QUANTUM X LABS INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS Special Note Regarding Forward-Looking Statements The following management’s discussion and analysis section should be read in conjunction with the Company’s unaudited financial statements as of March 31, 2024 and 2023, and the related statements of statement operation, statement of changes in shareholders’ equity and statements of cash flows for the nine and three months then ended, and the related notes thereto contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”). Forward-Looking Statements This management discussion and analysis section contains forward-looking statements, such as statements of the Company’s plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions “will,” “may,” “could,” “should,” etc., or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: ● the continued demand of digital advertising as an integral part of corporate marketing and internal communications plans and the continued growth and acceptance of digital advertising as effective alternatives to traditional offline marketing products and service; ● our ability to retain and attract a programmatic advertiser, and the associated payments received from such programmatic advertisers’ ads on websites which have been categorized as “Made for Advertising”; ● our ability to generate enough cash flow to meet our debt obligations or fund our other liquidity needs, and substantial doubt regarding our ability to continue as a going concern; ● our need to raise additional capital to meet our business requirements in the future and such capital raising may be costly or difficult to obtain and could dilute out shareholders’ ownership interests; ● our ability to receive credit facility to fund our operations, at favorable terms, or at all; ● our ability to pay our obligations when they become due, including the contemplated debt restructuring program currently under negotiation with our credit and debtholders; ● our subsidiaries’ future performance, including our ability to instill potential measures to assist Cortex and Gix Media in mitigating future economic harm; ● entry of new competitors and products, the impact of large and established internet and technology companies and potential technological obsolescence of our offered platforms; and ● political, economic and military conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and elsewhere in the region and Israel’s war against them, as well as the war’s potential impact on our business and operation - 23 - The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with which may cause our actual results to differ from those anticipated in our forward-looking statements. For a discussion of these and other risks that relate to our business and investing in our common stock, you should carefully review the risks and uncertainties described in this Quarterly Report on Form 10-Q, and those contained in section captioned “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 25, 2024 (the “Annual Report”). The Company’s actual results could differ materially from those contemplated in these forward-looking statements as a result of these factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report. Overview and background Viewbix Inc. (the “Registrant”, “Viewbix” or the “Company”) is a digital advertising platform that develops and markets a variety of technological platforms that automate, optimize and monetize digital online campaigns. Viewbix’s operations were previously focused on analysis of the video marketing performance of its clients as well as the effectiveness of their messaging (“Video Advertising Platform”). With the Video Advertising Platform, Viewbix allowed its clients with digital video properties the ability to use its platforms in a way that allows viewers to engage and interact with the video. The Video Advertising Platform measures when a viewer performs a specific action while watching a video and collects and reports the results to the client. However, due to the Company’s failure to meet predetermined sales targets which were set pursuant to the recapitalization transaction with Gix Internet Ltd., in January 2020, the Company determined to reduce its operations and the size of its sales and R&D team in the Digital Advertising Platform. The Company, through its subsidiaries Gix Media and Cortex, expanded its digital advertising operations across two additional main sectors: ad search and digital content (the “Search Platform” and the “Content Platform”, respectively”). Gix Media and Cortex develop and market a variety of technological software solutions that automate, optimize and monetize online campaigns. Cortex also creates, edits and markets content in various languages to different target audiences in order to generate revenues from advertisements displayed together with the content, which are posted on digital content, marketing and advertising platforms. These technological tools enable advertisers and website owners to earn more from their advertising campaigns and generate additional profits from their sites. Through its Search Platform, the Company provides services to leading search engines worldwide (“Search Engines”) by developing, marketing and distributing software products to internet users. The operations and activity on this platform are powered by Gix Media. Through the Content Platform, the Company provides editing and marketing services of content in different languages and to different target audiences with the goal of generating revenues from advertising employed in such content, which is based on digital content marketing and advertising platforms. The operations and activity on this platform are powered by Cortex. Search Platform Gix Media’s Search Platform allows for the referral of user traffic (i.e., searches that are performed by internet users) to Search Engines, such as Yahoo and Bing, where the Search Engines display the ads of their customers. The Search Engines pay Gix Media for the searches that were referred by it, based on the amount of consideration that the Search Engine receives from the advertisers for the user traffic generated, less a certain percentage from the revenues attributed to the Search Engine. Since the customers of Gix Media are the Search Engines, and not the advertisers, Gix Media recognizes revenues for the actual amount received from the Search Engines, and not from the advertisement revenue itself. The referral of user traffic by Gix Media to the Search Engines is possible after users download Gix Media’s products, which are browser add-ons, usually from the browser stores (mostly Google Chrome browsers) and by downloading desktop software products, free of charge, for the Apple operating system (for Mac computers) and for the Microsoft operating system (for PC computers). When downloading Gix Media’s products, the users grant permission to Gix Media to refer the searches performed while using Gix Media’s products to the Search Engines. In addition, Gix Media provides user traffic referral services to Search Engines through the referral of traffic of browsers who engage content generated by Gix Media. This content is displayed on ad spaces that are purchased by the Company by content recommendation companies (such as Yahoo!, Outbrain, Taboola and Gemini). When occasional users click on such content, Gix Media transfers user traffic to a Search Engine which contains search words that are related to the advertising content. - 24 - Content Platform Cortex’s Content Platform produces engaging content and marketing material in various languages to various target audiences, in order to generate revenues from advertisements displayed together with the content, which are posted on digital content, marketing and advertising platforms. Cortex acts as a digital content platform that publishes content written by creative writers and editors which it employs. The content is displayed on several different content websites owned by Cortex, covering various subjects including culture, history, trips, pets, entertainment and leisure, food, etc. (the “Cortex Websites”). Cortex developed capabilities that enable it and its customers to profit from the original content which it publishes by advertising the content on leading international third-party websites and online ad platforms (the “Third Party Platforms”). Readers are exposed to the articles on the Third-Party Platforms and may choose to read them by clicking an ad, after which readers are directed automatically to the Cortex Websites where the content is posted. The technological tools developed by Cortex allow businesses in the digital advertising market (search engines, ad exchanges, advertisers, content owners and brand owners) to earn more from their advertising campaigns and generate additional profit from their websites, both from its content and from its advertising. Advertisers display ads on various platforms for potential customers (internet users and readers). In order to help maximize the effectiveness of advertising, Cortex developed different advertising systems and tools for content management, content distribution and campaigns and measurement of performance on the various platforms that display the content. Recent Developments Cortex Adverse Effect In April 2024, the Company was informed by Cortex, that certain recent developments relating to publishers that are categorized by a number of programmatic advertisers as “Made for Advertising” (“MFA”) sites, including decisions made by leading media programmatic advertisers to prioritize different media categories and implement publishing restrictions in connection with MFA, have materially affected Cortex’s business and operations. In connection with the foregoing, a significant customer of Cortex recently notified Cortex that in light of the foregoing changes relating to MFA that customer decided to stop advertising on Cortex’s Websites, which decision Cortex anticipates will significantly and negatively impact its future revenue streams (the “Cortex Adverse Effect”). Upon receipt of this update, the Company’s board of directors convened a meeting to discuss the implications on the Company as well as potential measures to assist Cortex in mitigating any future economic harm to Cortex and the Company, including (inter alia), assisting with reducing operating expenses, helping identify new revenues sources for Cortex, participating in any negotiations with Cortex’s and Gix Media’s bank regarding the terms of its outstanding loans and business plans in an effort to provide additional liquidity and ensure continued compliance with Cortex’s and Gix Media’s obligations towards the bank, and assisting with fundraising prospects in debt or equity capital in order to help enable Cortex’s and Gix Media’s continued business and operations. Following the Cortex Adverse Effect, the Company updated Cortex’s and Gix Media’s bank, in which Cortex’s and Gix Media’s accounts, credit facilities, and loans rendered by the bank are maintained, and, as a result, the bank determined to limit each company’s respective credit facilities with the bank until a debt restructuring program can be established between the parties. On May 20, 2024, the Company and the bank agreed in principle on a debt restructuring program pursuant to which, inter alia : (i) the credit facility to Cortex was increased to 80% of the balance of Cortex’s customers (up to a limit of $2 million), as opposed to the 70% limitation imposed previously; (ii) Gix Media’s monthly revolving credit facilities were increased by an additional $300 thousand; (iii) the Company committed to perform cost-cutting measures, including a reduction in head count; (iv) the Company committed to pursue a capital raise of up to $1.25 million by means of issuance of equity or debt; (v) the covenants under the original loan agreements as of March 31, 2024 were waived; (vi) a new covenant, measured by reference to EBTIDA, was implemented; and (vii) implemented a grace period in relation to a portion of the monthly loan repayments was given (the “Program”). The Program will be in effect until August 2024, after which it will be renegotiated between the Company and the bank. - 25 - Reorganization Transaction with Gix Media Ltd. On December 5, 2021, the Company entered into a certain Agreement and Plan of Merger (the “Reorganization Transaction”) with Gix Media., an Israeli company and the majority-owned subsidiary of Gix Internet, in the field of MarTech (Marketing Technology) solutions, primarily search and content monetization and Vmedia Merger Sub Ltd., an Israeli company and wholly-owned subsidiary of the Company (“Merger Sub”), pursuant to which, following the Reorganization Transaction, and upon satisfaction of additional closing conditions, Merger Sub will merge with and into Gix Media, with Gix Media being the surviving entity and wholly-owned subsidiary of the Company. Prior to the closing of the Reorganization Transaction, Gix Media was a majority-owned subsidiary of Gix Internet, which held approximately 58% of the Common Stock of the Company, on a fully diluted basis. On September 19, 2022, the Reorganization Transaction, was consummated (the “Closing”) and, as a result, all outstanding ordinary shares of Gix Media, having no par value (the “Gix Media Shares”) were exchanged for shares of the Company’s Common Stock such that Gix Media became a wholly owned subsidiary of the Company. Following the Reorganization Transaction, holders of the Gix Media Shares held 90% of the Company’s Common Stock on a fully diluted basis, with Gix Internet holding 76.67% of the Common Stock on a fully diluted basis. The following diagram illustrates the associated corporate structure of the Company prior to and following the Reorganization Transaction. Following the closing of the Reorganization Transaction, the Company began to integrate Gix Media’s technology into its operations aiming to expand its growth potential in the search and content monetization space. Gix Media’s business operations include both (i) the provision of services to the world’s leading search engines through the development, marketing and distribution of free software to many Internet users, and (ii) editing and marketing of content in different languages to different target markets, for the purpose of monetizing advertisements on digital marketing and advertising platforms. In connection with the Closing, effective as of August 31, 2022, the Company adopted an Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”), pursuant to which the Company, among other things, effected a reverse stock split of its Common Stock at a ratio of 1-for-28 (the “Reverse Split”) and an Amended and Restated Bylaws (“Bylaws”). All descriptions of our capital stock, including share amounts and per share amounts in this Quarterly Report, are presented after giving effect to the Reverse Split. Acquisition of Cortex Media Group Ltd. On October 13, 2021, Gix Media acquired 70% (on a fully diluted basis) of the share capital of Cortex (the “Cortex Acquisition”), an Israeli private company operating in the field of online media and advertising. In consideration for the Cortex Acquisition, Gix Media paid NIS 35 million in cash (approximately $11 million), out of which an amount of $0.5 million was deposited in trust for a period of 12 months from the closing date. The Cortex Acquisition also includes the obligation and right of Gix Media to acquire 30% of Cortex’s share capital in three equal tranches, each at the beginning of 2023, 2024 and 2025 (“Remaining Balance Shares”), such that following the acquisition of all of the Remaining Balance Shares, Gix Media will hold 100% of Cortex’s share capital on a fully diluted basis. On January 23, 2023, Gix Media purchased an additional 10% of Cortex’s share capital. In January 2024, Gix Media did not purchase an additional 10% of Cortex’s share capital, as Cortex did not meet certain Key Performance Indicators (KPIs), as conditioned in the definitive agreements of the Cortex Acquisition. - 26 - In connection with the Cortex Acquisition, on October 13, 2021, Gix Media entered into a financing agreement with Bank Leumi Le Israel Ltd (“Leumi”), for the provision of a line of credit in the total amount of up to $3.5 million and a long-term loan totaling $6 million, which Gix Media used to finance the Cortex Acquisition (the “Financing Agreement”). On July 25, 2022, Gix Media and Leumi entered into an addendum to the Financing Agreement according to which Leumi will provide Gix Media with a loan of up to $1,500,000 to be withdrawn at the discretion of Gix Media by no later than January 31, 2023 (the “Additional Loan”). The Additional Loan was withdrawn in connection with the purchase of the additional 10% of Cortex’s share capital on January 17, 2023. On October 10, 2023, Gix Media and Leumi entered into a second addendum to the Financing Agreement (the “Second Addendum”), according to which, effective as of September 26, 2023, certain provisions, including among others, the conditions of the financial covenants contained therein and the interest rate quote, were amended according to the agreed terms between the parties. 2023 Loan Agreement On November 15, 2023, Viewbix Ltd., the Company’s subsidiary (“Viewbix Israel”) entered into a Loan Agreement (the “2023 Loan”) with certain lenders (the “Lenders”) whereby the Lenders provided Viewbix Israel with loans in the aggregate amount of $480,000 (which sum may be increased to up to $1,000,000, at the discretion of the Lenders). In accordance with the terms of the 2023 Loan, the principal amount bears an annual interest at a rate of 9% and shall be repaid over the course of two years following January 1, 2024. In the event that Viewbix Israel fails to repay a part or all of the loan amount (including the accrued interest) and subject to certain conditions, the outstanding loan amount may be converted, at each Lender’s discretion, into shares of the Company’s Common Stock, at a price per share equal to the 30-day average of the closing bid price of the Common Stock, calculated as of such date the respective portion of the outstanding loan amount becomes repayable. In connection with the 2023 Loan, the Company issued to each Lender a warrant to purchase shares of Common Stock (the “2023 Warrants”), such that the number of shares of Common Stock underlying each 2023 Warrant will reflect (one-for-one) the number of dollars provided by each Lender as part of the principal amount. Each 2023 Warrant has an exercise price per share of Common Stock of $0.50 and will expire and cease to be exercisable on December 31, 2025. The 2023 Warrants were issued to the Lenders pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”). Reincorporation in Nevada On September 27, 2023, our stockholders approved to grant to the Board of Directors the power to effect a reincorporation of the Company from the State of Delaware to the State of Nevada by way of a parent-subsidiary merger (the” Reincorporation”). The Reincorporation will be effected pursuant to an Agreement and Plan of Merger to be entered between the Company and Viewbix Inc., a soon to be formed wholly-owned subsidiary under the laws of the State of Nevada (the “Surviving Corporation”), which will provide that the Company, as parent in this transaction, will merge with and into the Surviving Corporation. Upon the consummation of the Reincorporation, the Company will cease its legal existence as a Delaware corporation, and the Surviving Corporation will continue the Company’s business as the surviving corporation under the name “Viewbix Inc.” succeeding to all of the Company’s rights, assets, liabilities and obligations, except that its affairs will cease to be governed by the Delaware General Corporation Law and will be subject to the Nevada Revised Statutes. In addition, as approved by our stockholders, upon completion of the Reincorporation, the Company will adopt an Articles of Incorporation and new bylaws under the Nevada Revised Statues, which will replace its current Certificate of Incorporation and Bylaws. As of the date of this Annual Report, our Board of Directors has not effected the Reincorporation. The Reincorporation remains subject to obtaining approval of a tax ruling from the Israeli Tax Authority. We anticipate the Reincorporation will take effect in the second half of 2024. Corporate Information We were incorporated in the State of Delaware on August 16, 1985, under a predecessor name, The InFerGene Company (“InFerGene Company”). On August 25, 1995, a wholly owned subsidiary of InFerGene Company merged with Zaxis International, Inc., an Ohio corporation, which following such merger, the surviving entity, InFerGene Company, changed its name to Zaxis International, Inc. - 27 - Our principal executive offices are located at 11 Derech Menachem Begin Street, Ramat Gan, Israel, 5268104 and our telephone number is +972 9-774-1505. Our website address is www.viewbix.com . Results of Operations Results of Operations During the Three Months Ended March 31, 2024 as Compared to the Three Months Ended March 31, 2023 Our revenues were $10,002 thousand for the three months ended March 31, 2024, compared to $20,862 thousand during the same period in the prior year. Our revenues from Cortex’s Content Platform were $7,530 thousand for the three months ended March 31, 2024, a decrease of $8,222 as compared to $15,752 thousand during the same period in the prior year. The reason for the decrease during the three months ended March 31, 2024, is due to a decrease of user traffic acquisition from Third-Party Platforms causing a lower amount of users to reach the Cortex Websites and thus decreasing the exposures to the ads displayed on the Cortex Websites, and an industry-wide decrease in advertising budget. Our revenues from Gix Media’s Search Platform were $2,472 thousand for the three months ended March 31, 2024, a decrease of $2,638 as compared to $5,110 thousand during the same period in the prior year. The reasons for the decrease during the three months ended March 31, 2024, is due to the decrease in the amount of search referrals conducted by users, provided by Gix Media to search engines, caused primarily by changes and updates to internet browsers’ technology, which have caused a decrease in revenues from the direct model and a decrease in the number of searches received from Gix Media’s third-party strategic partners in the indirect model. Our traffic-acquisition and related costs were $8,215 thousand for the three months ended March 31, 2024, as compared to $17,981 thousand during the same period in the prior year. The decrease of $9,766 thousand is due to the decrease in revenues from both the Content and Search Platforms during the three months ended March 31, 2024 as mentioned above. Our research and development expenses were $730 thousand for the three months ended March 31, 2024, a slight decrease as compared to $796 thousand during the same period in the prior year. Our selling and marketing expenses decreased to $658 thousand for the three months ended March 31, 2024, as compared to $723 thousand during the same period in the prior year. The reason for the decrease in the three months ended March 31, 2024, is due to the decrease of the costs incurred in the content platform mainly connected with content displayed on the Cortex Websites. Our general and administrative expenses were $656 thousand for the three months ended March 31, 2024, a slight decrease as compared to $704 thousand during the same period in the prior year. Our depreciation and amortization expenses were $734 for the three months ended March 31, 2024, and for the same period in the prior year. Our other expenses for the three months ended March 31, 2024, were $20 thousand, compared to $0 thousand during the three months ended March 31, 2023. The reason for the increase in the three months ended March 31, 2024, is due to costs incurred in connection with the reincorporation in Nevada. Our net financial expenses were $163 thousand for the three months ended March 31, 2024, a slight decrease as compared to $185 thousand net financial expenses during the same period in the prior year. Our tax expenses were $1 thousand for the three months ended March 31, 2024, as compared to $84 thousand income tax during the same period in the prior year. The reason for the decrease during the three months ended March 31, 2024, is due to the decrease in income before tax. - 28 - Liquidity and Capital Resources As of March 31, 2024, we had current assets of $12,805 thousand consisting of $1,284 thousand in cash and cash equivalents, $86 thousand restricted deposits, $7,004 thousand in accounts receivable, $623 thousand in other current assets and $3,808 thousand in loan to our Parent Company. As of March 31, 2024, we had non-current assets of $24,717 thousand consisting of $144 thousand in deferred taxes, $374 thousand in operating lease right-of-use asset, $230 thousand in property and equipment net, $11,715 thousand in intangible assets, net and $12,254 thousand in goodwill. As of March 31, 2024, we had $15,900 thousand in current liabilities consisting of $8,407 thousand in accounts payable, $988 thousand in other payables, $6,422 thousand in short term loans and current maturities of long-term loans, $83 thousand in operating lease liabilities – short term. As of March 31, 2024, we had $4,155 thousand in non-current liabilities consisting of $2,441 thousand long-term loans, $281 thousand in operating lease liabilities - long term and $1,433 thousand in deferred taxes. As of December 31, 2023, we had current assets of $17,805 thousand consisting of $1,774 thousand in cash and cash equivalents, $149 thousand in restricted deposits, $11,359 thousand in accounts receivable, $771 thousand in other current assets and $3,752 thousand in the loan to our Parent Company. As of December 31, 2023, we had non-current assets of $25,477 thousand consisting of $147 thousand in deferred taxes, $397 thousand in operating lease right-of-use assets, $245 thousand in property and equipment net, $12,434 thousand in intangible assets net and $12,254 thousand in goodwill. As of December 31, 2023, we had $19,773 thousand in current liabilities consisting of $12,359 thousand in accounts payable, $889 thousand in other payables, $6,440 thousand in short term loans and current maturities of a long-term loans and $85 thousand in operating lease liabilities. As of December 31, 2023, we had $4,885 thousand in non-current liabilities consisting of $3,064 thousand long-term loans, $304 thousand in operating lease liabilities - long term and $1,517 thousand in deferred taxes. We had a negative working capital of $5,220 thousand compared to a negative working capital of $1,968 thousand as of March 31, 2024 and December 31, 2023, respectively. During the three months ended March 31, 2024, we had positive cash flow from operating activities of $107 thousand, which was the result of $1,175 thousand in net loss, $648 thousand from positive adjustments to operating activities, and $634 thousands from positive changes in assets and liabilities items. During the three months ended March 31, 2023, we had positive cash flow from operating activities of $12 thousand, which was the result of $345 thousand in net loss, $679 thousand from positive adjustments to operating activities, and $322 thousands from negative changes in assets and liabilities items. There are no limitations in the Company’s Amended and Restated Certificate of Incorporation on the Company’s ability to borrow funds or raise funds through the issuance of shares of its common stock to affect a business combination. Gix Media has provided several liens under the Financing Agreement with Leumi in connection with the Cortex Transaction, including: (1) a floating lien on Gix Media’s assets; (2) a lien on Gix Media’s bank account in Leumi; (3) a lien on Gix Media’s rights under the Cortex Transaction; (4) a fixed lien on Gix Media’s intellectual property; and (5) a lien on all of Gix Media’s holdings in Cortex. As of March 31, 2024, the Company has also provided several liens under Financing Agreement with Leumi in connection with the Cortex Acquisition, as follows: (1) a guarantee to Bank Leumi of all of Gix Media’s obligations and undertakings to Bank Leumi, unlimited in amount; (2) a subordination letter on behalf of the Company to Leumi Bank; (3) a first ranking asset charge over all of the assets of the Company; and (4) a Deposit Account Control Agreement over the Company’s bank accounts. - 29 - As of March 31, 2024, the Company is party to the 2023 Loan, which is in the aggregate amount of $480,000. In accordance with the terms of the 2023 Loan, the principal amount bears an annual interest at a rate of 9% and shall be repaid over the course of two years following January 1, 2024. In the event that Viewbix Israel fails to repay a part or all of the loan amount (including the accrued interest) and subject to certain conditions, the outstanding loan amount may be converted, at each Lender’s discretion, into shares of the Company’s Common Stock. Going Concern The Company experienced the Cortex Adverse Effect, a decrease in its revenues from the digital content and search segments as a result of a decrease in user traffic acquired from third party advertising platforms, an industry-wide decrease in advertising budget, changes and updates to internet browsers’ technology, and other changes in the online advertising industry. As a result of the foregoing, the Company’s operations were adversely affected. While Cortex have successfully taken steps to implement certain adjustments to the business model in response to the Cortex Adverse Effect, the decline in revenues and other circumstances described above raise substantial doubts about the Company’s ability to continue as a going concern during the 12-month period following the issuance date of these Quarterly Report. Management’s plans in response to these conditions include reducing operating expenses, creating new income sources, seeking additional liquidity opportunities to ensure the Company’s continued operations and raising funds through issuance of debt or equity from various potential investors. However, there is significant uncertainty as to whether the Company will succeed in implementing its plans, or be able to secure sufficient funds when needed. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for smaller reporting companies.