The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the fair market value of the Company’s shares of common stock on March 31,September 30, 2018 and December 31, 2017, 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 March 31,September 30, 2018, and December 31, 2017, have been separated into exercise prices, as follows:

Compensation expense recorded by the Company in respect of its stock-based employee compensation awards in accordance with ASC 718-10 was nil for each of the three month periodthree- and nine -month periods ended March 31,September 30, 2018 (and for three- and nine -month periods ended September 30, 2017, was nil$58,650 and $58,650, respectively.$117,301, respectively).

Note 5. Related Party Transactions.

Other than transactions and balances related to cash and share based compensation to the Company’s officers and directors, the issuances of convertible debt and warrants to Alpha Capital Ansalt and as otherwise set forth herein, the Company did not have any transactions and balances with related parties and executive officers during the threenine months ended March 31,September 30, 2018 and 2017.

As a result of the issuance of the Notes (see Note 2) and the acquisition by the New Investors of certain convertible notes (see Note 2), certain New Investors may hold convertible notes allowing them to convert the notes in excess of 5% of the Company’s issued and outstanding shares of common stock. Accordingly, such New Investors may be deemed to be related parties under Item 404(a) of Regulation S-K. In addition, certain New Investors receive fees for consulting services provided to the Company, none of which were incurred during the first quarter ended March 31, 2018.

Note 6. Discontinued Operations.

On January 29, 2018, the Company ceased the DermaCompare operations of its former subsidiary, Emerald Israel, and on May 2, 2018, the District Court of Lod, gaveIsrael (the “District Court”) issued a winding-up order for Emerald Israel and nominated an Israeli advocate (attorney) as a special executor to Emerald Israel. To the extent that the liquidation procedure yield proceeds in excess of Emerald Israel’s current obligations, the first $250,000 will be distributed to the previous shareholders of the Company’s preferred stock (see Note 3. Notes Payable) and any excess thereafter, to the Company. However, based on the Company’s current best estimate, it is not anticipated that such excess proceeds will be achieved.

As such, financial results of Emerald Israel are presented as net loss from discontinued operations on the Consolidated Statements of Comprehensive Loss for the three monthsand nine-month periods ended March 31,September 30, 2018 and 2017; and assets and liabilities of Emerald Israel to be disposed of are presented as Assets held for sale and Liabilities held for sale on the Consolidated Balance Sheet as of March 31, 2018.

Note 7. Subsequent Events.

On April 20, 2018, the Company issued 700,000 shares of its common stock to two former directors in respect of services provided by during the second quarter ended JuneSeptember 30, 2018.

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,September 30, 2018 and 2017, and the relatedstatements of operations and comprehensiveloss, statement of changes in stockholders’ equity (deficit)deficit and statements of cash flows for the three monthsand nine month periods then ended, and the related notes thereto contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”). This management’s 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. These factors include those contained in section captioned “Risk“Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 17, 2018 (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.

Business Overview

On January 17, 2018, the Company formed a new wholly ownedwholly-owned subsidiary under the laws of the State of Israel, Virtual Crypto Technologies Ltd. (the “Subsidiary”“Virtual Crypto Israel”), to develop and market software and hardware products facilitating, allowing and supporting purchase and/or sale of cryptocurrencies through ATMs, tablets, personal computers (“PCs”) and/or mobile devices. On January 29, 2018, the Company ceased the DermaCompare operations of its former subsidiary, Emerald Israel, and on May 2, 2018, the District Court of Lod gave a winding-up order for Emerald Israel and nominated an Israeli advocate as a special executor to Emerald Israel.

In March 2018, the Company changed its name from “Emerald Medical Applications Corp.” to “Virtual Crypto Technologies, Inc.” to reflect its new operations and business focus, and the Company’s trading symbol changed from MRLA“MRLA” to VRCP“VRCP”. The Company’s shares are now quoted on the OTCQB.OTCQB under the symbol “VRCP”.

Plan of Operations and Recent Developments

The following plan of operation provides information which management believes is relevant to an assessment and understanding of the Company’s results of operations and financial condition. The discussion should be read along with the Company’s financial statements and notes thereto included elsewhere in this Quarterly Report.

On January 17, 2018, the Company formed Virtual Crypto Technologies Ltd.Israel 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 effective June 30, 2018. 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, personal computers (“PCs”) and/or mobile devices (the “Products”).

In March 2018, the Company changed its name from “Emerald Medical Applications Corp.” to “Virtual Crypto Technologies, Inc.” to reflect its new operations and business focus, and the Company’s trading symbol changed from MRLA to VRCP on the OTCQB.

The Company, through its fully owned Israeli subsidiary Virtual Crypto Israel, has developed the NetoBit Trader, a proprietary, Cryptographic algorithmic technology that it is able to confirm in real-time the purchase or sale of any cryptocurrency. The Company’s NetoBit products dramatically improve the cryptocurrency trading experience with faster execution and lower costs, setting a new time to transaction standard, trading in seconds rather the industry norm of 20 minutes. Because of its speed, the Company’s customers enjoy the best crypto exchange rate at the point of transaction. The Company is marketing its NetoBit Trader software and hardware products for the purchase and sale of cryptocurrencies through ATMs, tablets, PCs and/or mobile devices (collectively, the “VC Products”). The Company further believes that the ability to immediately confirm cryptocurrency transactions in real-time should be a major competitive breakthrough in making the purchase and sale of cryptocurrencies user friendly.

The Company filed with the SEC a Current Report on Form 8-K on January 24, 2018, reporting that through Virtual Crypto Israel subsidiary, 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 (i) Virtual Crypto Israel, shall appoint a wholly-owned subsidiary of Chiron, 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 to Virtual Crypto Israel 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 the Company’s Products.

The Company further granted such 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 Virtual Crypto Israel an appointment fee not higher than $250,000.To$250,000. To date, $50,000$100,000 has been paid by such distributor to Virtual Crypto Israel.

The appointment of such distributor is subject to the payment by the distributor to Virtual Crypto Israel of US$250,000 (the “Appointment Fee”). An amountan appointment fee of $150,000$250,000, of the total Appointment Feewhich $150,000 shall be deemed an advance payment by the Distributor, made on account of future purchases of the Company’s Products and related services.

As a result of the foregoing, the disclosure under “ResultsCompany’s results of Operations Duringoperations discussed below for the Three Months Ended March 31,three and nine months ended September 30, 2018, As Comparedas compared to the Three Months Ended March 31, 2017” isthree and nine months ended September 30, 2017 are not comparable and should not be relied upon in evaluating or understanding the Company.Company or its results of operations for the fiscal year ending December 31, 2018. Reference is made to the disclosure under “Note 11. Subsequent Events” included inof the Company’s Annual.financial statements filed as part of the Annual Report.

Results of Operations Duringoperations during the Three Months Ended March 31,three months ended September 30, 2018, As Comparedas compared to the Three Months Ended March 31,three months ended September 30, 2017

Our research and development expenses were $54,011$107,971 for the three months ended March 31,September 30, 2018, as compared to nil during the same period in the prior year. The increase was due to research and development expenses inincurred as a result of the development for our virtual crypto products.

Our general and administrative expenses increased to $1,064,283$175,735 for the three months ended March 31, 2017September 30, 2018, as compared to $68,650$30,885 during the same period in the prior year.

Interest expense increased to $259,866 for the three months ended September 30, 2018, as compared to $75,000 income during the same period in the prior year. The expense in 2018 was primarily as a result of the changes in the terms of the convertible loans that took place in 2018. In 2017, The income was due to a recalculation of the penalties and liquidation damages calculated in the Settlement Agreement between the Company that Alpha and Chi Squared.

Results of operations during the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017

Our research and development expenses were $738,936 for the nine months ended September 30, 2018, as compared to nil during the same period in the prior year. The increase was due to research and development expenses incurred as a result of the development for our virtual crypto products.

Our general and administrative expenses increased to $1,596,533 for the nine months ended September 30, 2018, as compared to $583,911 during the same period in the prior year. The significant increase was due to non-cash consulting expenses paid by way ofvia the issuances of the Company’s sharescommon stock and warrants to certain consultants who assisted in the establishment of theour new business.business operations.

Interest expense increased to $19,374,082$22,249,708 for the threenine months ended March 31,September 30, 2018, as compared $198,450$240,354 during the same period in the prior year. The significant increase during the period in 2018 was primarily as a result of the changes of the terms of certain convertible notes that occurred during the threenine months ended March 31,September 30, 2018.

Financing Activities During the Three-Month Period Ended March 31, 2018

Issuance of equity during the three-monthnine-month period ended MarchSeptember 31, 2018

During the first quarter of 2018, the Company received the aggregate amount of $1,673,800$1,940,950 from certain “accredited investors” in consideration for the issuance of 23,876,42727,697,855 of the Company’s units (the “Units”), at an offering price of $0.07 per Unit, withdefined as the “$0.07 Unit Offering” discussed above, each Unit consisting of: (i) one share of the Company’s common stock (the “Shares”);Share; (ii) one common stock purchase warrantClass F Warrant exercisable for a period of twelve months to purchase one additional Share at an exercise price of $0.14 per share (“Class F Warrant”);Share; and (iii) one common stock purchase warrantClass G Warrant exercisable for a period of twelve months to purchase one additional Share at an exercise price of $0.28 per share (“Class G Warrant”) (the “$0.07 Unit Offering”).Share. The offer and sale of thethese Units, without registration under the Securities Act of 1933, as amended (the “Act”), was made in reliance upon the exemption provided by Section 4(2) of the Act and/or Regulation S and Regulation D promulgated thereunder.

In addition, during March 2018, an additional $117,150 was received from other “accredited investors” under the $0.07 Unit Offering, who subscribed from 571,429 Units, which were issued in April 2018 and are reflected as Receipt on Account of Shares in the Statement of Changes in Stockholders’ Equity as of March 31, 2018.

On February 8, 2018, in connection with the August 2017 Unit Offering discussed above, the Company issued 571,429 units of the Company’s securities to two accredited investors in respectfor consideration of $80,000 which was received in August 2017 (“2017. Each Unit in the August 2017 Financing”). Each unit was comprised ofUnit financing consisted of: (i) one share of the Company’s common stock;Share; (ii) one Class A warrantWarrant exercisable intofor twelve months to purchase one share of the Company’s common stock,additional Share at a price of $0.14 per share, within 12 months for the issuance date;Share; and (iii) one Class B warrantWarrant exercisable intofor twenty-four months to purchase one share of the Company’s common stock,additional Share at a price of $0.14 per share, within 24 months for the issuance date.Share.

On March 12, 2018, the Company issued a total of 3,629,999 restricted sharesShares to certain consultants in connection withconsideration for services rendered during the first quarter of 2018, which sharesShares were valued at $901,902,$892,300, based on the closing share price on the day prior to eachthe date of the issuances.issuance. The above-mentioned amount was recorded as a charge to the Company’s Statement of Comprehensive Loss, with a corresponding credit to Additional Paid in Capital in the Company’s Statement of Changes in Stockholders’ Equity.

On March 20, 2018, the Company issued a total of 62,500 restricted shares of its common stock in consideration forShares pursuant to the exercise of a stock option at an exercise price of $0.01 per share,Share, which option was granted in connection of certain services rendered in October 2016.

In March 2018, the Company issued a total of 921,800 shares of its common stockShares in respect ofconnection with the conversion of $9,218 of the January 2018 Convertible Notes.

On April 20, 2018, the Company issued a total of 700,000 restricted Shares to certain consultants in connection with services rendered during the second quarter of 2018, which Shares were valued at $112,000, based on the closing share price on the day prior to the date of issuance. The above-mentioned amount was recorded as a charge to the Company’s Statements of Operations and Comprehensive Loss, with a corresponding credit to Additional Paid in Capital in the Company’s Statement of Changes in Stockholders’ Deficit.

Issuance of new convertible notes during the three-monthnine -month period ended March 31,September 30, 2018

From January 16,201816, 2018 through January 23, 2018, the Company received an aggregate amount of $100,000 as consideration for the issuance of the Company’s convertible promissory notesJanuary 2018 Convertible Notes discussed above, with an aggregate principal amount of $100,000 (the “Notes”)$100,000. The January 2018 Convertible Notes: (i) bearingbear interest at the rate of 1% per annum; (ii) withhave a conversion price of $0.01 per share of the Company’s common stock;Share; and (iii) repayable through toare due on January 15, 2019. 3,000To date, $3,000 of the January 2018 Convertible Notes werewas converted at a conversion price of $0.01 per share into 300,000 shares.Shares.

Liquidity and Capital Resources

Our balance sheet asAs of March 31,September 30, 2018, reflectswe had current assets of $1,478,498$834,354, consisting of cash of $1,449,795$724,107, other receivables of $68,114 and assets held for sale in respectshort term investment of our discontinued operations of $28,703.$42,133. We also have $921,270in$1,406,224 in current liabilities consisting of $206,304$34,866 in accounts payable and accrued liabilities, $50,000$100,000 of deferred revenues, $16,667$101,396 employee payable, $1,922 in accrued interest, short-term portion of convertible notes of $186,412$683,917 and liabilities held of sale in respect of our discontinued operations of $459,965.$486,045. As of December 31, 2017, we had current assets of $15,181 consisting of $2,959 in cash and other receivables of $12,222. As of December 31, 2017, we had fixed assets, net of $14,290, $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.

We had negative working capital of $557,228as$571,870 as of March 31,September 30, 2018, as compared to negative working capital of $996,760 at December 31, 2017. Our total liabilities as of March 31,September 30, 2018 were $921,270,$1,406,224, as compared to $1,618,106 at December 31, 2017.

During the period ended March 31,September 30, 2018, we had negative cash flow from continuing operations of $345,449,$1,319,865, which was the result of a net loss of $20,802,376,$24,585,177, depreciation expense of $14,290, increase in accrued interest and amortization of discount on convertible notes of $20,165,406 and $892,300shares$769,134, increase in provision for settlements of convertible loan of $21,472,897, $1,044,144 worth of shares and warrants issued for services, $50,000 in proceeds from deferred revenues, and loss from short term investment of $7,867, offset by net changesdecrease in working capital of $600,799.$93,020.

During the threenine months ended March 31,September 30, 2018, we had no cash flow effect from investing activities.

During the period ended March 31,September 30, 2018, we had positive cash flow from financing activities of $1,792,185,$2,041,013, which was the result of $1,574,972 proceeds of $1,940,950 received from sale of common stock and related warrants (net of issuance of equity, $117,150 of receipt on account of shares,expenses), $100,000 received from the issuance of short-term convertible notes, and $63 forfrom the eserviceexercise of options. Based on the receipt of these funds, we believe we have adequate capital to operate pursuant to our business plan through June 2019.

There are no limitations in the Company’s Certificate of Incorporation on the Company’s ability to borrow funds or raise funds through the issuance of shares of its common stock to affect a business combination.combination, subject to the maximum number of shares of the Company’s common stock authorized under the Company’s Certificate of Incorporation. The Company’s limited resources and lack of having cash-generating business operations may make it difficult to borrow funds or raise capital. The Company’s limitations to borrow funds or raise funds through the issuance of restricted capital stock required to effect or facilitate a business combination may have a material adverse effect on the Company’s financial condition and future prospects, including the ability to complete a business combination.

Until such time as the Company can generate substantial revenues, the Company expects to finance its cash needs through a combination of the sale of its equity and/or convertible debt securities, debt financing and strategic alliances and collaborations. The Company does not have any committed external source of funds. To the extent that the Company raises additional capital through the sale of its equity and/or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. To the extent that debt financing ultimately proves to be available, any borrowing will subject us to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest, including debt of an acquired business. If the Company raises funds through additional collaborations or strategic alliances with third parties, we may have to relinquish valuable rights to our future revenue streams and/or distribution arrangements. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. If the Company is unable to raise additional funds through equity and/or debt financings when needed or on attractive terms, the Company may be required to delay, limit, reduce or terminate the operations of some or all of its business segments.operations.

The Company has only limited capital. Additional financing is necessary for the Company to continue as a going concern. The Company’s independent auditors haveregistered public accounting firm issued its unqualified audit opinion for the periodfiscal year ended December 31, 2017 with an explanatory paragraph on going concern.

In view of these matters, realization of a major portion of the Company’s 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31,September 30, 2018, the Company’s Chief Executive Officer and Chief Financial Officer conducted an evaluation (the “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 required by Rules 13a-15 or 15d-15, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of the end of March 31,September 30, 2018 under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) because of certain material weaknesses. As of such date, the Company had neither the resources, nor the personnel, to provide an adequate control environment.

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 quarter ended March 31,September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls and Procedures

The Company’s management, including our Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or its internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The Company’s control systems are designed to provide such reasonable assurance of achieving their objectives. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

CEO and CFO Certifications

Exhibits 31.1 and 31.2 to this Quarterly Report are the Certifications of the Company’s Chief Executive Officer and the Chief Financial Officer, respectively. These Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act (the “Section 302 Certifications”). This Item 4 of this Quarterly Report, which you are currently reading, is the information concerning the Evaluation referred to above and in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On December 12, 2016, the Company filed a Current Report on 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 Company’s Board of Directors authorized the termination of Lior Wayn as CEO/president of the Company and of its then wholly-owned Israeli subsidiary, Emerald Israel. The termination of Mr. Wayn as an executive officer of the Company and Emerald Israel was “for cause” as described more fully in such Form 8-K. In addition, the Company further reported in 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 Companying accordance with the provisions of Section 141(k) of the General Corporation Law of the State of Delaware based upon the written consent of the holders of the majority of the Company’s shares of common stock issued and outstanding at November 16, 2016.

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

InAs discussed above, in December 2017, a liquidation request was filed with the Tel Aviv District Court by a group of former employees of Emerald Israel, under the assertion of delay of pay and insolvency. On December 20, 2017, at a hearing before the court,District Court, it was ordered that Emerald Israel 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) being potentially issued. Based on the collaboration of Emerald Israel 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.District Court. The amounts being claimed by the former employees were less than $96,000 and are included in current liabilities at March 31,September 30, 2018.

On January 29, 2018, the Company transferred the ordinary shares of its former Israeli subsidiary, Emerald Israel, 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 Israel to satisfy its debts and satisfy its financial obligations to former employees. As a result, the former employees of Emerald Israel commenced an action in a court of competent jurisdiction in Israel to liquidate Emerald Israel and use any assets to satisfy the debts owed to the former employees.

On April 24, 2018, Emerald Israel announcedreported to the District Court of Lod, Tel Aviv aboutregarding the failure in contracting a buyer for its DermaCompare technology at fair market price and therefore that Emerald Israel iswas no longer opposed to the requested Liquidation Warrant. On May 1, 2018, the Official Receiver submitted its response to the court,District Court, stating that according to such announcement of Emerald Israel, it did not oppose the requested Liquidation Warrant either. Based on both the Company’s and the Official Receiver’s position, on May 2, 2018, the District Court of Lod has givenissued a Winding-up Order in Emerald Israel’s file and temporarily nominated Adv. Hanit Nov (attorney) as a Special Executor to Emerald Ltd.Israel.

ITEM 1A. RISK FACTORS

See risk factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 23, 2018, $3,000 of the Notes was converted at $0.01 per share into 300,000 shares, based upon the Notes conversion price of $0.01 per share of common stock.

On January 24, 2018, $73,000 of the January 2018 Convertible Notes were converted at a conversion price of $0.01 per share into 7,300,000 shares of the Company’s common stock and on March 19, 2018, a further $9,218 of the January 2018 Convertible Loans were converted at a conversion price of $0.01 per shares into 921,800 shares of the Company’s common stock.

From January 31, 2018 through March 23, 2018, the Company received an aggregate amount of $1,769,950 from the sale to accredited investors of 25,285,000 of the Company’s units, at an offering price of $0.07 per unit, with each unit consisting of: (i) one share of the Company’s common stock; and (ii) one common stock purchase warrant, exercisable for a period of twenty-four months, to purchase one additional share of the Company’s common stock, at an exercise price of $0.14 per share. On April 16, 2018, after the quarter ended March 31, 2018, the Company received an additional $150,000 from the sale of the units at $0.07 per unit, pursuant to which the Company issued an additional 2,142,857 units.

On February 8, 2018 the Company issued 571,429 shares of its common stock to two accredited investors in consideration for $80,000, which was paid by these investors prior to December 31, 2017.

On March 12,20, 2018, the Company issued a total of 3,629,999700,000 restricted sharesShares to certain consultants in connection with services rendered during the firstsecond quarter of 2018, which sharesShares were valued at $901,902, based on the closing share price on the day prior to each of the issuances.

On March 20, 2018, the Company issued a total of 1,092,500 restricted shares of its common stock as follows: (i) 62,500 shares were issued to an accredited investor in connection with 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, the Company’s CEO and Chairman, pursuant to a services agreement, which shares were valued at $0.01 per share and do not vest and are not deemed earned until February 2019 under the agreement; and (iii) 730,000 restricted shares were issued to an accredited investor in connection with services under a six-month services agreement, which shares were valued at $124,100,$112,000, based on the closing share price on the day prior to the executionissuance. The above-mentioned amount was recorded as a charge to the Company’s Statements of Operations and Comprehensive Loss, with a corresponding credit to Additional Paid in Capital in the agreement.Company’s Statement of Changes in Stockholders’ Deficit.

The offer and sale of the Company’s units and shares of common stockShares to accredited investorsthe consultants referenced above, without registration under the Securities Act, of 1933, as amended (the “Act”), was made in reliance upon the exemption provided under Section 4(2) of the Act and/or Regulation S and/or Regulation D promulgated thereunder.

Reference is also made to the disclosure in “Item 2. Management’s Discussion and Analysis and Results of Operations” under the subcaption “Issuance of equity during the nine-month period ended September 31, 2018” above.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5. OTHER INFORMATION

On January 23, 2018, $3,000 of the Notes was converted at $0.01 per share into 300,000 shares, based upon the Notes conversion price of $0.01 per share of common stock. On January 24, 2018, $73,000 of the January 2018 Convertible Notes were converted at a conversion price of $0.01 per share into 7,300,000 shares of the Company’s common stock and on March 19, 2018, a further $9,218 of the January 2018 Convertible Loans were converted at a conversion price of $0.01 per shares into 921,800 shares of the Company’s common stock.None.

ITEM 6. EXHIBITS

(a) The following documents are filed as exhibits to this Quarterly Report or incorporated by reference herein.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereuntohereunto duly authorized.