |  | 1,114,797 |
|  |  | 62,500 |  |  |  | 4,193,397 |  |  |  | 8.25 |  |  |  | 9.25 |  |  |  | 4,193,397 |  |  |  | 4,193,397 |

(*) 0.01 or less

Compensation expense recorded by the Company in respect of its stock-based employee compensation awards in accordance with ASC 718-10 for the year ended December 31, 2017 and 2016 was $76,616 and $2,028,805, respectively and are included in General and Administrative expenses in the Statements of Operations

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The fair value of the stock options is estimated at the date of grant using Black-Scholes options pricing model with the following weighted-average assumptions:

|  | Years ended December 31, |
|  | 2017 |  |  | 2016 |
Expected volatility |  |  | (* | ) |  |  | 157 | %
Risk-free interest |  |  | (* | ) |  |  | 0.69 | %
Dividend yield |  |  | (* | ) |  |  | 0 | %
Expected life of up to (years) |  |  | (* | ) |  |  | 6.0 |

(*) There were no options granted during the year ended December 31, 2017.

Note 7. Related Party Transactions.

Other than transactions and balances related to cash and share based compensation to officers and directors and other than the issues of convertible debt and warrants to Alpha, the Company did not have any transactions and balances with related parties and executive officers during 2017 and 2016 other than an amount of $82,331 and $125,896 as of December 31, 2017 and 2016, respectively owed to the Company’s chairman in respect of Company expenditures paid by him on behalf of the Company.

Note 8. Commitments and Contingencies

The Company received grants to fund research and development projects from the State of Israel according to guidelines and procedures of the Office of the Chief Scientist of the Ministry of Industry and Trade. According to the agreement, the Company is obligated to pay royalties on the sale of products developed with the participation of the Chief Scientist. The royalty rate is 3.5% of sales and the total royalties will not exceed the amount of the grants received. As of December 31, 2016, total grants received amounted approximately $222 thousands.

The obligation to pay royalties is contingent upon the successful outcome of the Company’s research and development projects and the attainment of sales. The Company has no obligation to pay royalties, if sales are not generated, and if the research and development project fails.

In April 2017, a lawsuit was filed with the Tel Aviv court by Emerald’s former CEO and founder, claiming certain damages to the total amount of $100,000, under the assertion of wrongful dismissal by the Company. The Company believes these claims to be unsubstantiated and wholly without merit and intends to defend itself against these claims. The Company believes that there is a less than 50% chance of his claim being successful. Accordingly, no provision was recorded in regards to this claim.

In December 2017, a liquidation request was filed with the Tel Aviv court by a group of former Company’s employees under the assertion of delay of pay and insolvency. On December 20, 2017, a hearing discussion took place according to which the court decision that the Company shall settle its pension debts to the former employees within 21 days and settle its severance debts to them in 60 days, otherwise a winding-up order could be given. The amounts being claimed by the former employees are less than $96,000 and are included in current liabilities. The Company is seeking to identify potential acquired of Emerald Israel, but as of the date of this report has been unsuccessful and therefore the Company believes that the Court will place Emerald Israel in liquidation.

Note 9 Income Taxes.

The Company is subject to income taxes under the Israeli and U.S. tax laws:

Corporate tax rates

The Company is subject to Israeli corporate tax rate of 25% in 2016, 24% in 2017 and 23% from 2018. The maximum statutory federal tax rate in the US in 2017 and 2016 is 35%. The Company is not subject to current federal taxes, as it has incurred losses in 2016 and 2017.

As of December 31, 2017, the Company generated net operating losses in Israel of approximately $3,193,927, which may be carried forward and offset against taxable income in the future for an indefinite period.

As of December 31, 2017, the Company generated net operating losses in the U.S. of approximately $15,150,925. Net operating losses in the United States are available through 2035. Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.

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The Company is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will not be available for the tax losses to be utilized in the future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts.

|  | As of December 31, 2017 |  |  | As of December 31, 2016 |
Net loss carry-forward |  | $ | 18,344,852 |  |  | $ | 17,155,076 |
Total deferred tax assets |  |  | 3,916,297 |  |  |  | 5,730,945 |
Valuation allowance |  |  | (3,916,297 | ) |  |  | (5,730,945 | )
Net deferred tax assets |  | $ | - |  |  | $ | - |

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law in the United States. The Tax Act, among other provisions, introduces changes in the U.S corporate tax rate, business related deductions and credits, and has international tax consequences for companies that operate globally. Most of the changes introduced in the Tax Act are effective beginning on January 1, 2018. As a result of the tax act the maximum statutory federal tax rate was reduced to 21% starting on January 1, 2018. The other effects of the Tax Act provisions are still being identified and evaluated by the Company.

Note 10 -Restatement

Options to Purchase Convertible Notes and Warrants

As described in Note 5, during July 2016 the Company issued Alpha and Chi Squared, an option to (the “Option”) to purchase an aggregate of up to $385,000 (up to $350,000 for Alpha and up to $35,000 for Chi Squared) of Notes (“Option Notes”) and Warrants (“Option Warrants”) substantially identical to the Notes and Warrants issued pursuant to Alpha and Chi in June 2016. As part of the Settlement Agreement concluded in August 2017 (see note 5), The Option was extended through to July 15, 2018. As of the date of the Settlement Agreement, and as of December 31, 2017, the fair value of the Option is nil.

The Option, as described above does not meet the scope exception of ASC 815 (“Derivatives and Hedging”) and as such, the Option should have been measured at its fair value at the effective date of the grant date and at each subsequent reporting date.

The Company erroneously did not record the fair value of the Option at the issuance date and at December 31, 2016.

The fair value of the Option at issuance date and as of December 31, 2016 was $1,049,953 and $336,272, respectively.

The following tables present the restated financial statements line items:

Emerald Medical Applications Corp.

Balance Sheet

|  | As of December 31, 2016 |
|  | As Reported |  |  | Adjustments |  |  | As Restated |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Derivative liability |  |  | - |  |  |  | 336,272 |  |  |  | 336,272 |
Accumulated deficit |  |  | 14,670,241 |  |  |  | 336,272 |  |  |  | 15,046, 513 |
Total shareholders’ deficit |  |  | (900,627 | ) |  |  | 336,272 |  |  |  | (1,236,899 | )

Emerald Medical Applications Corp.

Statement of Operations

|  | For the year ended December 31, 2016 |
|  | As Reported |  |  | Adjustments |  |  | As Restated |
Total finance income (expense) |  |  | (414,190 | ) |  |  | (336,272 | ) |  |  | (750,462 | )
Net Loss |  |  | (5,808,925 | ) |  |  | (336,272 | ) |  |  | (6,145,197 | )

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Down Round Feature Included in Convertible Notes and Warrants

As described in Note 5, the Company’s convertible notes and warrants issued in 2016 to Alpha and Chi Squared and Firstfire contain a down round adjustment feature which, according to US Gaap, requires such derivatives to be classified in liabilities and to be measured at their fair value at each cut of date. Such derivative liabilities, with a fair value of $567 thousand as of December 31, 2016 were erroneously not included in the Company’s December 31 2016 balance sheet.

The Company early adopted ASU 2017-11, Part I (“Accounting for Certain Financial Instruments with Down Round Features”), issued in July 2017, which makes certain changes in relation to classifying certain financial instruments as either liabilities or equity such that the aforementioned derivatives are no longer precluded from being recorded in equity. The Company adopted the standard retrospectively for all prior periods presented in these interim financial statements such that December 31 2016 comparison information included in these financial statements is identical to the December 31 2016 financial information included in the Company’s original 2016 annual 10-K filing.

Note 11. Subsequent Events.

Cessation of Operations

On January 29, 2018, the Company determined to cease it DermaCompare operations and a trustee is currently in the process of liquidating Emerald Israel to satisfy its debts.

New Business Developments

On January 17, 2018, the Company formed a new wholly owned subsidiary, Virtual Crypto Technologies Ltd. (the Subsidiary”), 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.

On January 23, 2018, the Subsidiary entered into a binding term sheet with Chiron Refineries Ltd. (“Chiron”), a public company listed on the Tel-Aviv Stock Exchange (TASE: CHR). Pursuant to the Term Sheet, they shall act as a distributer in the territory of the Republic of Turkey, including the territory of Turkish Republic of Northern Cyprus (the “Territory”); and (ii) the shall have the right to appoint sub-distributors within the Territory.

The appointment of the Distributor is subject to the payment by the Distributor to our Subsidiary of US$250,000 (the “Appointment Fee”). An amount of $150,000 of the total Appointment Fee shall be deemed an advance payment by the Distributor, made on account of future purchases of our Products and related services.

The Company further granted the Distributor an option, exercisable by the Distributor within 12 months from the date on which the ATM Product, including the related software and hardware, is fully tested and ready for installation and operation, to be appointed as an exclusive distributor of the Products for the Federal Republic of Nigeria. If the option is exercised, the Distributor shall pay the Subsidiary an appointment fee not higher than $250,000.

Issuance of convertible notes in 2018.

From January 16 through January 23, 2018, the Company received the aggregate amount of $100,000 from “accredited investors” in consideration for the issuance of convertible promissory notes (the “Notes”) bearing: (i) interest at the rate of 1% per annum; and (ii) a conversion price of $0.01 per share.

On December 19, 2017, the Company approved, subject to a future sale by the “Sellers,” (as defined below) to sell their convertible loans, loans, and warrant to certain third-party investors and in connection therewith, to: (i) amend the exercise price of warrants granted to Alpha, Chi Squared Capital, Firstfire, Goldmed Ltd, Ilan Malca and Maz Partners (the “Sellers”) to $0.01, (ii) to amend the conversation price of convertible notes granted to Sellers to $0.01 and (iii) to amend the interest rate to 1% per annum.

On January 24, the Sellers sold their loans totaling $956,209 to the new third-party investors, and $73,000 of such loans were converted at $0.01 per shares into 7,300,000 ordinary shares of the Company. Also, on March 19, 2018, a further $9,218 into 921,800 shares, based upon the note conversion price of $0.01 per share.

On January 26, 2018 the company signed a consulting agreement with Maz Partners, pursuant to which they are to provide investment and corporate finance advise in consideration for 200,000 Class H warrants. Each Class H warrant is execrable into one share at $0.14 per share and the warrants expire each exercisable into one shares. The period of the agreement is two years the effective date.

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Equity raise from the sale of units in 2018.

From January 31 through February 13, 2018, the Company received the aggregate amount of $1,375,700 from “accredited investors” in consideration for the issuance of 19,647,856 units (the “Units”) at an offering price of $0.07 per Unit, each Unit consisting of: (i) one (1) share of common stock (the “Shares”); and (ii) one (1) common stock purchase warrant exercisable for a period of twenty-four (24) months to purchase one (1) additional Share at an exercise price of $0.14. (the “$0.07 Unit Offering”). The offer and sale of the Units, without registration under the Securities Act of 1933, as amended (the “Act”), was made in reliance upon the exemption provided Regulation S and Regulation D promulgated by the Securities and Exchange Commission under the Act.

An additional 13 “accredited investors” under the $0.07 Unit Offering, who subscribed during the period set forth above, submitted their subscription proceeds after February 16, 2018 and, as a result, the Registrant issued an additional 3,928,571 restricted shares through March 13, 2018 and, in connection therewith, the Registrant received additional subscription proceeds of $277,100.

On February 8, 2018 the Company issued 571,429 shares to two accredited investors in respect of $80,000 which was received in 2017 – see note (6).

On March 12, 2018, the Company issued a total of 2,600,000 restricted shares to certain consultants in connection with services rendered during the first quarter of 2018 which shares were valued at $676,000, based on the closing share price on the day prior to the issuance.

On March 20, 2018, the Company issued a total of 1,092,500 restricted shares as follows: (i) 62,500 restricted shares were issued to Guy Shalom, a resident of Israel, in consideration for the exercise of a stock option at an exercise price of $0.01 per share, which options were granted in connection with a services rendered in October 2016; (ii) 300,000 restricted shares were issued to Yair Fudim, a resident of Israel, pursuant to a Services Agreement for serving as the Registrant’s CEO, which shares were valued at $0.01 per share; and (iii) 730,000 restricted shares were issued to Lyons Capital LLC, an accredited investor organized under the laws of the State of Florida, in connection with services under a six-month engagement letter/services agreement (“Engagement Letter”), which shares were valued at $124,100, based on the closing share price on the day prior to the Engagement Letter.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Evaluation of disclosure controls and procedures. As of December 31, 2017, the Company’s chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as of the end of the fiscal year 2017 under the COSO framework.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of those internal controls. As defined by the SEC, internal control over financial reporting is a process designed by our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with U.S. generally accepted accounting principles.

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 has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, we have concluded that our internal control over financial reporting had material weaknesses including lack of sufficient internal accounting personnel in order to ensure complete documentation of complex transactions and adequate financial reporting during the year ended December 31, 2017. Management has identified corrective actions for the weakness and will begin implementation during the second quarter of 2018.

This annual report 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 temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this annual report.

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, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our directors were elected to serve until the next annual meeting of shareholders and until his respective successors will have been elected and will have qualified. The following table sets forth the name, age and position held with respect to our present executive officers and directors:

Name |  | Age |  | Title
Yair Fudim |  | 67 |  | CEO and Chairman
Gadi Levin |  | 44 |  | CFO
Eyal Ben-Ami |  | 41 |  | Director
Alon Dayan |  | 41 |  | Director

Yair Fudim, age 66, Director. On February 15, 2018, the Registrant’s Board of Directors appointed Mr. Yair Fudim, as Chairman of the Board of Directors and Chief Executive Officer of the Registrant. Mr.Fudim previously served as Chairman of the Registrant’s Board of Directors from April 30, 2015 until December 25, 2016. Mr. Fudim was also Chairman and CEO of Peregrine Industries, Inc., a public company (OTCQB: PGID) from July 2013 to August 2017. During the past five years, Mr. Fudim has also served as Chairman of Dolomite Holdings Ltd., a public company organized in Israel and listed on the Tel Aviv Stock Exchange (“TASE”) since February 2013, prior to which he served as Dolomite’s CEO from February 2010 until March 2013. From April 1991 through April 2013, Mr. Fudim served as CEO of Leader Holdings & Investments Ltd (“Leader Holdings”), a public company organized in Israel and listed on the TASE; Mr. Fudim also serves as Chairman of the Board of Leader Capital Markets Ltd., a TASE listed public company organized in Israel and a subsidiary of Leader Holdings. Mr. Fudim holds a B.A. in Economics and an MBA from the Hebrew University of Jerusalem.

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Mr. Gadi Levin, age 44, Chief Financial Officer. On April 18, 2017, the Board of Directors appointed Mr. Levin to serve a CFO of the Registrant. Mr. Levin has over 15 years of experience working with public US, Canadian and multi-jurisdictional public companies. Mr. Levin currently serves as Chief Financial Officer of Briacell Therapeutics Corp (OTCQB: BCTXF, TSX-V: BRIA.V) and Adira Energy Limited (OTCMKTS: ADENF, TSX.V: ADL.V). Previously, Mr. Levin served as Chief Financial Officer of DarioHeath Corp (NASDAQ: DRIO), a mHealth company operating in the field diabetes management. Mr. Levin also served as the Vice President of Finance and Chief Financial Officer for two Israeli investment firms specializing in private equity, hedge funds and real estate. Mr. Levin began his CPA career at the accounting firm, Arthur Andersen, where he worked for nine years, specializing in U.S. listed companies involved in IPO's working with US GAAP and IFRS. Mr. Levin has a Bachelor of Commerce degree in Accounting and Information Systems from the University of the Cape Town, South Africa, and a post graduate diploma in Accounting from the University of South Africa. He received his Chartered Accountant designation in South Africa and has an MBA from Bar Ilan University in Israel.

Eyal Ben-Ami, age 41, Director. On January 19, 2018, the Registrant’s Board of Directors appointed Mr. Eyal Ben-Ami as a member of the Board. From 2008 to the present, Mr. Ben-Ami has served as the Director of Employee Benefits at the IDB Bank of Israel, founded in 1935 and one of Israel’s three largest banks. IDB Bank has more than 260 branches, a staff of approximately 5,700, assets of approximately US$50 billion and international operations with branches in Israel and the United States. From 1993 through 2007, Mr. Ben-Ami was a professional soccer player and a member of Hapoel Tel-Aviv FC, a professional Israeli soccer team, and a member of Israel’s National Soccer Team.

Alon Dayan, age 41, Director: On March 14, 2018, the Registrant appointed Mr. Alon Dayan as a member of the Registrant’s Board of Directors. On January 24, 2018, Mr. Dayan was appointed as CEO of the Registrant’s wholly-owned Israeli subsidiary, Virtual Crypto Technologies Ltd. with responsibilities for the development, production, manufacture and sale of the Subsidiary’s planned ATM for the purchase and sale of crypto currencies. Mr. Dayan’s background includes business and technical experience and success in new technologies.

From July 2014 to the present, Mr. Dayan has served as the CEO and founder of L1 Systems Ltd (www.L1-systems.com), an Israeli based company engaged in the business of providing the public and private sectors with advanced security solutions including: (i) development, production and sale of a new technology for secured wide band cellular communication; (ii) telecommunications and cyber large-scale system integration; (iii) identifying potential business partners and system integration companies for companies in Israel, Latin America, Eastern Europe, and Spain. Since July 2013, Mr. Dayan has served as CEO and was the founder of Polaris Star (www.polaris-sys.com), an Israeli-based company which is engaged in providing advanced cyber security telecommunication for utilities world-wide, including the United States, Israel, India, Japan, Singapore, Italy, Mexico and Brazil.

From 2006 to July 2013, Mr. Dayan served as Regional Director-Sales and Business Development, for Elbit Systems Ltd (NASDAQ: ESLT), an Israeli-based company and a leading manufacturer of electronic defense materials with approximately 5,000 employees.

In 2003, Mr. Dayan received his B.Tech. degree in electronic engineering from Ariel University Israel, which is part of Bar-Ilan University.

We do not compensate our directors. We do not have any standing committees at this time.

Our director, officers or affiliates have not, within the past five years, filed any bankruptcy petition, been convicted in or been the subject of any pending criminal proceedings, or is any such person the subject or any order, judgment or decree involving the violation of any state or federal securities laws.

Section 16(a) Compliance. Section 16(a) of the Securities and Exchange Act of 1934 requires that directors and executive officers, and persons who own beneficially more than ten percent (10%) of the Registrant’s Common Stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission. Copies of all filed reports are required to be furnished to the Registrant pursuant to Section 16(a). Based solely on the reports received by the Registrant and on written representations from reporting persons, the Registrant was informed that our CEO, CFO and directors have not filed reports as required under Section 16(a).

NASDAQ Rule 4200. The NASDAQ Rule 4200, which sets forth several tests to determine whether a director of a listed company is independent. Rule 4200 provides that a director would not be considered independent if the director or an immediate family member accepted any compensation from the listed company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the determination of independence (excluding compensation for board or board committee service, compensation paid to an immediate family member as a non-executive employee, benefits paid under a tax-qualified retirement plan and non-discretionary compensation).

Director Independence. In determining whether or not our directors are considered independent, the Company used the definition of independence as defined in NASDAQ Rule 4200. We therefore believe that only Eyal Ben-Ami and Alon Dayan are deemed to be independent directors.

Directors’ Term of Office. Our directors are elected to serve until the next annual meeting of shareholders and until their respective successors will have been elected and will have qualified.

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Audit Committee and Financial Expert, Compensation Committee, Nominations Committee. We do not have any of the above mentioned standing committees because our corporate financial affairs and corporate governance are simple in nature at this stage of development and each financial transaction is approved by our sole officer or director.

Potential Conflicts of Interest. Since we do not have an audit or compensation committee comprised of independent Directors, the functions that would have been performed by such committees are performed by our Board of Directors. Thus, there is a potential conflict of interest in that our Directors have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our Executives or Directors.

Board’s Role in Risk Oversight. The Board assesses on an ongoing basis the risks faced by the Company. These risks include financial, technological, competitive, and operational risks. In addition, since the Company does not have an Audit Committee, the Board is also responsible for the assessment and oversight of the Company’s financial risk exposures.

Involvement in Certain Legal Proceedings. We are not aware of any material legal proceedings that have occurred within the past ten years concerning any Director or control person which involved a criminal conviction, a pending criminal proceeding, a pending or concluded administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations.

ITEM 11. EXECUTIVE COMPENSATION

Any compensation received by our officers, directors, and management personnel will be determined from time to time by our Board of Directors. Our officers, directors, and management personnel will be reimbursed for any out-of-pocket expenses incurred on our behalf.

For the three fiscal years ended December 31, 2017, 2016 and 2015, we did not pay any compensation to our executive officers, nor did any other person receive a total annual salary and bonus exceeding $100,000.

New Service Agreements

Subsequent to the Registrant’s year-ended December 31, 2017, the Registrant entered into separate service agreements with Yair Fudim, CEO and Chairman, Gadi Levin, CFO and Eyal Ben-Ami, a Director, respectively. The Registrant’s service agreements provide as follows: (i) the agreement with Yair Fudim for serving as CEO provides for monthly cash compensation of $2,500, payable quarterly of the first day of each fiscal quarter, and the issuance of 300,000 restricted shares of the Registrant’s common stock which shares do not vest and are not deemed fully-earned until 12 months from the February 2018 date of his agreement; (ii) the agreement with Gadi Levin for serving as CFO of the Registrant and its new Israeli subsidiary provides for monthly cash compensation of $7,500; and (iii) the agreement with Eyal Ben-Ami for serving as a Director provides for the payment of monthly cash compensation of $1,250, payable quarterly on the first day of each fiscal quarter.

Director’s Compensation

Other than with respect to the service agreement with Mr. Ben-Ami, a director referenced above, our directors are not entitled to receive compensation for service rendered to us or for meeting(s) attended except for reimbursement of out-of-pocket expenses. There is no formal or informal arrangements or agreements to compensate employee directors for service provided as a director; however, compensation for new non-employee directors is determined on an ad hoc basis by the existing members of the board of directors at the time a director is elected.

Compensation Policies and Practices as They Relate to the Company’s Risk Management

We believe that our compensation policies and practices for all employees, including executive officers, do not create risks that are reasonably likely to have a material adverse effect on us.

Employment Contracts

We do not have any formal employment agreement with any of our officers. Any future compensation will be determined by the Board of Directors, and, as appropriate, an employment agreement will be executed. We do not currently have plans to pay any compensation until such time as the Company maintains a positive cash flow.

Outstanding Equity Awards

There were no equity awards outstanding as of the end the year ended December 31, 2017.

Option Grants

During the year ended December 31, 2017, the Board of Directors did not authorize the issuance of stock options to executive officers and directors to purchase shares of common stock.

Aggregated Option Exercises and Fiscal Year-End Option Value

There were no stock options exercised during the year ending December 31, 2017 by our executive officers.

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Long-Term Incentive Plan (“LTIP”) Awards

There were no awards made to a named executive officers in the last completed fiscal year under any LTIP.

Indebtedness of Management

No officer, director or security holder known to us to own of record or beneficially more than 5% of our Common Stock or any member of the immediate family or sharing the household (other than a tenant or employee) of any of the foregoing persons is indebted to us in the years 2017 and 2016.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table depicts the beneficial ownership of our common stock as of April __, 2018. The information provides the ownership information for: each person known by us to be the beneficial owner of more than 5% of our common stock; each of our directors; each of our executive officers; and our executive officers and directors as a group.

Name of Beneficial Owner |  | Common Stock Beneficially Owned (1) |  |  | Percentage of Common Stock Owned (1) |
Yair Fudim, CEO and Chairman |  |  | 300,000 |  |  |  | 0.51 | %
Khilat Zitomir |  |  |  |  |  |  |  |
6 Tel-Aviv, Israel |  |  |  |  |  |  |  |
Gadi Levin, CFO |  |  | 0 |  |  |  | 0.00 | %
Moshav Azriel 108 |  |  |  |  |  |  |  |
Lev Hasharon, Israel |  |  |  |  |  |  |  |
Eyal Ben-Ami, Director |  |  | 0 |  |  |  | 0.00 | %
22 Ma’agal Shalom Street |  |  |  |  |  |  |  |
Rishon Lezion, Israel |  |  |  |  |  |  |  |
Alon Dayan, Director |  |  | 0 |  |  |  | 0.00 | %
Shir Hashirim 39 |  |  |  |  |  |  |  |
Elakana, Israel |  |  |  |  |  |  |  |
Tamarid Ltd. |  |  | 3,064,657 |  |  |  | 5.18 | %
2 Kaufman Street |  |  |  |  |  |  |  |
Tel Aviv, Israel |  |  |  |  |  |  |  |
Universal Link Ltd. |  |  | 5,320,545 |  |  |  | 8.99 | %
1 Hapardes Street |  |  |  |  |  |  |  |
Ein Vered, Israel |  |  |  |  |  |  |  |
Officers and Directors as a Group (4 persons) |  |  | 300,000 |  |  |  | 0.51 | %

(1) Applicable percentage ownership is based on 59,206,415 shares of common stock outstanding as of April __, 2018. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of April __, 2018 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORS INDEPENDENCE

Certain Related Party Transactions

Indebtedness of Management

No officer, director or security holder known to us to own of record or beneficially more than 5% of our Common Stock or any member of the immediate family or sharing the household (other than a tenant or employee) of any of the foregoing persons is indebted to us in the years 2017 and 2016.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Independent Public Accountants

The Registrant’s Board of Directors has appointed Brightman Almagor Zohar & Co as independent public accountant for the fiscal years ended December 31, 2017 and 2016.

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Principal Accounting Fees

The following table presents the fees for professional audit services rendered by Brightman Almagor Zohar & Co. for the audit of the Registrant’s annual financial statements for the year ended December 31, 2017 and 2016 and fees billed for other services rendered by Brightman Almagor Zohar & Co. during those periods.

|  | Year Ended |  |  | Year Ended |
|  | December 31, 2017 |  |  | December 31, 2016 |
Audit fees (1) |  | $ | 43,000 |  |  | $ | 15,000 |
Audit-related fees (2) |  |  | — |  |  |  | — |
Tax fees (3) |  |  | — |  |  |  | — |
All other fees |  |  | — |  |  |  | — |

(1) | Audit fees consist of audit and review services, consents and review of documents filed with the SEC.
(2) | Audit-related fees consist of assistance and discussion concerning financial accounting and reporting standards and other accounting issues.
(3) | Tax fees consist of preparation of federal and state tax returns, review of quarterly estimated tax payments, and consultation concerning tax compliance issues.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as exhibits to this report on Form 10-K or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.

Exhibit No. |  | Description
31.1 |  | Certification of CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 |  | Certification of CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 |  | Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 |  | Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1 |  | 2017 Stock Incentive Plan, filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.

VIRTUAL CRYPTO TECHNOLOGIES, INC.

By: | /s/ Yair Fudim |
| Yair Fudim, Chief Executive Officer |
| (Principal Executive Officer) |
Date: April 17, 2018 |
By: | /s/ Gadi Levin |
| Gadi Levin, Chief Financial Officer |
| (Principal Financial and Principal Accounting Officer) |
Date: April 17, 2018 |

Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: | /s/ Yair Fudim |
| Yair Fudim, Chairman |
Date: April 17, 2018 |

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