(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

(Name, address, including zip code, and telephone number, including area code, of agent for service)

As soon as practicable after this registration statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☒

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission has declared this registration statement effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state or jurisdiction where such offer or sale is not permitted.

This is our initial public offering. We are offering 130,000,000 INX Tokens, (the “INX Tokens” or “Tokens”). Each INX Token (including fractions of INX Tokens) will entitle its holder to receive pro rata distributions of 40% of the Company’s cumulative net cash flow from operating activities, excluding any cash proceeds from an initial sale by the Company of an INX Token (“Adjusted Operating Cash Flow”). Commencing in 2021, the distribution will be calculated on an annual basis and paid on or before April 30 to parties (other than the Company or its subsidiaries) that hold INX Tokens on the preceding March 31. Each annual distribution will be based on the Company’s cumulative Adjusted Operating Cash Flow (net of cash flows which have already formed the basis for a prior distribution), calculated as of December 31 of the year prior to the distribution. However, because each INX Token holder’s right to a pro rata distribution is based on our cumulative Adjusted Operating Cash Flow, no distribution will be made to INX Token holders, if at all, until the Company generates positive cumulative Adjusted Operating Cash Flows. As of September 30, 2019, cumulative Adjusted Operating Cash Flow was a negative cash flow of approximately $5,848,000. The distribution to INX Token holders is a contractual obligation of the Company and a right of each INX Token holder of record as of March 31 of a year following a year end for which there was positive cumulative Adjusted Operating Cash Flow. However, the pro rata distribution of our cumulative Adjusted Operating Cash Flow is not self-executing and requires that our board of directors approve the Company’s financial statements and calculate such distribution in good faith. In addition, the INX Token may be used as a form of payment for transaction fees on the INX Securities trading platform, our proposed platform for the trading of security tokens, and INX Tokens are entitled to, at a minimum, a 10% discount as compared to other forms of payment. See “Description of INX Tokens.”

We intend to offer record holders of INX Tokens promotional discounts on transaction fees on the INX Digital trading platform. However, such discounts are promotional and not a right associated with ownership of the INX Token. INX Tokens may not be used as payment for transaction fees on the INX Digital trading platform. We do not currently accept INX Tokens as payment for our services and, until the INX Securities trading platform becomes operational, purchasers of INX Tokens will have no guarantee that their INX Tokens can be used as payment for any of our services. Further, there is currently significant uncertainty regarding the application of federal and state laws and regulations to the trading of security tokens, including regulations governing market intermediaries, and this uncertainty may cause significant delay or may prevent us from developing our INX Securities trading platform and utilizing the INX Token as currently envisioned.

There is currently no public market for the INX Token and no guarantee can be provided whether such a market will be established. U.S. persons may only trade INX Tokens on a registered securities exchange or alternative trading system (“ATS”) that has accepted the INX Tokens for trading or quotation. As of the date of this prospectus, no such exchange or ATS exists. As a result, purchasers in this offering, and subsequent purchasers of INX Tokens, will likely be limited in their ability to engage in secondary trading of INX Tokens.

The minimum investment amount to participate in the offering is One Thousand Dollars ($1,000). We currently expect the initial public offering price to be between $0.80 and $1.00 per Token. The initial public offering price was arbitrarily determined by our Board of Directors based on market conditions at the time of pricing. Payment for INX Tokens will be accepted in U.S. Dollars. After the Company meets the minimum offering requirement (as described below), payment for INX Tokens will also be accepted in Bitcoin (“BTC”) and Ether (“ETH”). BTC/USD and ETH/USD exchange rates will be determined by Brave New Coin’s Bitcoin Liquid Index (BLX) and Ethereum Liquid Index (ELX), respectively, as of 12:00 a.m. (UTC) on the date a purchaser has submitted an executed INX Token Purchase Agreement.

We will not complete the sale of any INX Tokens unless we raise gross offering proceeds of $7,500,000 from this offering (in U.S. Dollars) within one year from the date of this prospectus, which we refer to as the minimum offering requirement. See “Plan of Distribution.” Pending satisfaction of this condition, all subscription payments will be promptly transmitted to Metropolitan Commercial Bank, which has agreed in writing to hold all such funds in escrow for the persons who have beneficial interests therein (the “Escrow Agent”). To the extent that we engage broker-dealers to participate in the offer and sale of our INX Tokens, all subscription payments made to such broker-dealers will also be promptly transmitted to the Escrow Agent. If we do not meet the minimum offering requirement prior to the termination of this Offering, we will promptly return all funds held by the Escrow Agent (in U.S. Dollars) without interest or deduction. If the Company meets the minimum offering requirement, then the Company will conduct a closing of the committed purchases and the funds held by the Escrow Agent will be made immediately available to fund the Company’s operations. After the initial closing, sales will be conducted on a continuous basis. Any rejected subscription will have its funds returned promptly. We will continue our public offering until its termination, which will be effective upon the earliest to occur of: (i) the sale of all of the 130,000,000 INX Tokens being offered, (ii) 365 days after this registration statement is declared effective, or (iii) such shorter period as may be determined by the Company in its sole discretion.

Holders of INX Tokens have contractual rights determined by the INX Token Purchase Agreement. Pursuant to the terms of the INX Token Purchase Agreement, ownership of the INX Tokens and all rights under the INX Token Purchase Agreement are contingent upon holders of INX Tokens satisfying the Company’s KYC/AML procedures, including any requirements to periodically or otherwise update information provided to the Company. Each holder’s interest in INX Tokens will be evidenced by the INX Token Distributed Ledger. None of the rights granted to holders of INX Tokens are defined by the INX Token source code, the underlying blockchain, or its network attributes.

The foregoing description of the INX Token Purchase Agreement is not a complete description of its terms. For more details about the INX Token Purchase Agreement, you should read the INX Token Purchase Agreement, which is attached as Exhibit 4.1 hereto, and is incorporated herein by reference.

During the offering, we will offer for sale INX Tokens in fractional divisions up to five decimal places (0.00001); sales that would otherwise result in fractional divisions of more than five decimal places will be rounded down to five decimal places. After the offering, INX Tokens may be purchased and sold in fractional divisions up to eighteen decimal places (0.000000000000000001), which is the technical limit for ERC20 compliant tokens.

In their report dated September 25, 2019, our independent auditors stated that our financial statements for the period ended December 31, 2018 were prepared assuming that we would continue as a going concern and they expressed substantial doubt about our ability to continue as a going concern.

We are an emerging growth company, as defined in the U.S. Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, have elected to comply with certain reduced public company reporting requirements.

Purchasing INX Tokens involves a high degree of risk. See “Risk Factors” beginning on page 15 of this prospectus.

None of the United States Securities and Exchange Commission, the Gibraltar Financial Services Commission, or any state securities commission or other jurisdiction has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

We expect to deliver the INX Tokens to the purchasers in this offering commencing on or about , 2020.

You should rely only on the information contained in this prospectus and any related free-writing prospectus that we authorize to be distributed to you. We have not authorized any person, including any underwriter, to provide you with information different from that contained in this prospectus or any related free-writing prospectus that we authorize to be distributed to you. This prospectus is not an offer to sell, nor is it seeking an offer to buy, the INX Tokens in any state or jurisdiction where such offer or sale is not permitted. The information in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies, regardless of the time of delivery of this prospectus or of any sale of the INX Tokens offered hereby. Our business, financial condition, results of operations, and prospects may have changed since that date. We do not take any responsibility for, nor do we provide any assurance as to the reliability of, any information other than the information in this prospectus and any free writing prospectus prepared by us or on our behalf. Neither the delivery of this prospectus nor the sale of INX Tokens means that information contained in this prospectus is correct after the date of this prospectus.

The INX Tokens we are offering through this prospectus are suitable only as a long-term investment for persons of adequate financial means and who have no need for liquidity in this investment. Because currently there is no public market for our tokens, you will have difficulty selling your tokens. Investors in the United States are directed to the special suitability standards listed in the “Suitability Standards” section.

You may lose all monies that you spend purchasing INX Tokens. If you are uncertain as to our business and operations or you are not prepared to lose all monies that you spend purchasing INX Tokens, we strongly urge you not to purchase any INX Tokens. We recommend you consult legal, financial, tax and other professional advisors or experts for further guidance before participating in the offering of our INX Token as further detailed in this prospectus.

We do not recommend that you purchase INX Tokens unless you have prior experience with cryptographic tokens, blockchain-based software and distributed ledger technology and unless you have received independent professional advice.

Those selling INX Tokens on our behalf and participating broker-dealers and registered investment advisors recommending the purchase of INX Tokens in this offering have the responsibility to make every reasonable effort to determine that your purchase of tokens in this offering is a suitable and appropriate investment for you based on information provided by you regarding your financial situation and investment objectives. In making this determination, these persons have the responsibility to ascertain that you meet the minimum income and net worth standards set forth under the “Suitability Standards” section of this prospectus.

Market data and certain industry data and forecasts used throughout this prospectus were obtained from sources we believe to be reliable, including market research databases, publicly available information, reports of governmental agencies, and industry publications and surveys. The information in or accessible through the websites referred to herein is not incorporated into, and is not considered part of, this prospectus. Further, our references to the URLs for these websites are intended to be inactive textual references only.

In addition, we have relied on certain data from third party sources, including internal surveys, industry forecasts, and market research, which we believe to be reliable based on our management’s knowledge of the industry. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” and elsewhere in this prospectus.

Our financial statements are prepared and presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our historical results do not necessarily indicate our expected results for any future periods.

Certain figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Unless derived from our financial statements or otherwise noted, the terms “dollar,” “U.S. dollar,” “US$,” “USD,” and “$” refer to U.S. dollars, the lawful currency of the United States.

PROSPECTUS SUMMARY

This is only a summary of the prospectus and does not contain or summarize all of the information contained in this prospectus which is material and/or which may be important to you. You should read this entire prospectus, including “Risk Factors,” before making an investment decision about the INX Tokens. Definitions used in this prospectus can be found in the section entitled “Glossary of Defined Terms”. Unless otherwise stated in this prospectus, references to:

●

“Coin” refers to blockchain assets, coins, and tokens, and are often used interchangeably. In some contexts, coins may be used to refer to cryptocurrencies, a category of blockchain assets. See Blockchain Asset.

●

“Companies Act” refers to Gibraltar Companies Act 2014.

●

“Cryptocurrency” refers to a subset of blockchain assets which is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. Also known as digital currency or virtual currency, a “cryptocurrency,” as the term is used in this prospectus, is not a “security” as provided in the Securities Act of 1933;

●

“INX Digital” refers to INX Digital, Inc., a Delaware corporation, which we intend to register as a money transmitter to operate a trading platform for cryptocurrencies;

	●	“INX Securities” refers to an order book platform with a matching engine solution for the trading of security tokens which we currently intend to register as an alternative trading system to be operated by INX Services;

	●	“INX Services” refer to INX Services, Inc., which we intend to register as a broker-dealer;

	●	“INX Tokens,” “Tokens” or “our Tokens” refer to INX Tokens, an ERC20 blockchain asset that is programmed using a smart contract that is compatible with the Ethereum blockchain, and the rights of the INX Token holder, which are contractual rights set forth in the INX Token Purchase Agreement, as more fully described in the section titled “Description of INX Tokens” at page 99;

	●	“INX Trading Solutions” means the business conducted by the Company in the United States, which includes the INX Digital trading platform, the INX Securities trading platform, the broker services to be provided by INX Services and other related business activities;

●

“Security Token” refer to a subset of blockchain assets that falls within the definition of a “security” as provided in the Securities Act of 1933;

●

“Trades” refer to changes in ownership of a blockchain asset that are not a transfer of a blockchain asset from one digital wallet to another digital wallet, and therefore are not recorded on a blockchain ledger, but are recorded on a private and centralized database;

●

“Transaction Fees” refer to fees that are charged for the execution of a trade that occurs on an INX Trading Solutions trading platform; provided, however, that “transaction fees” do not include deposit fees, withdrawal fees or other fees that may be charged for other services;

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“Transfers” refer to transfers of blockchain assets from one digital wallet to another digital wallet as recorded on a blockchain ledger;

●

“Transfer Fees” refer to fees that are charged blockchain network participants when a transfer is recorded on the blockchain; and

●

“we,” “us,” “Company,” “our company” or “INX” refer to INX Limited and its wholly owned subsidiaries;

Overview

We are developing a regulated solution for trading blockchain assets (“INX Trading Solutions”) that will initially include a cryptocurrency trading platform operated by INX Digital, Inc., our wholly-owned subsidiary (“INX Digital”), for which we have obtained money transmitter licenses or otherwise qualified to operate in 7 US states, with the intention of being licensed or otherwise qualified to operate in most US states by June 2021. We also presently intend to establish an alternative trading system (“ATS”) for security tokens (“INX Securities”) to be operated by INX Services, Inc., our wholly-owned subsidiary (“INX Services”), which we plan to register as a licensed broker-dealer. However, there is currently significant uncertainty regarding the application of federal and state laws and regulations to the trading of security tokens, including regulations governing market intermediaries, and this uncertainty may cause significant delay or may prevent us from developing our INX Securities trading platform as currently envisioned. Prior to the establishment of INX Securities as an ATS, INX Services may operate exclusively as an introducing broker with an order management system and to route security token order flow to one or more third party alternative trading systems.

Our vision is to establish two trading platforms and a security token that provide regulatory clarity to the blockchain asset industry. We plan to achieve this by: (1) differentiating between security and non-security blockchain asset classes and providing trading opportunities for each class; (2) obtaining appropriate regulatory licenses and approvals, including money transmitter licenses, a U.S. broker-dealer license and subsequent registration as an ATS; (3) issuing our security token, the INX Token, and maintaining the INX Registry, which reflects a real time list of INX Token holders; (4) requiring that all INX Token holders comply with KYC/AML procedures; and (5) granting certain rights and benefits to the holders of INX Tokens.

When fully operational, we expect to offer professional traders and institutional investors trading platforms with established practices common in other regulated financial services markets, such as customary trading, clearing, and settlement procedures, regulatory compliance, capital and liquidity reserves and operational transparency.

In the future, we intend to establish a platform for the trading of derivatives such as futures, options and swaps. We have taken no steps towards the establishment of such a platform, which will require the development of technological solutions as well as federal and state regulatory approvals; accordingly, there is no assurance that such a trading platform will ever be developed. We also intend that our subsidiary in Gibraltar will apply to the Gibraltar Financial Services Commission for licenses under the Financial Services (Markets in Financial Instruments) Act 2018 and the Financial Services (Distributed Ledger Technology Providers) Regulations 2017 for our European-based operations.

INX Trading Solutions envisions that blockchain assets traded on our trading platforms will be transferred to a digital wallet held by one of our custodians, which transfer is recorded on the blockchain ledger that underlies such blockchain asset. Once a blockchain asset is deposited with our custodian, none of the trading transactions performed on our trading platforms are recorded on a blockchain ledger. Trades on our trading platforms are recorded only on our internal centralized servers, and they are then reflected in each customer’s respective account. A transfer of a blockchain asset is recorded on its underlying blockchain ledger when the owner of the blockchain asset wishes to withdraw the blockchain asset from their account. In this event, the blockchain asset is transferred from our respective custodian’s digital wallet to the customer’s private digital wallet.

The architectures for the INX Digital and INX Securities trading platforms are based on a sequential processing and storage, meaning that transactions can be processed only one after the other and not in parallel. In order to facilitate liquidity and support a vibrant trading market on our trading platforms, we intend to offer incentives to attract high volume traders and establish strategic partnerships with market makers. We also envision that our trading platforms will enable trading via web portal and application programming interface (“API”) solutions. As we further develop our trading platforms, broker-dealers or other appropriately regulated third parties may route their customers’ trades to our trading platforms using API.

Further, we intend to provide additional comfort to our customers with respect to the financial stability of the Company by allocating 75% of the net proceeds before expenses from this offering in excess of $25 million to be available to cover customer and Company losses, if any, that result from cybersecurity breaches or theft, errors in execution of the trading platform or its technology, and counterparty defaults, including instances where counterparties lack sufficient collateral to cover losses. We refer to this amount as our “Cash Fund.”

We have also created the INX Token, which is offered pursuant to this prospectus. The INX Token is an ERC20 blockchain asset that is programmed using a smart contract that is compatible with the Ethereum blockchain. After the INX Securities trading platform becomes operational, holders of INX Tokens will be able to use the INX Token to pay transaction fees on the INX Securities trading platform. When paying for transaction fees, INX Tokens will be entitled to, at a minimum, a 10% discount to other forms of payment. See “Description of INX Tokens - Uses of the INX Token on the INX Platforms.” We intend to offer record holders of INX Tokens promotional discounts on transaction fees on the INX Digital trading platform. However, such discounts are promotional and not a right associated with ownership of the INX Token. INX Tokens may not be used as payment for transaction fees on the INX Digital trading platform. We do not currently accept INX Tokens as payment for our services and, until the INX Securities trading platform becomes operational, purchasers of INX Tokens will have no guarantee that their INX Tokens can be used as payment for any of our services. In addition, holders of INX Tokens will be entitled to receive pro rata distributions of 40% of the Company’s cumulative Adjusted Operating Cash Flow. Commencing in 2021, the distribution will be calculated on an annual basis and paid on or before April 30 to parties (other than the Company or its subsidiaries) that hold INX Tokens on the preceding March 31. Each annual distribution will be based on the Company’s cumulative Adjusted Operating Cash Flow (net of cash flows which have already formed the basis for a prior distribution), calculated as of December 31 of the year prior to the distribution. However, because each INX Token holder’s right to a pro rata distribution is based on our cumulative Adjusted Operating Cash Flow, no distribution will be made to INX Token holders, if at all, until the Company generates positive cumulative Adjusted Operating Cash Flows. As of September 30, 2019, cumulative Adjusted Operating Cash Flow was a negative cash flow of approximately $5,848,000. See “Description of INX Tokens - Participation Right in Adjusted Operating Cash Flow.”

In order to participate in this offering, a purchaser must be duly identified through the Company’s KYC/AML procedures and such purchaser must provide the Company with a compatible digital wallet address to receive INX Tokens. In order to verify that INX Tokens are transferred between KYC/AML-vetted holders, transfers of INX Tokens will be executed by the INX Token smart contract under conditional permission that the wallet addresses of both the sender and receiver of INX Tokens are listed on a database stored on the data section of the INX Token smart contract (the “Whitelist Database”). If either the sender or receiver wallet address is not listed in the Whitelist Database (or if the Company has “frozen” the sender or receiver wallet address), the smart contract rejects the transfer and the INX Token Distributed Ledger is not updated. The transferor of INX Tokens will be responsible for payment of the transfer fees on the Ethereum blockchain. For example, in 2018, Ethereum average daily transfer fees varied between $0.15 and $5.528. In 2019, Ethereum average daily transfer fees varied between $0.05 and $0.1235. The average time to record transfers (new blocks on the Ethereum blockchain) has been 3 minutes. For additional information regarding that transfer of INX Tokens, see “Description of INX Tokens - Holding and Transferring INX Tokens”.

Corporate Information and Structure of INX

We are a Gibraltar private company limited by shares, incorporated on November 27, 2017. Approximately twenty-nine percent (29%) of our issued share capital is held by Triple-V (1999) Ltd, an entity wholly owned by Shy Datika, one of our founders, our controlling shareholder and President (see – “Principal Shareholders”). The balance of our issued share capital is held by our employees, lenders, service providers and investors. We plan to have the following wholly-owned subsidiaries:

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INX Digital, Inc., a Delaware corporation, which we intend to register as a money transmitter to operate a trading platform for cryptocurrencies;

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INX Services, Inc., a Delaware corporation, which we intend to register as a broker-dealer to act as an introducing broker and subsequently to operate an alternative trading system for security tokens;

●

INX Solutions Limited., incorporated in Gibraltar as a private company limited by shares (“INX Solutions”), through which we intend to offer the Company’s services and products to the European market. We intend to apply to the Gibraltar Financial Services Commission for licenses under the Financial Services (Markets in Financial Instruments) Act 2018 and the Financial Services (Distributed Ledger Technology Providers) Regulations 2017 for our European-based operations.

INX Limited’s registered office is located at Unit 1.02, 1st Floor 6 Bayside Road, Gibraltar, GX11 1AA, and its telephone number is +350 200 79000. INX Limited also has an office located in Israel, where a majority of its senior officers are currently based. After the INX Digital trading platform becomes fully operational, INX Limited intends to relocate its principal office to the United States.

Industry Overview

Background & Current Market

Blockchain Technology and Blockchain Assets

Blockchain technology is a digital record or ledger of transaction data that is permanently recorded in files called “blocks.” Each blockchain is founded upon software source code that establishes and governs its cryptographic system for verifying transactions.

In traditional blockchain networks, copies of the blockchain ledger are stored in a decentralized manner on computers across a peer-to-peer network. Users of the blockchain network maintain a copy of the ledger with all copies of the ledger synchronized through a consensus algorithm. Protocols included in the source code govern the rules, operations and communications of the underlying blockchain network, including the validation of new blocks that contain an updated ledger reflecting new transactions.

This lack of a single point of data collection is believed to enhance the security of traditional blockchain networks and blockchain assets. Nonetheless, blockchain assets and blockchain trading platforms remain susceptible to security breaches and cybercrime. Since 2011, more than $1.7 billion has been publicly reported stolen from cryptocurrency exchanges and investors. For example, in January 2018, about $500 million worth of blockchain assets were stolen from a major Japanese trading platform¹. Variations on traditional blockchain networks include “permissioned” blockchains, in which a limited number of pre-selected users monitor and validate transactions (or add “blocks” to the chain). In a fully centralized blockchain, one organization monitors and validates transactions. Such blockchain ledgers may be viewable by the public or viewing ledger information may be restricted.

Blockchain assets are assets that utilize blockchain ledgers to record their creation, ownership and transfer of ownership. Blockchain assets have generally been created and used in two broad contexts: within blockchain protocol layers and within application layers. Blockchain assets used at the protocol layer are generally intended to create financial incentives that drive the underlying blockchain network to verify and authorize the creation of a new block to update the ledger of ownership. Network participants may receive a fee, generally paid in the protocol’s native blockchain asset, for validating the authenticity of new block. A blockchain asset used at the application layer is not designed to incentivize validation of new blocks on the blockchain. However, the ledger of ownership of an application blockchain asset, including the record of transfers of such blockchain asset, is recorded on blocks added to the underlying blockchain. For example, bitcoin and ether are protocol blockchain assets used on the Bitcoin and Ethereum blockchains, respectively. The INX Token is an application blockchain asset that is recorded on the Ethereum blockchain.

Ownership of a blockchain asset is established by recording on the blockchain ledger the owner’s unique identifier address, or “public address,” and the amount of the asset held by such address. When a blockchain asset is transferred, the ledger records the sender’s public address, the recipient’s public address and the amount of digital assets transferred. Authorization of the transfer requires the sender’s digital signature and a transfer fee.

https://www.cnbc.com/2018/01/26/japanese-cryptocurrency-exchange-loses-more-than-500-million-to-hackers.html; See also http://blockgeeks.com/guides/cryptocurrency-hacks

Digital signatures are generated by use of the private key associated with the relevant public address. The public address is publicly known so that it may be used to direct transfers of the blockchain asset. Private keys are used to sign transactions that initiate the transfer of blockchain assets from a sender’s public address to a recipient’s public address. Only the private key associated with a particular public address can digitally sign a transaction proposing a transfer of the blockchain asset from one public address to another. Similar to a digital password, if an unauthorized third person learns of a user’s private key, that third person could forge the user’s digital signature and transfer blockchain assets from the user’s public address to another public address, thereby transferring ownership of the user’s blockchain assets.

Blockchain Asset Classes

Blockchain assets exist as a digital representation of value or rights, including rights to an underlying asset. Some blockchain assets may be viewed as having intrinsic value. In addition, the blockchain asset may be tethered to the value of another asset or may be a representation of contractual rights. Almost any asset can be “tokenized,” meaning that title to the asset, including any rights associated with such title, can be recorded on a blockchain ledger. To this point, blockchain assets may be used to pay for goods and services, may entitle the owner to certain rights, or may represent assets that have traditionally existed off the blockchain.

We have identified and targeted our business operations around two emerging blockchain asset classes: cryptocurrencies and security tokens.

A “cryptocurrency,” also known as a digital currency or virtual currency, is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value. Cryptocurrencies are generally used a substitute for fiat currencies as a means of paying for goods or services or transferring value. A “cryptocurrency,” as the term is used in this prospectus, is not a “security” as provided in the Securities Act of 1933. Bitcoin and ether are examples of well-known cryptocurrencies.

A “security token” is a blockchain asset that falls within the definition of a security under U.S. federal securities laws. On April 3, 2019, the Strategic Hub for Innovation and Financial Technology (FinHub) of the SEC published informal guidance, titled “Framework for ‘Investment Contract’ Analysis of Digital Assets” (the Framework), which provides analytical tools for determining whether a blockchain asset is a security under the U.S. federal securities laws. In the Framework, the SEC uses the term “digital asset” to refer to an asset that is issued and transferred using distributed ledger or blockchain technology. In this prospectus, we use the term “blockchain asset” to distinguish between assets that are recorded and stored using blockchain technology and assets that may be stored in digital form but which do not utilize blockchain technology. In addition, the SEC does not use the term “security token.” The Framework provides a list of factors to consider when determining whether a digital asset offered for sale is a security. The factors included in the Framework are based on an analysis of whether the blockchain asset is an “investment contract” as that term was first used by the Supreme Court in SEC v. Howey, 328 U.S. 293 (1946), and which has been further clarified through subsequent case law.

The SEC staff has acknowledged that determining whether a blockchain asset is a security can require a careful analysis of the nature of the blockchain asset and how it is offered and sold. Further, the SEC staff acknowledged that a blockchain asset that is initially sold as a security may, at a later point, no longer meet the characteristics of a security. The Framework represents the views of the SEC staff and it is not a rule, regulation, or statement of the SEC and it is not binding on the SEC.

To determine the character of a blockchain asset and whether it should be traded on our INX Digital trading platform or our INX Securities trading platform, we plan to seek the guidance of nationally-recognized outside legal counsel. In certain instances, we may seek a declaratory judgment or no action relief from the relevant regulatory agency prior to deciding whether to permit the trading of an asset on one of our platforms.

Markets for Blockchain Assets and ICOs

The market for blockchain assets has grown dramatically including through dramatic volatility since blockchain assets were first introduced in 2009 with the launch of Bitcoin. According to CoinMarketCap.com², on December 31, 2016, global market capitalization for all blockchain assets was approximately $17 billion. By December 31, 2017, global market capitalization grew to approximate $612 billion, then fell sharply through 2018. As of December 31, 2018, blockchain assets had a total market capitalization of approximately $125 billion. As of December 31, 2019, blockchain assets had a total market capitalization of approximately $190 billion.

The volatility in market capitalization of blockchain assets correlates with the frequency and size of “initial coin offerings” and other initial sales of new blockchain assets (collectively, “ICOs”). According to CoinSchedule.com³, approximately $6.5 billion in the aggregate was raised through ICOs during 2017. During 2018, aggregate proceeds from ICOs increased to approximately $21 billion, although offerings slowed significantly in the second half of 2018. This downward trend continued into 2019 and aggregate proceeds from ICOs during the year only amounted to approximately $3.2 billion.⁴

https://coinmarketcap.com/charts/

https://www.coinschedule.com/stats/

⁴

https://www.coinschedule.com/stats/

The decline of ICOs (and global market capitalization of blockchain assets) further correlates with high-profile regulatory enforcement actions taken by the SEC and other federal regulators regarding the sale of blockchain assets. For example, in late 2017 the SEC brought enforcement actions relating to the ICOs for PlexCoin and Munchee, claiming that the blockchain assets offered for sale were securities and that the offer and sale of blockchain assets had violated federal securities laws. Similar enforcement actions continued through 2018 and 2019, including claims brought against Kik Interactive Inc., Block.one and Telegram Group Inc. for their unregistered ICOs.

In addition, some blockchain industry participants have reported that a significant percentage of blockchain asset trading activity is artificial or non-economic in nature and may represent attempts to manipulate the price of certain blockchain assets. For example, in a report published by Bitwise Asset Management⁵, Bitwise claimed that 95% of bitcoin trading activity appearing on 81 blockchain asset trading platforms is fake. Bitwise’s report further stated that trading platforms and blockchain asset developers are incentivized to artificially inflate trading volumes so that their platform or asset rises in league tables and gains prominence in the industry. As a result, trading platforms or blockchain assets may seek to inflate demand for a specific blockchain assets, or blockchain assets generally, which could increase the volatility of that asset or blockchain asset trading prices generally.

Despite the volatility of blockchain market prices, adoption of blockchain technology has continued. For example, in February 2019, JPMorgan launched its own cryptocurrency, JPM Coin, which it initially plans to use for settlement of international payments for large corporate clients, securities transactions and for larger corporations that use JP Morgan’s treasury services. In June 2019, Facebook announced that it would launch a cryptocurrency, the Libra coin, and develop payment and other financial services and products around its Libra network. In addition, in connection with the release of the Framework, FinHub, through the SEC Division of Corporation Finance, issued a no action letter to TurnKey Jet, Inc. (“TKJ”) stating that it will not recommend any enforcement action against TKJ if it offers and sells its “tokenized” jet card without registration under the federal securities laws. The no action letter is the first of its kind to analyze whether a blockchain asset is a security under the federal securities laws.

Blockchain Asset Exchanges

According to CoinMarketCap.com⁶, over 200 blockchain asset trading platforms provide basic buy and sell services for one or more blockchain assets. On January 14, 2020, approximately 80 of those trading platforms had 30-day trailing average daily trading volumes over $20,000,000 and more than 50 trading platforms had 30-day trailing average daily trading volumes over $100,000,000. Top blockchain asset trading platforms, based on USD 30-day trading volume, include BKEX, Binance, MXC, LBank, Fatbtc, BiKi, CoinBene and DigiFinex. The majority of blockchain assets traded on these platforms are considered to be cryptocurrencies.

There has been growing institutional interest in operating regulated blockchain asset exchanges and trading platforms and utilizing blockchain assets in bank financing practices.

On December 18, 2017, the Chicago Board of Exchange began trading in bitcoin futures, and was joined shortly thereafter by CME Group, also offering bitcoin futures. In May 2018, it was reported that Goldman Sachs will offer trading in bitcoin futures and non-deliverable forwards to its clients.

Also in December 2017, Bloomberg added three cryptocurrencies to its terminal service (previously having provided bitcoin data since 2014) and the Australian Securities Exchange (ASX) announced it would move forward with a plan to replace its current clearing and settlement process with a blockchain solution.

In November 2018, the Gibraltar Blockchain Exchange, a subsidiary of the Gibraltar Stock Exchange, secured a license from the Gibraltar Financial Services Commission (GFSC) to operate as a crypto blockchain exchange and currently supports trading in six digital assets, including Bitcoin, Ethereum, EOS and the exchange’s native Rock token.

On November 16, 2018, Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets issued the Statement on Digital Asset Securities Issuance and Trading addressing the SEC’s enforcement actions involving and relating to digital asset securities. The Statement confirmed the applicability of the federal securities law framework to new and emerging technologies, such as blockchain, and provided a summary of the circumstances under which the SEC has taken enforcement action against participants in the marketplace for digital asset securities, including actions against initial offerings and sales of securities and actors and institutions that develop and facilitate the secondary market for securities.

Finally, the CFTC has stated that virtual currencies, like bitcoin, may be commodities that are within the purview of the CFTC. However, beyond its anti-fraud and anti- manipulation authorities, the CFTC generally does not oversee “spot” or cash market exchanges and transactions involving cryptocurrencies that do not utilize margin, leverage, or financing.

Because of the uncertainty built into a “facts and circumstances” analysis, as well as general regulatory uncertainty worldwide, companies have begun to structure their blockchain assets as securities and conduct sales of their blockchain assets as registered securities offerings. As blockchain assets take on the attributes of securities and market makers expand the breadth of blockchain asset trading products into spot, futures and derivative trading instruments, the need and demand for a regulated blockchain asset trading solution continues to grow.

⁵

https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf

⁶	https://coinmarketcap.com/rankings/exchanges/

Opportunities in the Current Market

As blockchain assets are sorted into cryptocurrencies and security tokens, the need and demand for regulated trading solutions for each asset class continues to grow.

However, current platforms or exchange markets that permit the trading of blockchain assets have the following shortcomings:

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Pre-trade and post-trade services are limited. Current blockchain exchanges do not provide investment tools that would allow clients to continually monitor and manage blotter, position, and other technical analysis. The current market of exchanges does not offer analytical capabilities during the pre-trading period and does not provide trade confirmations, reporting and access to pricing data during the post-trading period. This lack of transparency results in lower pricing performance, inefficiencies and ultimately higher trading risks.

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Lack of Trading History. Most blockchain asset trading platforms do not or cannot present the entire history of trades to exchange participants in manner that would be requested by a regulator. This lack of trading history does not allow regulatory agencies to effectively monitor transactions.

	●	Lack of Regulatory Compliance. Many blockchain asset trading platforms are not prepared to comply (or are not willing to comply) with regulatory requirements imposed by U.S. federal and state securities law. Blockchain asset trading platforms assume less responsibility for what takes place on their platforms as compared to regulated exchanges. For example, blockchain asset trading platforms are generally unable to verify the legitimate origin of funds in a trade and therefore cannot confirm that the trades are not in violation of anti-money laundering laws. In addition, current blockchain asset trading platforms do not provide traditional trading protections, such as liquidity reserves, making professional traders unable or reluctant to conduct trading on these exchanges. The lack of compliant exchanges for the trading of blockchain assets leads to low customer and public confidence in both the exchanges and the blockchain assets traded.

	●	Lack of Technological Capability. Blockchain asset trading platforms generally do not have the technological capability to handle the large trading volumes or capture trades for multiple simultaneous trading requests without disruption or significant errors. The technology of many blockchain asset trading platforms was not developed to handle the dramatic growth in demand to engage in blockchain trades and the market has witnessed exchange outages, sometimes for many hours, pricing errors, lack of user access to their funds, and other service related complaints.

	●	Lack of Fee Transparency. There is currently no clear market standard for fees for trading blockchain assets. This is particularly true in the retail market, where many trading platforms do not separately state the transaction fee but instead include any fees as part of the price of the blockchain asset. In this way, many unregulated exchanges do not disclose their fees, creating uncertainty regarding the cost of trading.

	●	Poor Price Discovery. Blockchain asset trading platforms experience inefficiencies in the form of significant arbitrage due to recurrent operational issues including temporary service outages and other temporary restrictions on access to the trading platform, the ability to withdraw or deposit fiat currencies and cryptocurrencies, or otherwise perform a trade on the platform. This creates significant exposure to arbitrage trading between exchanges. Further, the operator of a blockchain asset trading platform may trade on its own behalf on the trading platform. Doing so provides liquidity to platform participants. However, it also presents potential conflicts of interest, such as front-running customer order flow and engaging in price manipulation. By acting as a trading participant on one’s own platform, trading platforms may artificially inflate or deflate prices, which impairs market pricing discovery.

These weaknesses in current blockchain asset trading platforms reveal a significant opportunity in the blockchain asset industry for market development through operations and services that provide functionality, transparency and trading platforms backed by cash reserves similar to those of regulated trading marketplaces.

Our Proposal: INX Trading Solutions, a Single Regulated Ecosystem for Trading Blockchain Assets

We believe that we have a comprehensive solution to the issues that we have identified. We are developing a new marketplace for blockchain assets that is subject to governmental oversight. We are designing our platforms to provide the following solutions to the problems identified above, which we believe will make INX Trading Solutions an attractive choice for the trading of blockchain assets:

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Robust Pre-Trade and Post-Trade Services. We are designing trading features to permit clients to continually monitor and manage blotter, position, and other technical analysis. We also plan to offer investment tools during the pre-trading period and provide trade confirmations, reporting and access to pricing data during the post-trading period.

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Historical Trading Record. Beginning with the first recorded transaction on the INX Trading Solutions trading platforms, we plan to apply KYC/AML procedures for all account holders and provide transparency so that clients have the ability to review all activities taken by them. We believe that this accessibility will supplement the transparency of blockchain assets.

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Regulation. We believe that regulatory oversight will instill greater confidence in our trading platforms compared to unregulated blockchain asset trading platforms. As the ownership of blockchain assets becomes more commonplace and professional traders continue to analyze and enter the blockchain asset marketplace, we believe that clients will expect regulatory safeguards for blockchain asset trading, comparable to the current fiat and securities exchanges. All customers of INX Trading Solutions, whether trading cryptocurrencies or security tokens, will be required to complete KYC/AML checks in compliance with applicable laws and regulations.

	●	Cash Fund. We intend to provide additional comfort to our customers with respect to the financial stability of the Company by allocating 75% of the net proceeds before expenses from this offering in excess of $25 million to be available to cover customer and Company losses, if any, that result from cybersecurity breaches or theft, errors in execution of the trading platform or its technology, and counterparty defaults, including instances where counterparties lack sufficient collateral to cover losses. We refer to this amount as our “Cash Fund.”

	●	Our Robust Technology. We intend to develop technology to support high volumes of traffic to enable rapid trading activity. Because our platforms are custom-built to support the growing blockchain asset market, we are designing our platforms to scale along with the continued growth of the market.

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Transaction Fee Transparency. We plan to establish transaction fees as a percentage of the trade price of each trade executed on our platforms. Transaction fees must be paid, (a) with regard to the INX Digital trading platform, in the currency or cryptocurrency that is used as payment for the purchase or sale associated with the transaction fee, and (b) with regard to the INX Securities trading platform, in the currency that is used as payment for the purchase or sale associated with the transaction fee or INX Tokens. Transaction fees will be disclosed to our customers prior to executing a trade or performing other transactions on our platforms.

Our Development Plan

We are designing our trading platforms to provide clients with multi-currency, non-biased execution trading solution and to function as broker, execution, and clearing agent. We plan to provide trading of different types of digital blockchain assets, including securities and cryptocurrencies, with the optionality for execution of trades in both traditional fiat currencies and digital assets.

Our goal in the development of INX Trading Solutions is to offer professionals in the financial services community a comprehensive, interactive platforms that allow for seamless integrated trading, real-time risk management and reporting and administration tools.We plan to develop INX Trading Solutions as a series of centralized platforms that facilitate peer-to-peer professional trading services. These trading platforms will help our customers automate and coordinate front-office trading functions, middle-office risk management and reporting functions, and back-office accounting functions.

We are developing our system in modules to allow for a phased roll out of features in accordance with regulatory approvals that we receive and the technological development of INX Trading Solutions. See “Business— Phases of Development.”

Our intention is for the INX Trading Solutions website to serve as a single entry point for our customers. On the homepage, customers will be able to access the INX Digital portal for the trading of cryptocurrencies, and, when established, the INX Services portal for the trading of security tokens, in each case subject to the satisfaction of applicable regulatory requirements. Each of INX Digital portal and INX Services portal will be a separate and distinct trading platform. As we develop our trading platforms, we intend to add functionalities across the entire transaction lifecycle, as well as other information and features. Our platforms will not support cross-asset (i.e., securities token for cryptocurrency) trading, nor will we permit the settlement of securities transactions in cryptocurrency, at least until such time as the regulatory uncertainty regarding such transactions is resolved.

The trading platform to be operated by each entity will support “straight through processing” of orders received from customers. As such, orders and resulting trades will be recorded on internal databases and will be reflected in customer accounts without any intervention. Both INX Services, Inc. and INX Digital Inc. will employ staff to monitor trading activity and support customers. Each entity will also employ supervising managers to oversee the trading and settlement process. The staff of both entities will be able to process trade corrections, but this activity will require management approvals and audit reports will be reviewed to monitor this activity.

Neither INX Services, Inc. nor INX Digital, Inc. will extend credit to customers. Further, our proprietary order management software, which will be utilized by both INX Services, Inc. and INX Digital, Inc., has a rules engine that ensures sufficient funds or fully paid assets are available to cover orders, prior to their submission.

INX Digital Trading Platform

We are currently developing the INX Digital trading platform, and are testing its trading capabilities from a functional and load perspective. We have completed the minimum viable product of the platform that includes the architecture design, trading functionalities and the user interface and experience. To be able to handle large amount of traffic and transactions, we are currently working on scaling the capabilities of the system from an architecture and application level to improve the latency and solve concurrency issues. We are putting in place fail safe and recovery processes in case of system failure that are designed to inherently respond in a way that will cause no or minimal harm to core trading data. We are also in the process of developing the back office to administer and manage the platform.

We are currently preparing the required applications and supporting materials to register INX Digital as a money transmitter. We have registered INX Digital with U.S. Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”) as a federal money service business. In addition, we have submitted notifications to California, Massachusetts, Missouri, Montana, Pennsylvania, Utah and Wisconsin and INX Digital is now eligible to operate as proposed in those jurisdictions. We anticipate that we will be able to obtain money transmitter licenses or otherwise qualify to operate in most US states by June 2021. We expect to commence operations twelve months after reaching the minimum offering amount of $7,500,000.

The INX Digital trading platform will incorporate a secure trading/matching engine, which will have high frequency transaction capabilities and support a range of standard order types. We also expect to develop an API interface for broker-dealers, traders and market makers.

The architecture for the INX Digital platform is based on sequential processing and storage, allowing transactions to be processed one after the other, and not in parallel.

We are designing trading features to permit clients to continually monitor and manage blotter, position, and other technical analysis. We also plan to offer investment tools during the pre-trading period and provide trade confirmations, reporting and access to pricing data during the post-trading period.

Transaction fees on the INX Digital platform may be paid using US dollars, BTC or ETH.

INX Digital receives custody services for cryptocurrencies held on behalf of the clients of our INX Digital trading platform from BitGo Trust Company, Inc., a trust company duly organized and chartered in South Dakota, as the custodian (“BitGo Trust”). BitGo Trust is a “qualified custodian” as defined in Rule 206(4)-2 promulgated under the Investment Advisers Act of 1940. We believe that BitGo Trust, together with its affiliate BitGo Inc., a multi-signature hot wallet service, which we refer to collectively as BitGo, is the leading provider of custody and wallet services for cryptocurrency trading, with the ability to support both “hot” and “cold” storage with a high degree of electronic and physical security, as well as transaction processing and reporting. See “Business—Overview—INX Digital Trading Platform.”

INX Securities Trading Platform

We are currently developing the INX Securities trading platform, and are testing its trading capabilities from a functional and load perspective. We have completed the minimum viable product of the platform that includes the architecture design, trading functionalities and the user interface and experience. To be able to handle large amount of traffic and transactions, we are currently working on scaling the capabilities of the system from an architecture and application level to improve the latency and solve concurrency issues. We are putting in place fail safe and recovery processes in case of system failure that are designed to inherently respond in a way that will cause no or minimal harm to core trading data. We are also in the process of developing the back office to administer and manage the platform.

We intend to register INX Services as a broker-dealer and operate the INX Securities trading platform as an ATS for security tokens; however, at least initially, INX Services may operate as an introducing broker with an order management system and to route security token order flow to one or more third party alternative trading systems. As an introducing broker, INX Services will act in an agency capacity and will seek to obtain best execution by routing orders to one or more market centers and/or alternative trading systems.

The INX Securities trading platform will incorporate a secure trading/matching engine, which will have high frequency transaction capabilities and support a range of standard order types. We also expect to develop an API interface for broker-dealers, traders and market makers.

The architecture for the INX Securities trading platform is based on sequential processing and storage, allowing transactions to be processed one after the other, and not in parallel.

Transaction fees on the INX Securities trading platform may be paid using US dollars or INX Tokens.

INX Services has yet to identify a clearing firm to serve as a custodian which satisfies the requirements of Rule 15c3-3, known as the Customer Protection Rule. There is currently significant uncertainty regarding the application of Rule 15c3-3 and other federal securities laws and regulations to the conduct of market intermediaries that seek to facilitate the trading of security tokens. If we are not able to identify such an arrangement, or if the FINRA delays in approving our broker-dealer license as a result of our custodial relationship, such failure or delay could prevent us from developing the INX Securities trading platform or other operations of INX Services as currently envisioned. We will not be able to commence trading of security tokens on the INX Securities trading platform until we identify such a firm and receive approval from FINRA. See “Business—Overview—INX Securities Trading Platform.”

The INX Token

We have currently developed the INX Token. After the INX Securities trading platform is operational, prospective investors who have been duly identified through KYC/AML procedures may purchase and trade INX Tokens on the INX Securities trading platform. INX Token holders will be able to use the INX Token to pay INX Securities trading platform transaction fees, which are entitled to, at a minimum, a 10% discount to other forms of payment. The INX Tokens may not be used as payment for transaction fees on the INX Digital trading platform, but we intend from time to time to offer promotional discounts on transaction fees on the INX Digital trading platform to record holders of INX Tokens. Holders of INX Tokens will also be entitled to receive pro rata distributions of 40% of the Company’s cumulative Adjusted Operating Cash Flow. Commencing in 2021, distributions will be calculated on an annual basis and paid on or before April 30 to parties (other than the Company or its subsidiaries) that hold INX Tokens on the preceding March 31. Each annual distribution will be based on the Company’s cumulative Adjusted Operating Cash Flow (net of cash flows which have already formed the basis for a prior distribution), calculated as of December 31 of the year prior to the distribution. However, because each INX Token holder’s right to a pro rata distribution is based on our cumulative Adjusted Operating Cash Flow, no distribution will be made to INX Token holders, if at all, until the Company generates positive cumulative Adjusted Operating Cash Flows. As of September 30, 2019, cumulative Adjusted Operating Cash Flow was a negative cash flow of approximately $5,848,000. See “Description of INX Tokens.” In addition, there is currently no public market for the INX Tokens and there is no plan to have our INX Token trade on a national securities exchange or any other exchange or trading platform, whether within or outside the United States.

Our Growth Strategies

We believe that our operational capabilities will strengthen and expand as INX Trading Solutions completes each phase of development. This will enable us to launch several growth strategies, including the following:

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Active expansion of institutional blockchain asset trading and large-scale block transactions. The Company plans to promote our trading platforms and related services with institutional and other accredited investors such as family offices, hedge funds and others who require access to platforms for trading cryptocurrencies or security tokens, including trades in large-scale block transactions.

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Monetize market data and connectivity. We plan to serve as a hub for blockchain asset traders, institutional investors, commercial banks and individuals trading blockchain assets. As we attract more clients, we expect that we will accumulate non-proprietary big-data relating to trading behavior and related market statistics. We plan to use this data for internal use and as a product to be sold to institutional investors and trade analysts.

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Strategic opportunities. We plan to pursue strategic alliances with commercial banks and other licensed and regulated blockchain asset trading platforms for the expansion of our business. In addition, we believe that a part of our future growth strategy will include the acquisition and integration of other blockchain service providers under INX Trading Solutions.

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The INX Token. Use of the INX Token is intended to create a “virtuous cycle.” Holders of INX Tokens will be entitled to a distribution based on our net cash flow from operating activities, excluding any cash proceeds from an initial sale by the Company of an INX Token. Our profit share model makes these INX Token holders beneficiaries of the growth and success of the Company’s operations. This in turn increases the value of the INX Token and its acceptance as a method of payment on the INX Securities trading platform. In addition, the Company will reserve an additional 20% of INX Tokens received as payment of transaction fees, as long as the total amount of INX Tokens reserved does not exceed 35 million plus 50% of the number of INX Tokens sold by the Company to the public pursuant to this offering and subsequent offerings of INX Tokens (excluding re-issuances of reacquired INX Tokens), up to a maximum of 100 million INX Tokens. The Company does not intend to issue these reserved INX Tokens for general fundraising purposes; these INX Tokens may be issued to fund acquisitions, address regulatory requirements or fund the operations of the Company if the Board of Directors determines that the Company has net cash balances sufficient to fund less than six months of the Company’s operations. We intend to restrict issuances of the reserved INX Tokens to these or similar extraordinary situations to limit dilution to INX Token holders.

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Single integrated solution. We believe that developing INX Trading Solutions with the capability to provide customers with a single integrated solution to access an array of services and features will be preferred by participants in the financial services community and will attract high volume traders who need a multifunctional trading solution. We intend to bolster our competitive position by developing platforms for a wide breadth of asset classes, each platform with a suite of workflow functionalities across the entire transaction lifecycle, including pre-trade, trade and post-trade services. In the future, the Company intends to establish a platform for the trading of derivatives such as futures, options and swaps. We have taken no steps towards the establishment of such a platform, which will require the development of technological solutions as well as federal and state regulatory approvals; accordingly, there is no assurance that such a trading platform will ever be developed.

Competition

We face intense competition in the blockchain asset trading market on a global level. An ever-growing number of previously unregulated trading platforms have announced intentions to operate as a regulated broker-dealer, or as otherwise regulated entities either under the federal securities laws, U.S. state or local laws or, as applicable, the laws of other jurisdictions (outside the U.S.) such as the EU. The market for trading blockchain assets has generated considerable interest and is continually evolving with new entrants to the market. In addition, established financial institutions have expressed interest in operating regulated blockchain asset exchanges or trading platforms and utilizing blockchain assets in bank financing practices. See “Business— Competition.”

Risk Factors

Our business is subject to numerous risks, as more fully described in the section titled “Risk Factors” immediately following this prospectus summary. You should read and carefully consider these risks and all of the other information in this prospectus, including the financial statements and the related notes included elsewhere in this prospectus, before deciding whether to invest in INX Tokens. In particular, such risks include, but are not limited to, the following:

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We may not be able to develop the INX Digital and INX Securities trading platforms as contemplated or at all, or receive the regulatory approvals necessary to operate our business as currently contemplated.

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Blockchain networks represent a new and rapidly changing industry and there remains relatively limited use of blockchain networks and assets.

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Our company has no operating history and our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

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The prospect of Token holders receiving any distributions of our cumulative Adjusted Operating Cash Flow is highly uncertain.

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Blockchain technology is an emerging technology that is novel and untested.

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The legal framework of regulations applicable to blockchain technologies, cryptocurrencies, security tokens and token offerings is uncertain and evolving quickly.

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We may face significant delays in receiving a broker-dealer license as a result of our inability to identify a custodial relationship arrangement that FINRA or the SEC will approve as meeting the requirements of Rule 15c3-3.

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Tax authorities may disagree with our tax positions with regard to the Company, its business and the INX Token and may ask us to revise these positions in a manner that could adversely affect you.

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The prices of blockchain assets are extremely volatile and fluctuations in the price of blockchain assets could materially affect our profits.

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There is currently no trading market for our INX Tokens and, if a trading market were to develop, the price of the INX Tokens may be volatile.

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Valuation of the INX Token is difficult and the offering price of the INX Tokens has been arbitrarily determined based on market conditions at the time of pricing and should not be used by an investor as an indicator of the fair market value of the INX Tokens.

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The market for trading blockchain assets is still in the early stages of development and we expect to face intense competition from both regulated and unregulated blockchain asset trading platforms .

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We may not receive regulatory approval in the various jurisdictions in which we plan to operate our businesses.

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We may not be able to prevent illegal activity from occurring over our platform, which could subject us to disciplinary action, including fines.

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Our securities business and related clearing operations expose us to material default and liquidity risk.

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We rely on third party contractors for the design, development and implementation of our trading platform infrastructure.

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Systems failures or capacity constraints could materially harm our ability to conduct our operations and execute our business strategy.

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Blockchain assets and blockchain trading platforms remain susceptible to security breaches and cybercrime and the INX Token, the Company or our trading platforms may be a target of cyber security breaches or theft.

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Company private keys that allow the unilateral transfer or “freezing” of INX Tokens may be compromised.

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The tax characterization of INX Tokens is uncertain and you must seek your own tax advice in connection with purchasing INX Tokens.

Implications of Our Emerging Growth Company and Foreign Private Issuer Status

As a company with less than $1.07 billion in revenue for our year ending December 31, 2017, we qualify as an “emerging growth company” under Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the U.S. Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of certain exemptions from reporting requirements that generally apply to public companies, including the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), compliance with new standards adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring communication of critical audit matters in the independent public accounting firm report on our annual financial statements, exemption from say-on-pay, say-on-frequency, and say-on-golden parachute voting requirements, and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We have irrevocably elected not to avail ourselves of the exemption from new or revised accounting standards.

We will remain an emerging growth company until the earliest of: (i) the last day of our fiscal year during which we have total annual gross revenue of at least $1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided to emerging growth companies under the JOBS Act.

Upon completion of this offering, we will be subject to the reporting requirements of Section 15(d) of the Exchange Act, that are applicable to “foreign private issuers,” and under those requirements we will file reports with the SEC. The INX Tokens are not currently registered under the Exchange Act, but if, within 120 days after the last day of its fiscal year ended on which the Company has total assets of more than $10,000,000, the number of record holders of the INX Tokens is more than 2,000 persons, or 500 persons who are not accredited investors, the Company will be required to register the INX Tokens under the Exchange Act, in accordance with Section 12(g) of the Exchange Act, and to continue to file such reports. The Company intends to remain subject to the reporting requirements of the Exchange Act either through continued compliance with Section 15(d) of the Exchange Act or by registration of the INX Tokens in accordance with Section 12(g) of the Exchange Act.

As a foreign private issuer we are exempt from certain rules and regulations under the Exchange Act that are applicable to other public companies that are not foreign private issuers. For example, we will not be required to issue quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual report with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. We may also present financial statements pursuant to International Financial Reporting Standards (“IFRS”), instead of pursuant to U.S. generally accepted accounting principles (“U.S. GAAP” or “GAAP”). Our executive officers, directors, and principal shareholders will be exempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act. As a foreign private issuer, we will also not be subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act.

We may choose to take advantage of any, some, or all of the exemptions available to us as an emerging growth company or as a foreign private issuer. We have taken advantage of reduced reporting requirements in this prospectus.

Accordingly, the information contained in this prospectus may be different from the information you receive from other public companies in which you hold shares. Please see the section of this prospectus titled “Risk Factors—Risks Relating to our Incorporation in Gibraltar” for a description of exemptions that apply to emerging growth companies and foreign private issuers.

THE OFFERING

Security Offered		INX Tokens, an ERC20 compliant token.

Token ticker on INX Securities		INX

Total Tokens offered in this Offering		130,000,000 Tokens

Total Tokens to be outstanding (and not held by the Company) immediately after this Offering		Tokens

Minimum Offering Amount		$7,500,000; we will not complete the sale of any INX Tokens unless we raise gross offering proceeds exceeding $7,500,000 (in U.S. Dollars). See “Plan of Distribution.”

Use of Proceeds		We intend to use the net proceeds raised from the sale of INX Tokens in this offering for the continued development and operation of INX Trading Solutions, including our cryptocurrency and security token trading platforms (See “Business—Phases of Development”); 75% of the net proceeds before expenses from this offering in excess of $25 million will be used to establish and capitalize the Cash Fund for INX Trading Solutions. We intend to use the remaining amount of net proceeds from this offering for general corporate purposes and working capital. See “Use of Proceeds.”

Termination of the Offering		The offering will terminate upon the earliest to occur of: (i) the sale of all of the 130,000,000 Tokens being offered, (ii) 365 days after this registration statement is declared effective by the SEC, or (iii) such shorter period as may be determined by the Company in its sole discretion.

Uses of the INX Token on the INX Trading platforms		When used as payment of transaction fees on the INX Securities trading platform, the INX Token will entitle owners to, at a minimum, a ten percent (10%) discount as compared to fees paid using other currencies. The Company, from time to time in its sole discretion, may offer promotional incentives such as a greater discount compared to other forms of payment for transaction fees. In no case however, will the discount right included in the INX Token be less than the ten percent (10%). INX Tokens may not be used as payment for transaction fees on the INX Digital trading platform, but we intend from time to time to offer promotional discounts on transaction fees on the INX Digital trading platform to record holders of INX Tokens. See “Description of INX Tokens - Uses of the INX Token on the INX Platforms.”

Distributions on INX Tokens		Each INX Token will entitle its holder to pro rata distributions of 40% of the Company’s cumulative Adjusted Operating Cash Flow. Commencing in 2021, the distribution will be calculated on an annual basis and paid on or before April 30 to parties (other than the Company or its subsidiaries) that hold INX Tokens on the preceding March 31. Each annual distribution will be based on the Company’s cumulative Adjusted Operating Cash Flow (net of cash flows which have already formed the basis for a prior distribution), calculated as of December 31 of the year prior to the distribution. However, because each INX Token holder’s right to a pro rata distribution is based on our cumulative Adjusted Operating Cash Flow, no distribution will be made to INX Token holders, if at all, until the Company generates positive cumulative Adjusted Operating Cash Flows. As of September 30, 2019, cumulative Adjusted Operating Cash Flow was a negative cash flow of approximately $5,848,000. Distributions will be paid either in U.S. Dollars to an INX Token holder’s bank account or in Ether which will be transferred to the INX Token holders’ wallet that is recorded on the INX Token Distributed Ledger. The distribution to INX Token holders is a contractual obligation of the Company and a right of each INX Token holder of record as of March 31 of a year following a year end for which there was positive cumulative Adjusted Operating Cash Flow. However, the pro rata distribution of our cumulative Adjusted Operating Cash Flow is not self-executing and requires that our board of directors approve the Company’s financial statements and calculate such distribution in good faith. See “Description of INX Tokens - Participation Right in Adjusted Operating Cash Flow.”

Rights of INX Token Holders Upon a Failure or a Change of Control		Each INX Token held by parties other than the Company shall entitle its holder to receive a pro rata portion (based upon the number of INX Tokens then outstanding) of the Cash Fund, if any of the following occur: (1) the Company fails to operate a bona fide trading platform that permits the spot trading of Bitcoin and Ethereum by December 31, 2021, or (2) (a) a sale of all or substantially all of the assets of the Company; (b) any person or entity becoming the beneficial owner, directly or indirectly, of more than 50% of the outstanding voting interests of the Company; or (c) the closing of a merger, consolidation, recapitalization or reorganization of the Company with or into any person or entity pursuant to which the shareholders of the Company immediately prior to such transaction own less than 50% of the outstanding voting interests of the resulting entity or its parent company. See “Description of INX Tokens – Rights of INX Token Holders Upon a Failure or a Change of Control.”

Rights of INX Token Holders Upon an Insolvency Event		If (i) the Company permanently discontinues all the activities of INX Solutions and there is no successor conducting a substantially similar business that assumes the obligations of the Company with regard to the INX Tokens and (ii) an “Insolvency Event” (as defined in the INX Token Purchase Agreement) occurs, then the Company shall be deemed to be in breach of its obligations under the INX Token Purchase Agreement, which breach shall create a claim in favor of INX Token holders that may be asserted by INX Token holders against the Company in any proceeding arising from such Insolvency Event. The claim amount will be determined by the liquidator, a court of competent jurisdiction overseeing the liquidation, or some other authority pursuant to applicable insolvency law, and accordingly, there can be no assurance as to the payment amount, if any, that may be received by an INX Token Holder in settlement of such claim. The Company intends that the INX Token holders will be unsecured creditors of the Company and would therefore rank pari passu with all the other unsecured creditors of the Company and senior to the claims of holders of the Company’s shares. Further, the Company has caused current shareholders who hold approximately 79% of its issued share capital, and shall cause its future shareholders, to enter an agreement, pursuant to which such shareholders (a) irrevocably subordinate their rights to receive any distributions and payments from the Company prior to the payment in full by the Company of all distributions owed to INX Token holders, and (b) irrevocably waive and subordinate their rights, in the event of an Insolvency Event, to any cash held in the Cash Fund. However, in the case of an Insolvency Event, a liquidator, court or other applicable authority may determine that INX Token holders are not entitled to any payment from the Company’s assets or that the INX Token holders’ claims are not senior in right to claims or interests of the Company’s shareholders, in particular the shareholders who have not agreed to subordinate their rights to the claims of Token holders. In addition, the Company may incur debt (including secured debt) that ranks equally with, or senior to, the rights of INX Token holders. In the case of an Insolvency Event, holders of debt instruments ranking senior to INX Tokens, as well as holders of other preferential claims under relevant insolvency laws, may be entitled to receive payment in full before INX Token holders receive any distribution, including distributions of Adjusted Operating Cash Flow and distributions from the Cash Fund.

Tokens Reserved for Additional Issuances		The Company reserved 17,373,438 INX Tokens for sales and issuances to employees, directors, advisors and early investors in the Company. Of this amount, 1,265,500 INX Tokens have been issued and the Company has commitments to issue up to 5,908,750 additional INX Tokens (assuming an initial public offering price of $0.90 per Token, the midpoint of the price range set forth on the cover page of this prospectus). The Company has not allocated for issuance and does not intend to issue 35 million of the 200 million INX Tokens that have been created. In addition, the Company will reserve an additional 20% of INX Tokens received as payment of transaction fees, as long as the total amount of INX Tokens reserved does not exceed 35 million plus 50% of the number of INX Tokens sold by the Company to the public pursuant to this offering and subsequent offerings of INX Tokens (excluding re-issuances of reacquired INX Tokens), up to a maximum of 100 million INX Tokens. The Company does not intend to issue these reserved INX Tokens for general fundraising purposes; these INX Tokens may be issued to fund acquisitions, address regulatory requirements or fund the operations of the Company if the Board of Directors determines that the Company has net cash balances sufficient to fund less than six months of the Company’s operations. We intend to restrict issuances of the reserved INX Tokens to these or similar extraordinary situations to limit dilution to INX Token holders.

Total Tokens; No Mining		200,000,000 INX Tokens have been created. There is no mining of INX Tokens and there is no other means of creating new INX Tokens.

SUMMARY FINANCIAL DATA

The following table sets forth a summary of our consolidated statement of comprehensive loss and summary of our consolidated balance sheet data for the periods indicated. This information should be read together with our audited consolidated financial statements and related notes included elsewhere in this prospectus. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

Summary Consolidated Statements of Comprehensive Loss

(U.S. Dollars in thousands except share and per share data)

	Six Months ended June 30, 2019			Six Months ended June 30, 2018		Year ended December 31,		From September 1, (date of inception) through December 31,
	(unaudited)			(unaudited)		2018		2017
Operating expenses:
Research and development		266			204		525		56
General and administrative		1,195			1,699		3,139		530
Loss from operations		1,461			1,903		3,664		586

Fair value adjustment of INX Token and derivative liabilities		952			301		340		50
Finance expense (income)		(129	)		8		6		1

Loss and total comprehensive loss		2,284			2,212		4,010		637

Loss per share, basic and diluted		0.23			0.32		0.50		0.13

Weighted average number of shares outstanding, basic and diluted		10,102,690			7,011,176		7,948,935		4,917,166

Summary Balance Sheet Data

	June 30, 2019 (unaudited)			December 31, 2018		December 31, 2017

Total Assets		625			1,021		517
Working Capital		(1,252	)		54		62
Total Liabilities		1,877			967		455
Total Equity		(1,252	)		54		62

Investing in INX Tokens involves a high degree of risk. You should carefully consider the risks we describe below, along with all of the other information set forth in this prospectus, including the section entitled “Cautionary Note Regarding Forward-Looking Statements” and our financial statements and the related notes beginning on page F-1, before deciding to purchase INX Tokens. The risks and uncertainties described below are those significant risk factors, currently known and specific to us, that we believe are relevant to an investment in INX Tokens. If any of these risks materialize, our business, results of operations or financial condition could suffer, the price of INX Tokens could decline substantially and you could lose part or all of your investment. Additional risks and uncertainties not currently known to us or that we now deem immaterial may also harm us and adversely affect your investment in INX Tokens.

In order to participate in this offering, a purchaser must provide the Company with a digital wallet address to receive INX Tokens. We do not recommend that you purchase INX Tokens unless you have prior experience with cryptographic tokens, blockchain-based software and distributed ledger technology and unless you have received independent professional advice.

We have no operating history and our independent auditors have expressed substantial doubt about our ability to continue as a going concern. Even if this offering is successful, we may need to raise additional capital in the future to continue operations, which may not be available on acceptable terms, or at all.

We are a recently formed company established under the laws of Gibraltar with minimal activity and no historical operating results. In their report dated September 25, 2019 our independent auditors stated that our financial statements for the period ended December 31, 2018 were prepared assuming that we would continue as a going concern and they expressed substantial doubt about our ability to continue as a going concern. This doubt is based upon the Company’s current lack of resources to execute its business plan. Since our date of inception in September 2017, the Company has incurred a loss from operations and as of June 30, 2019, the Company has an accumulated deficit of $6,931,000. In addition to the accumulated deficit, we have entered into contractual arrangements committing us to future expenses, including the repayment of loans, as well as significant contingent obligations which are not currently reflected on our balance sheet. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Commitments and Contractual Obligations.” Additionally, we expect that we will incur approximately $19 million of expenses to complete the development of the two phases of development contained in our business plan. “See “Business – Phases of Development.”

This offering is subject to a minimum offering amount of $7,500,000 and we will not commence operations of INX Trading Solutions until obtaining funding through this offering. However, we may meet our minimum offering amount, close on committed purchases and have access to investor funds before we obtain the funding that we expect will be required to complete our business plan. There is no guarantee that we will be able to raise any additional capital in the future or that additional capital will be available on acceptable terms.

Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective. Our proposed operations are subject to all business risks associated with a new enterprise. The likelihood of our creation of a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the inception of a business operating in a relatively new, highly competitive, and developing industry. Even if we close this offering, there can be no assurance that we will ever generate any operating activity or develop and operate the business as planned. If we are unsuccessful at executing on our business plan, our business, prospects, and results of operations may be materially adversely affected and investors may lose all or a substantial portion of their investment.

Blockchain is a nascent and rapidly changing technology and there remains relatively small use of blockchain networks and blockchain assets in the retail and commercial marketplace. The slowing or stopping of the development or acceptance of blockchain networks may adversely affect an investment in our Company.

The development of blockchain networks is a new and rapidly evolving industry that is subject to a high degree of uncertainty. Factors affecting the further development of the blockchain industry include:

Our business model is dependent on continued investment in and development of the blockchain industry and related technologies. If investments in the blockchain industry become less attractive to investors or innovators and developers, or if blockchain networks and assets do not gain public acceptance or are not adopted and used by a substantial number of individuals, companies and other entities, it could have a material adverse impact on our prospects and our operations.

The application of distributed ledger technology is novel and untested and may contain inherent flaws or limitations.

Blockchain is an emerging technology that offers new capabilities which are not fully proven in use. There are limited examples of the application of distributed ledger technology. In most cases, software used by blockchain asset issuing entities will be in an early development stage and still unproven. As with other novel software products, the computer code underpinning the INX Tokens and Ethereum blockchain may contain errors, or function in unexpected ways. Insufficient testing of smart contract code, as well as the use of external code libraries, may cause the software to break or function incorrectly. Any error or unexpected functionality may cause a decline in value of the INX Token and result in substantial losses to purchasers of INX Tokens.

If we discover errors or unexpected functionalities in the INX Token smart contract after it has been deployed, we may make a determination that the INX Token smart contract is defective and that its use should be discontinued. Although we intend to replace the INX Token and the INX Token smart contract with a new token using a new smart contract, we may be required to take certain measures, such as freezing digital wallet addresses so that such wallets cannot transfer INX Tokens, which may disrupt trading in the INX Tokens. Such a determination and our subsequent deployment of a new smart contract and replacement token could have a material effect of the value of any investment in the INX Token or our business.

The creation and operation of digital platforms for the public trading of blockchain assets will be subject to potential technical, legal and regulatory constraints. There is no warranty that the process for receiving, use and ownership of blockchain assets will be uninterrupted or error-free and there is an inherent risk that the software, network, blockchain assets and related technologies and theories could contain undiscovered technical flaws or weaknesses, the cryptographic security measures that authenticate transactions and the distributed ledger could be compromised, and breakdowns and trading halts could cause the partial or complete inability to use or loss of blockchain assets.

Risks associated with the distributed ledger technology could affect our business directly or the market for blockchain assets generally. In either case, the occurrence of these events could have a materially adverse effect on an investment in the Company.

The open-source structure of blockchain software means that blockchain networks may be susceptible to malicious cyber-attacks or may contain exploitable flaws, which may result in security breaches and the loss or theft of blockchain assets.

Most blockchain networks operate based on some form of open-source software. An open source project is not represented, maintained or monitored by an official organization or authority. Because of the nature of open-source software projects, it may be easier for third parties not affiliated with the issuer to introduce weaknesses or bugs into the core infrastructure elements of the blockchain network. This could result in the corruption of the open-source code which may result in the loss or theft of blockchain assets.

Blockchain networks may be the target of malicious attacks seeking to identify and exploit weaknesses in the software. Such events may result in a loss of trust in the security and operation of blockchain networks and a decline in user activity which could have a negative impact on the Company.

Each blockchain network, including the Ethereum network, is dependent upon its users and contributors, and actions taken, or not taken, by the users or contributors of a blockchain network could damage its reputation and the reputation of blockchain networks generally.

Developers and other contributors to blockchain network protocols generally maintain or develop those blockchain networks, including the verification of transactions on such networks. Because the networks are decentralized, these contributors are generally not directly compensated for their actions. Therefore, most blockchain networks provide that such contributors receive awards and transfer fees for recording transactions and otherwise maintaining the blockchain network. Such fees are generally paid in the blockchain asset of that network.

The security and integrity of blockchain assets, including the value ascribed to blockchain assets, relies on the integrity of the underlying blockchain networks. We are issuing the INX Token, an ERC20 blockchain asset that is programmed using a smart contract that is compatible with the Ethereum blockchain.

If the awards and fees paid for maintenance of a network are not sufficiently high to incentivize miners, miners may respond in a way that reduces confidence in the blockchain network. To the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a transfer fee will not be recorded on the blockchain until a block is solved by a miner who does not require the payment of transfer fees. Any widespread delays in the recording of transactions could result in a loss of confidence in the blockchain network and its assets. To the extent that this occurs with regard to blockchain networks that underlie the blockchain assets traded on our platforms, including the Ethereum network, it could have a materially adverse effect on an investment in the Company. To the extent that this occurs with regard to the Ethereum network, it could have a materially adverse effect on an investment in the INX Token.

The prices of blockchain assets are extremely volatile. Fluctuations in the price of Bitcoin, Ether and/or other blockchain assets could materially and adversely affect the Company.

The prices of blockchain assets such as Bitcoin and Ether have historically been subject to dramatic fluctuations and are highly volatile. As relatively new products and technologies, blockchain assets have only recently become accepted as a means of payment for goods and services, and such acceptance and use remains limited. Conversely, a significant portion of demand for blockchain assets is generated by speculators and investors seeking to profit from the short- or long-term holding of blockchain assets.

In addition, some blockchain industry participants have reported that a significant percentage of blockchain asset trading activity is artificial or non-economic in nature and may represent attempts to manipulate the price of certain blockchain assets. For example, in a report published by Bitwise Asset Management⁷, Bitwise claimed that 95% of bitcoin trading activity appearing on 81 blockchain asset trading platforms is fake. Bitwise’s report further stated that trading platforms and blockchain asset developers are incentivized to artificially inflate trading volumes so that their platform or asset rises in league tables and gains prominence in the industry. As a result, trading platforms or blockchain assets may seek to inflate demand for a specific blockchain assets, or blockchain assets generally, which could increase the volatility of that asset or blockchain asset trading prices generally.

The market price of these blockchain assets, as well as other blockchain assets that may be developed in the future, may continue to be highly volatile. A lack of expansion, or a contraction of adoption and use of blockchain assets, may result in increased volatility or a reduction in the price of blockchain assets.

Several additional factors may influence the market price of blockchain assets, including, but not limited to:

A decrease in the price of a single blockchain asset may cause volatility in the entire blockchain industry and may affect other blockchain assets. For example, a security breach that affects investor or user confidence in Ether or Bitcoin may affect the industry as a whole and may also cause the price of other blockchain assets to fluctuate.

The value of blockchain assets and fluctuations in the price of blockchain assets could materially and adversely affect our business and investment in the Company.

The regulatory regimes governing blockchain technologies, blockchain assets and the purchase and sale of blockchain assets are uncertain, and new regulations or policies may materially adversely affect the development of blockchain networks and the use of blockchain assets.

Initially, it was unclear how distributed ledger technologies, blockchain assets and the businesses and activities utilizing such technologies and assets would fit into the current web of government regulation. As blockchain networks and blockchain assets have grown in popularity and in market size, international, federal, state and local regulatory agencies have begun to clarify their position regarding the sale, purchase, ownership and trading of blockchain assets.

Regulation of the trading of blockchain assets has evolved significantly over the past year. On November 16, 2018, the Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets issued the Statement on Digital Asset Securities Issuance and Trading, confirming the applicability of the federal securities law framework to new and emerging technologies, such as blockchain assets. The Statement summarized the Commission’s stance with regard to actors and institutions that sell security tokens in initial offerings or develop and facilitate the secondary market for security tokens. Although the Statement provides additional guidance to participants in the blockchain asset marketplace, in general the regulation of blockchain assets under the current regulatory framework applicable to currencies or securities remains in its early stages and is subject to uncertainty.

In addition, various legislative and executive bodies in the United States and in other countries have shown that they intend to adopt legislation to regulate the sale and use of blockchain assets. Such legislation may vary significantly among jurisdictions, which may subject participants in the blockchain trading marketplace to different and perhaps contradictory requirements.

New or changing laws and regulations or interpretations of existing laws and regulations, in the United States and elsewhere, may materially and adversely impact the development and growth of blockchain networks and the adoption and use of blockchain assets. The imposition of restrictions on all blockchain assets, or certain blockchain assets, could affect the value, liquidity and market price of blockchain assets subject to heighten regulation, by limiting access to marketplaces or exchanges on which to trade such blockchain assets, or imposing restrictions on the structure, rights and transferability of such blockchain assets. Some governments may seek to ban transactions in blockchain assets altogether. See “Business—Regulatory Oversight of Blockchain Assets.”

The Company may be prevented from entering, or it may be required to cease operations in, a jurisdiction that makes it illegal or commercially unviable or undesirable to operate in such jurisdiction. Enforcement, or the threat of enforcement, may also drive a critical mass of participants and trading activity away from regulated markets, such as those provided by INX Trading Solutions, and toward unregulated exchanges. Although it is impossible to predict the positions that will be taken by certain governments, any regulatory changes affecting blockchain assets could be substantial and materially adverse to the development and growth of our business and investment in the Company.

Our ability to develop INX Trading Solutions faces operational, technological and regulatory challenges and we may not be able to develop the INX Trading Solutions as contemplated or at all.

We may not be able to develop INX Trading Solutions, including the INX Digital and INX Securities trading platforms, as contemplated by our business model or at all. In addition, a number of factors could materially adversely affect our ability to commercialize and generate any revenue from our proposed INX Trading Solutions platforms.

The development, structuring, launch and maintenance of our trading platforms could lead to unanticipated and substantial costs, delays or other operational or financial difficulties. Our proposed platforms are complex and their creation requires the integration of multiple technologies and the development of new software. There can be no assurance that we will have the financial and technological resources necessary to complete the development of our trading platforms if their development costs more than we have estimated or requires technology and expertise that we do not have and cannot develop. Even if we are able to develop INX Trading Solutions as contemplated, we may not be able to develop our platforms on a timely basis.

Further, there can be no assurance that our platforms will gain the acceptance of customers or other market participants. Because blockchain asset trading is in its early stages, it is difficult to predict the preferences and requirements of blockchain asset traders and our platform design and technology may be incompatible with new or emerging forms of blockchain assets or related technologies. Failure to achieve acceptance would impede our ability to develop and sustain a commercial business.

In addition, there can be no assurance that our platform will qualify for registrations that we are seeking or we plan to seek with the SEC, FINRA, U.S. state regulators and various other regulatory bodies both in the U.S. and in other countries. We intend that one of our subsidiaries, INX Digital, will apply for state money transmitter licenses in order to operate a trading platform for cryptocurrencies. In addition, we intend that another of our U.S. subsidiaries, INX Services, will register as a broker-dealer to act as an introducing broker and subsequently to operate an alternative trading system for security tokens. In addition, if in the future we determine to proceed with the establishment of a platform for the trading of derivatives, we would be required to seek registrations with other regulatory bodies, such as the CFTC.

We may fail to qualify for registrations under any of these authorities or we may be required to alter our business model as currently contemplated in order to meet the requirements of these regulatory authorities. Either of these results would have a broad impact on us and could have a material adverse effect on our businesses, financial condition, results of operations and prospects and, as a result, investors could lose all or most of their investment.

Because distributions to the INX Token holders are dependent on our cash flow, our failure to develop the INX Trading Solutions platforms, failure of the INX Trading Solutions platforms to gain regulatory approvals or failure of the INX Trading Solutions platforms to gain acceptance may prevent us from paying a distribution to the INX Token holders. Further, our failure to develop the INX Securities trading platform would prevent INX Token holders from using INX Tokens as payment for transaction fees on the INX Securities trading platform. Such adverse effects would impact the utility, liquidity, and the trading price of INX Tokens and potentially render INX Tokens worthless.

INX Securities trading platform depends upon security tokens being transferred to and held by a custodian before being traded on our INX Securities trading platform; however, we have been unsuccessful in identifying a custodian relationship that the SEC has determined will satisfy our obligations under Rule 15c3-3 of the Exchange Act with regard to providing custodial services for security tokens.

The model for our INX Securities trading platform envisions that security tokens traded on the platform will be transferred to a digital wallet held by one of our custodians, which transfer is recorded on the blockchain ledger that underlies such security token. Once a security token is deposited with our custodian, trades on our INX Securities trading platforms will be recorded only on our internal centralized servers, and they will not be recorded on a blockchain ledger.

Exchange Act Rule 15c3-3, known as the Customer Protection Rule, imposes several obligations on securities brokers and dealers, including an obligation to obtain possession or control of securities that its customers have purchased. After registering as a broker-dealer, INX Services plans to meet its obligations under Rule 15c3-3 with regard to security tokens traded by its customers by engaging a custodian and delivering the majority of its customers’ security tokens to a segregated account controlled by such custodian. Prior to obtaining a broker-dealer license, INX Services is required to demonstrate that it is able to comply with Rule 15c3-3.

There is currently significant uncertainty regarding the application of Rule 15c3-3 and other federal securities laws and regulations to market intermediaries that seek to facilitate the trading of security tokens. On July 8, 2019, the SEC Division of Trading and Markets and FINRA Office of General Counsel issued the Joint Staff Statement on Broker-Dealer Custody of Digital Assets, stating that established laws and practices that the Staffs recognize as enabling broker-dealers to comply with aspects of the Customer Protection Rule may not be available or effective in the case of blockchain assets. We have yet to identify a custodial arrangement for the secure holding of security tokens that FINRA or the SEC will approve as meeting the requirements of Rule 15c3-3.

If we are not able to identify such an arrangement, or if the FINRA delays in approving our broker-dealer license as a result of our custodial relationship, such failure or delay could prevent us from developing the INX Securities trading platform or other operations of INX Services as currently envisioned. This would have a material adverse effect on the ability to use the INX Token as a means of payment for transaction fees on the INX Securities trading platform, and would further negatively affect our businesses, financial condition, results of operations and prospects and, as a result, investors could lose all or most of their investment.

We expect to face intense competition from other companies and, if we are not able to successfully compete, our business, financial condition and operating results will be materially harmed.

We expect to encounter competition in all aspects of our business, including from entities having substantially greater capital and resources, offering a wide range of products and services and in some cases operating under a different and possibly less stringent regulatory regime.

We will face competition from other securities, futures and securities option exchanges; over-the-counter markets (OTC); clearing organizations; large industry participants; swap execution facilities; alternative trade execution facilities; technology firms, including electronic trading system developers, and others. New entrants may enter the market with alternative methods of providing trade execution and related services, and existing competitors may launch new initiatives.

Many of these competitors have greater financial, marketing, technological and personnel resources than we do. In addition, many of our competitors may offer a wider range of bundled services, have broader name recognition, and have larger customer bases than we do.

Our ability to develop competitive advantages will require continued enhancements to our products, investment in the development of our services, additional marketing activities and enhanced customer support services. There can be no assurance that we will have resources to make sufficient investments in the development of our services, that our competitors will not devote significantly more resources to competing services or that we will otherwise be successful in developing market share. If competitors offer superior services, our market share could be affected and this would adversely impact our business and results of operations.

Failure to keep up with rapid changes in industry-leading technology, products and services could negatively impact our results of operations.

The financial services industry is subject to rapid technological change and evolving industry standards. User demands become greater and more sophisticated as the dissemination of products and information to customers increases. If we are unable to anticipate and respond to the demand for new services, products and technologies, innovate in a timely and cost-effective manner and adapt to technological advancements and changing standards, we may be unable to compete effectively, which could have a material adverse effect on our business. Many of our competitors have significantly greater resources than we do to fund research and development initiatives. Moreover, the development of technology-based services is a complex and time-consuming process. New products and enhancements to existing products can require long development and testing periods. Significant delays in new product releases, failure to meet key deadlines, or significant problems in creating new products could negatively impact our revenues and profits.

We may not receive regulatory approval in the various jurisdictions in which we plan to operate our businesses.

We are seeking or we plan to seek registrations with the SEC, FINRA, U.S. state regulators and various other regulatory bodies both in the U.S. and in other countries. We intend that one of our subsidiaries, INX Digital, will apply for state money transmitter licenses in order to operate a trading platform for cryptocurrencies. In addition, we intend that another of our U.S. subsidiaries, INX Services, will register as a broker-dealer to act, at least initially, as an introducing broker and subsequently to operate INX Securities as an ATS for security tokens.

To establish INX Securities as an ATS, INX Services will be required to file a Form ATS with the SEC. The Form ATS will include a description of the processes, rules and procedures that will govern the trading of security tokens on the INX Securities trading platform.

However, there is currently significant uncertainty regarding the application of federal and state laws to the trading of digital assets, including regulations governing the conduct of market intermediaries to the trading of security tokens. In addition, such processes, rules and procedures remain subject to our further development of the INX Securities trading platform infrastructure. These and other factors may cause significant delay or may prevent us from developing our trading platforms, including the development of the INX Securities trading platform as an ATS as currently envisioned.

If we fail to qualify with any of these authorities, we may be unable to execute our business plan as a provider of financial services. This would have a broad impact on us and could have a material adverse effect on our businesses, financial condition, results of operations and prospects and, as a result, investors could lose all or most of their investment. In addition, any such action could also cause us significant reputational harm, which, in turn, could seriously harm the Company.

Firms in the financial services industry have experienced increased scrutiny in recent years. Such regulatory or other actions may lead to penalties, fines, disbarment and other sanctions which could place restrictions or limitations on our operations and otherwise have a material adverse effect on our businesses.

The securities markets and the brokerage industry in which we operate are subject to extensive, evolving regulation that imposes significant costs and competitive burdens that could materially impact our business.

Most aspects of our broker-dealer operations will be highly regulated, including regulated oversight over sales and reporting practices, operational compliance, capital requirements and licensing of employees. Accordingly, we face the risk of significant intervention by regulatory authorities such as the SEC and FINRA in the U.S. and their equivalents in other countries.

Compliance with regulations may require us and our customers to dedicate significant financial and operational resources that could result in some participants leaving our markets or decreasing their trading activity, which would negatively affect our profitability. We expect to continue to incur significant costs to comply with the extensive regulations that apply to our business.

See “Business—Regulation of Our Trading Platform” for a description of potential regulation of our business.

As we expand our business, we may be exposed to increased and different types of regulatory requirements. We may become subject to new regulations or changes in the interpretation or enforcement of existing regulations, which may adversely affect our business. Also, regulatory changes that impact how our customers conduct their business may impact our business and results of operations. The U.S. federal government and other governments outside of the United States may implement new or revised regulatory requirements for the financial services industry. Any changes to the regulatory rules could cause us to expend more significant compliance, business and technology resources, incur additional operational costs and create additional regulatory exposure.

If we fail to comply with applicable laws, rules or regulations, we may be subject to censure, fines, cease-and-desist orders, suspension of our business, removal of personnel or other sanctions, including revocation of our broker-dealer registrations.

The extent to which blockchain assets are used to fund criminal or terrorist enterprises or launder the proceeds of illegal activities could materially impact our business.

The potential, or perceived potential, for anonymity in transfers of bitcoin and similar blockchain assets, as well as the decentralized nature of blockchain networks, has led some terrorist groups and other criminals to solicit bitcoins and other blockchain assets for capital raising purposes. As blockchain assets have grown in both popularity and market size, the U.S. Congress and a number of U.S. federal and state agencies have been examining the operations of blockchain assets, their users and exchanges, concerning the use of blockchain assets for the purpose of laundering the proceeds of illegal activities or funding criminal or terrorist enterprises.

In addition to the current market, new blockchain networks or similar technologies may be developed to provide more anonymity and less traceability. There is also the potential that other blockchain asset trading platforms may court such illicit activity by not adhering to know-your-customer and anti-money laundering practices.

We may not be able to prevent illegal activity from occurring over our platforms. We may be unable to detect the unauthorized use of a KYC/AML vetted account on one of our platforms. Further, we may be unable to verify whether private keys for wallets containing INX Tokens have been transferred to third parties who have not completed our KYC/AML process. Although we plan to implement procedures that will ensure that we remain in compliance with our KYC/AML obligations, we may not be successful in deterring or identifying illegal activity.

The use of blockchain assets for illegal purposes, or the perception of such use, over our platforms or on other trading platforms could result in significant legal and financial exposure, damage to our reputation, damage to the reputation of blockchain assets and a loss of confidence in the services provided by our platforms and the blockchain asset community as a whole. Our failure to meet our KYC/AML requirements could result in regulatory penalties which could have a materially adverse effect on our business.

We may not have sufficient cash flow from operating activities, cash on hand and the ability to obtain borrowing capacity to finance required capital expenditures, fund strategic initiatives and meet our other cash needs. These obligations require a significant amount of cash, and we may need additional funds, which may not be readily available.

The viability of our business will be dependent on the availability of adequate capital to develop and maintain our business and meet our regulatory capital requirements. We will need to continue to invest in our operations for the foreseeable future to carry out our business plan. If INX Trading Solutions does not attract clients and does not achieve the expected operating results, we will need to seek additional financing or revise our business plan. Our ability to borrow additional funds may be impacted by financial lending institutions’ ability or willingness to lend to us on commercially acceptable terms.

Low levels of operating cash flow together with limited access to capital or credit in the future could have an impact on our ability to meet our regulatory capital requirements, invest in our software and infrastructure, engage in strategic initiatives, make acquisitions or strategic investments in other companies, react to changing economic and business conditions, repay our outstanding debt, or make dividend payments. Such outcomes could have an adverse effect on our business, financial condition and operating results.

Our business model depends, in part, on our ability to resell INX Tokens received as payment for transaction fees by INX Services. Resales by the Company of such Tokens require compliance with the registration requirements of the Securities Act. If we are unable to register such Tokens, there may not be a sustainable market in INX Tokens and we may be unable to execute our business plan.

We anticipate that users of the INX Securities trading platform will be incentivized to use INX Tokens as payment for transaction fees on the platform. Because only a finite amount of INX Tokens exist, Tokens received as payment will reduce the availability of INX Tokens unless the Company resells Tokens pursuant to a future primary offering. We intend to file one or more registration statements to register for re-issuance of INX Tokens which INX Services receives as payment for transaction fees on the INX Securities trading platform, however the Company may not be eligible to do so, may experience delays in preparing these registration statements or having these registration statements declared effective, or may not succeed in selling additional INX Tokens, either in registered offerings or offerings that are exempt from registration. If the Company is unable to re-issue INX Tokens received as payment for transaction fees, holders of INX Tokens may have reduced liquidity and the operations of INX Services and the INX Securities trading platform, and our business in general, may be adversely affected.

Our securities business and related clearing operations expose us to material default and liquidity risk.

We plan to self-clear blockchain asset transactions. Our clearing broker operations will expose us to counterparties with differing risk profiles. We plan to guarantee transactions submitted by our clearing broker with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional customers.

We may be required to finance our clients’ unsettled positions and we could be held responsible for the defaults of our clients. Default by our clients may also give rise to our incurring penalties imposed by execution venues, regulatory authorities and clearing and settlement organizations.

Regulatory agencies have recently required clearing and settlement organizations to increase the level of margin deposit requirements and they may continue to do so in the future. Growth in trading activity may lead to higher regulatory capital requirements. We cannot assure you that these capital requirements will be sufficient to protect market participants from a default or that we will not be adversely affected in the event of a significant default.

Broker-dealers are also subject to regulatory capital requirements promulgated by the applicable regulatory and exchange authorities of the countries in which they operate. The failure to maintain required regulatory capital may lead to suspension or revocation of a broker-dealer registration and suspension or expulsion by a regulatory body. If existing cash together with cash from operations are not sufficient, we may need to reject orders from clients and we may ultimately breach regulatory capital requirements.

Furthermore, if our broker-dealer subsidiaries are subject to new or modified regulatory capital rules or requirements, or fines, penalties or sanctions due to increased or more stringent enforcement, it could materially limit or reduce the liquidity we may need to expand or even maintain our then-present levels of business, which could have a material adverse effect on our business, results of operations and financial condition.

We may be unable to raise sufficient funds to maintain minimum net capital that meets regulatory requirements. Further, our commitment to reserve net proceeds before expenses from this offering to establish the Cash Fund may limit our ability to invest in our future growth.

Once INX Services is registered as a broker-dealer, it must maintain minimum net capital that satisfies the requirements under Rule 15c3-1 under the Exchange Act. Depending upon our future business activities, we may become subject to additional capital requirements in the United States or other foreign jurisdictions in which we may conduct business in the future.

In addition, we are committed to reserve 75% of the net proceeds before expenses from this offering in excess of $25 million to be available to cover customer and Company losses, if any, that result from cybersecurity breaches or theft, errors in execution of the trading platform or its technology, and counterparty defaults, including instances where counterparties lack sufficient collateral to cover losses. We refer to this amount as our “Cash Fund.” The Cash Fund is intended to provide additional comfort to our customers with respect to the financial stability of the Company.

We do not currently have any cash reserves. In addition, we intend to use the first $25 million of net proceeds before expenses raised from this offering for the continued development and operation of INX Trading Solutions. This offering is subject to a minimum offering amount of $7,500,000 and we may close on committed purchases and gain access to committed funds at any time after the gross proceeds from this offering meet our minimum offering amount. Therefore, we cannot guarantee that we will have any material amount of cash reserves after the completion of this offering.

Current and future regulations may require us to accumulate capital reserves in our subsidiaries which could limit our ability to carry on or expand our operations or may result in higher than anticipated costs for financing our operations. If we fail to maintain the required levels of capital, we may be required to suspend our broker-dealer operations during the period that we are not in compliance with capital requirements. If our reserves are insufficient to cover our future liabilities, we may be required to raise additional capital. Any one or all of these outcomes may have a material effect on our business.

There can be no assurance that we will have sufficient assets or that we will be able to obtain and maintain liability insurance on acceptable terms or with adequate coverage to cover our liabilities.

If our platform or the INX Token is alleged to have a flaw or is hacked such that our customers suffer significant losses, we may be subject to significant liability claims or regulatory action. We are committed to reserve 75% of the net proceeds before expenses from this offering in excess of $25 million to be available to cover customer and Company losses, if any, that result from cybersecurity breaches or theft, errors in execution of the trading platform or its technology, and counterparty defaults, including instances where counterparties lack sufficient collateral to cover losses. The Company will utilize the Cash Fund only in response to these events. However, the Cash Fund may be insufficient to cover all losses associated with significant liability claims. Further, the Company does not plan to replenish the Cash Fund after this offering and after it has been used for these purposes.

Further, we do not currently have insurance to cover potential losses that may occur on our platform. Insurance coverage against such losses is expensive and may not be available on acceptable terms, or at all. Available insurance coverage may be subject to unfavorable terms and conditions and require payments of significant deductibles, or it may not be sufficient to cover all losses in the case of a claim. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential liability claims could result in us becoming subject to significant liabilities that are uninsured.

We may experience systems failures or capacity constraints that could materially harm our ability to conduct our operations and execute our business strategy.

We will be heavily dependent on the capacity, reliability and security of the computer and communications systems and software supporting our operations. We plan to receive and/or process a large portion of our trade orders through electronic means, such as through public and private communications networks. Our systems, or those of our third party providers, may fail or be shut down or, due to capacity constraints, may operate slowly, causing one or more of the following to occur:

If any of our systems do not operate properly, are compromised or are disabled, including as a result of system failure, employee or customer error or misuse of our systems, we could suffer financial loss, liability to customers, regulatory intervention or reputational damage that could affect demand by current and potential users of our market.

We will need to continue to upgrade, expand and increase the capacity of our systems as our business grows and as we execute our business strategy. Although many of our systems are designed to accommodate additional volume and products and services without redesign or replacement, we will need to continue to make significant investments in additional hardware and software to accommodate the increases in volume of transactions and order transaction traffic and to provide processing services to third parties. If we cannot increase the capacity and capabilities of our systems to accommodate an increasing volume of transactions and to execute our business strategy, our ability to maintain or expand our businesses would be adversely affected.

We regard the secure transmission of confidential information and the ability to continuously transact and clear on our electronic trading platforms as critical elements of our operations. Our technology, our people and those of our third party service providers and our customers may be vulnerable to targeted attacks, unauthorized access, fraud, computer viruses, denial of service attacks, terrorism, firewall or encryption failures and other security problems. Attackers may seek to steal information about our technology, financial data or user information or take other actions that would be damaging to the Company and/or holders of INX Tokens.

In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs.

The INX Token Distributed Ledger is publicly available and contains encrypted personal information. The misuse or theft of this information may give rise to breaches of privacy laws, fines and sanctions.

For many blockchain assets, distributed ledgers are used to record transfers of ownership of the asset. Information regarding ownership is most commonly represented by ledger balances and an owner’s public wallet address. Such information includes the complete transfer history from the inception of the respective blockchain asset and such information regarding ownership of the assets, including the public wallet address, is generally available to the public. For many blockchain assets, personal identifying information that is used to associate a public wallet address with its owner is typically maintained in a separate database that is not exposed to the public.

The INX Token smart contract contains a feature whereby encrypted personal information is stored within the token smart contract (rather than a private, centralized database). The Company will hold a private key which will enable decryption of such personal information.

There are a number of data protection, security, privacy and other government- and industry-specific requirements that are implicated by utilizing a distributed ledger. If blockchain networks are unable to satisfy data protection, security, privacy, and other government-and industry-specific requirements, their growth could be harmed.

Further, if the key which enables decryption of personal information becomes comprised, personally identifiable information of INX Token holders may be revealed. Security breaches with respect to the holders’ personal identity information database could result in theft of the information necessary to link personal identity with public keys, and thus the stolen information could be used to determine the affected holder’s complete transfer history. Concerns over these issues may limit adoption of this novel trading system by a range of potential investors, reducing liquidity of blockchain assets.

Security attacks against the Company could result in a loss of the Company’s blockchain assets, including the INX Tokens, theft of personal information of our customers or damage to our reputation and our brand, each of which could adversely affect an investment in the Company. We could be required to incur significant expense to protect our systems and/or investigate any alleged attack.

Security breaches, computer malware and computer hacking attacks have been a prevalent concern since the launch of blockchain networks. Since 2011, more than $1.7 billion has been publicly reported stolen from cryptocurrency exchanges and investors. For example, in January 2018, about $500 million worth of blockchain assets were stolen from a major Japanese trading platform⁸. Our security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee of ours, or otherwise. Techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be designed to remain dormant until a predetermined event. Outside parties may also attempt to fraudulently induce employees of ours to disclose sensitive information in order to gain access to our infrastructure. Furthermore, we believe that, as our assets grow, the Company may become a more appealing target for security threats such as hackers and malware.

In addition, the Company will hold private keys that allow it or its transfer agent, as applicable, the ability to “freeze” or reject automatically any digital wallet address from participating in transfers of INX Tokens, or unilaterally transfer INX Tokens out of a third-party digital wallet. If such private keys are compromised, all owners of INX Tokens are at risk of losing the ability to transfer their INX Token out of their digital wallet or they may have their INX Token transferred out of their digital wallet without their permission. See “Description of INX Tokens – Technical Features of the INX Token.”

Our security measures may prove insufficient depending upon the attack or threat posed. We may be unable to anticipate these techniques or implement adequate preventative measures. As a result, an unauthorized party may obtain access to our private keys, company and customer data or blockchain assets.

Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the services we provide that could potentially have an adverse effect on our business, while resulting in regulatory penalties or the imposition of burdensome obligations by regulators. In the event of a security breach, we may be forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect an investment in the Company.

The loss of key personnel, particularly Mr. Shy Datika, our President, could have a material adverse effect on us.

Our success depends solely on the continued services of key personnel, particularly Mr. Shy Datika, one of our founders, our controlling shareholder and President, who has extensive market knowledge and long-standing industry relationships. In particular, our reputation among and our relationships with key blockchain industry leaders are the direct result of a significant investment of time and effort by Mr. Datika to build credibility in a highly specialized industry. The loss of services of Mr. Shy Datika could diminish our business and growth opportunities and our relationships with key leaders in the blockchain industry and could have a material adverse effect on us.

Our business will be adversely affected if we are unable to attract and retain talented employees, including sales, technology, operations and development professionals.

Our business operations will require highly specialized knowledge of the financial industry and of technological innovation as it applies to the financial industry. If we are unable to hire or retain the services of talented employees, including executive officers, other key management and sales, technology, operations and development professionals, we would be at a competitive disadvantage. In addition, recruitment and retention of qualified staff could result in substantial additional costs. The loss of the services of one or more of our executive officers or other key professionals or our inability to attract, retain and motivate qualified personnel, could have a material adverse effect on our ability to operate our business.

We have not identified all the persons that we will need to hire to provide services and functions critical to the development of the business and no assurance can be given that we will be able to hire the necessary persons on acceptable terms, if at all.

Our business is in its developmental stage and we have not identified all the persons that we will need to hire to provide services and functions critical to the development of the business. If we are unable to hire persons with the necessary expertise on terms acceptable to us then we will not be able to develop INX Trading Solutions as contemplated. Further, even if we are able to hire such service providers, they might be unable to meet our specifications and requirements, which could have a material adverse effect on our ability to develop and launch our business plan.

As a financial services provider, we will be subject to significant litigation risk and potential commodity and securities law liability.

Many aspects of our business involve substantial litigation risks. We could be exposed to substantial liability under federal and state laws and court decisions, as well as rules and regulations promulgated and/or direct actions brought by the SEC, state securities regulators and other U.S. regulatory agencies.

These risks include, among others, potential liability from disputes over terms of a trade, the claim that a system failure or delay caused monetary losses to a customer, that we entered into an unauthorized transaction, that we provided materially false or misleading statements in connection with a transaction or that we failed to effectively fulfill our regulatory oversight responsibilities. We may be deemed an underwriter under the Securities Act with regard to our role and involvement with respect to any initial offerings of securities on the INX Securities trading platform, and our failure to comply with applicable federal securities laws may expose us to legal liability. We may be subject to disputes regarding the quality of trade execution, the settlement of trades or other matters relating to our services. We may become subject to these claims as a result of failures or malfunctions of our systems and services we provide.

We could incur significant legal expenses defending claims, even those without merit. In addition, an adverse resolution of any future lawsuit or claim against us could have a material adverse effect on our business and our reputation. To the extent we are found to have failed to fulfill our regulatory obligations, we could lose our authorizations or licenses or become subject to conditions that could make future operations more costly and impairing our profitability.

Our compliance and risk management programs might not be effective and may result in outcomes that could adversely affect our reputation, financial condition and operating results.

Our ability to comply with applicable laws and rules is largely dependent on our establishment and maintenance of compliance, review and reporting systems, as well as our ability to attract and retain qualified compliance and other risk management personnel. We face the risk of significant intervention by regulatory authorities, including extensive examination and surveillance activity.

We cannot assure you that our compliance policies and procedures will always be effective or that we will always be successful in monitoring or evaluating our risks. In the case of alleged non-compliance with applicable laws or regulations, we could be subject to investigations and judicial or administrative proceedings that may result in substantial penalties or civil lawsuits, including by customers, for damages, which could be significant. Any of these outcomes may adversely affect our reputation, financial condition and operating results.

Operational risks, such as misconduct and errors of our employees or entities with which we do business, are difficult to detect and deter and could cause us reputational and financial harm.

Our employees and agents could engage in misconduct which may include conducting in and concealing unauthorized activities, improper use or unauthorized disclosure of confidential information. We are at risk that our employees may engage in insider trading of the digital assets listed on one of our platforms which may lead to corporate actions, such as a suspension of trading, and legal actions that could have an adverse effect on the Company.

Further, our employees could make errors in recording or executing transactions for customers which would cause us to enter into transactions that customers may disavow and refuse to settle.

It is not always possible to deter misconduct by our employees, and the precautions we take to prevent and detect this activity may not be effective in all cases. Our ability to detect and prevent errors or misconduct by entities with which we do business may be even more limited. Such misconduct could subject us to financial losses or regulatory sanctions and materially harm our reputation, financial condition and operating results.

Our operations of businesses outside of the United States and our acceptance of currencies other than the U.S. Dollar will subject us to currency risk.

Once we commercialize our INX Trading Solutions model, we intend to expand globally and portions of our revenues and expenses will be denominated in currencies other than the U.S. dollar. In addition, the Company and its subsidiaries will accept various currencies as payment for the purchase of the INX Tokens or fees for services. Because our financial statements are presented in U.S. dollars, we must translate non-U.S. dollar denominated revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. These fluctuations may materially impact the translation of our non-U.S. results of operations and financial condition.

Increases or decreases in the value of the U.S. dollar against these other currencies may affect our operating results and the value of assets and liabilities denominated in foreign currencies.

We will accept certain cryptocurrencies as payment for the purchase of INX Tokens and fees for services. Our holding of these cryptocurrencies will subject us to risks due to fluctuations in the value of these cryptocurrencies.

We may accept certain cryptocurrencies as payment for the purchase of INX Tokens and as payment for fees for services. These cryptocurrencies will be held until sold. Proceeds from the sale of such cryptocurrencies will be dependent on the U.S. dollar trading value for the respective cryptocurrency based on the relevant market or markets for that cryptocurrency. Decreases in the trading value of a cryptocurrency while it is held by us will result in a decrease in the operating results of the Company.

We may not be able to successfully execute our business strategy if we are deemed to be an investment company under the Investment Company Act of 1940.

In general, under the Investment Company Act, a U.S. company that does not qualify to use one of the “private investment company” (or other specialized) exemptions from investment company status, that has made (or proposes to make) a public offering of its securities and that is, or hold itself out as being, engaged primarily in the business of investing, reinvesting or trading in securities must register, and is subject to regulation, as an investment company under that Act. In addition, in general, investment company status may apply (again, unless a specialized exemption is available) because a company owns “investment securities” (essentially, non-controlling interests in other companies’ securities or controlling interests in companies that have the characteristics of an investment company) constituting more than 40% of the value of the investing company’s unconsolidated assets (disregarding U.S. government securities and “cash items”). We intend that our future activities will not cause us to be considered an investment company.

We may accept certain cryptocurrencies (Bitcoin or Ether) as payment for the purchase of INX Tokens and hold these cryptocurrencies until sold. Further, we intend that our subsidiaries, INX Digital and INX Services, will engage in the trading of cryptocurrencies and security tokens, respectively. During the initial operations of the Company, we intend that INX Digital will trade only cryptocurrencies, such as Bitcoin and Ether, that we have determined, after investigation, not to be securities. After INX Services, or a different U.S. subsidiary, is able to register as a broker and alternative trading system, we expect that it will engage in trading security tokens that will constitute securities, but that INX Services (or such subsidiary) will qualify to utilize an exemption from investment company status under Section 3(c)(2) of the Investment Company Act that applies to entities “primarily engaged in the business of underwriting and distributing securities issued by other persons, selling securities to customers, acting as broker, and acting as market intermediary, or any one or more of such activities, whose gross income normally is derived principally from such business and related activities.”

Accordingly, we believe that the cryptocurrencies that we or our subsidiaries will own and trade in will not be securities. In the case of trading in security tokens by a subsidiary that qualifies to use the Section 3(c)(2) exemption from investment company status, our ownership interest in that subsidiary will not constitute an “investment security” (as a result of the availability of the exemption). As a result, we believe we will not be primarily engaged in the business of investing, reinvesting or trading in securities and that investment securities will not constitute more than 40% of the unconsolidated value of our total assets after eliminating holdings in U.S. government securities and cash items.

While we believe that our business activities will not cause us to be an investment company, if we were deemed to be, and were required to register as, an investment company, we would be forced to comply with substantive requirements under the Investment Company Act, including limitations on our ability to borrow, limitations on our capital structure, limitations on our ability to issue additional common stock, restrictions on acquisitions of interests in associated companies, prohibitions on transactions with affiliates, restrictions on specific investments, and compliance with governance, reporting, record keeping, voting, proxy disclosure and other statutory requirements and related rules and regulations. If we were forced to comply with those requirements, we would be required to change our structure and future operations from our current plans, could be prevented from successfully executing our business strategy and could be required to cease business.

We will need to implement strict finance and accounting systems, procedures and controls to operate our business.

We will be required to comply with a variety of reporting, accounting and other rules and regulations. Compliance with these requirements will be expensive. We will need to implement strict finance and accounting systems, procedures and controls to satisfy our reporting requirements and these requirements may increase our costs and require additional management time and resources. However, as an “emerging growth company” as defined in the JOBS Act we may not be required to, among other things, provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act or comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). Prior to the closing of this offering, we have not completed an assessment, nor have our auditors tested, our systems of internal controls. For as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. If our internal controls have undetected weaknesses or our internal control over financial reporting is determined to be ineffective, such failure could cause investors to lose confidence in our reported financial information, negatively affect the market price of the INX Token and adversely impact our business and financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Controls and Procedures.”

Developing and maintaining our reputation is critical to attracting and retaining customers and investors and for maintaining our relationships with our regulators. Our success depends on our ability to complete development of, successfully implement and maintain the electronic trading systems that have the functionality, performance, reliability and speed required by our customers. We must swiftly and effectively construct the INX Digital and INX Securities trading platform to remain competitive.

Negative publicity regarding our Company, INX Tokens, our key personnel or blockchain assets generally, whether based upon fact, allegation or perception and whether justified or not, could give rise to reputational risk which could significantly harm our business prospects.

We, as well as many of our potential customers, depend on third party suppliers and service providers for a number of services that are important. An interruption or cessation of an important supply or service by any third party could have a material adverse effect on our business, including revenues derived from our customers’ trading activity.

We will depend on a number of suppliers, such as banking, clearing and settlement organizations, on-line service providers, data processors, and software and hardware vendors, for elements of our trading, clearing and other systems, as well as communications and networking equipment, computer hardware and software and related support and maintenance. We also depend on third parties to provide Internet, telecommunication and fiber optic network connectivity to our data centers. Many of our customers rely on third parties, such as independent software vendors, to provide them with front-end systems to access our platform and other back office systems for their trade processing and risk management needs.

We cannot guarantee that these service providers will make the necessary monetary and time investments to provide services for our INX Trading Solutions model and changes to our interfaces and functionality that occur as we develop our business. To the extent any of our service providers or the organizations that provide services to our customers in connection with their trading activities cease to provide these services in an efficient, cost-effective manner or fail to adequately expand their services to meet our needs and the needs of our customers, we could experience decreased trading volume, lower revenues and higher costs which could adversely affect an investment in the Company.

Our revenues and profits will be substantially dependent on the trading volume in our markets. Our revenues and profits would be adversely affected if we are unable to develop and continually increase our trading volume once INX Trading Solutions becomes operational.

The success of our business depends, in part, on our ability to develop then continually increase our trading volume; develop and expand our product offerings or execution facilities; and attract new customers. Our success also depends on our ability to offer competitive prices and services in an increasingly price-sensitive business.

We cannot provide assurances that we will be able to develop and expand product lines, that we will be able to attract and retain customers or that we will be able to modify our pricing structure to compete effectively.

Trading volumes on blockchain asset trading platforms have historically been volatile. Such volatility may be the result of various factors, including fluctuations in the price of blockchain assets or periods of rapid expansion and contraction of adoption and use of blockchain assets. Trading volume will also be directly affected by domestic and international factors that are beyond our control, including:

Any one or more of these factors may contribute to reduced activity in our markets.

Declines in trading volume may negatively impact market liquidity, which could lead to further loss of trading volume. Material decreases in trading volume would have a material adverse effect on our financial condition and operating results.

The revaluation of the INX Token liability to fair value for each reporting period may have a negative effect on our equity and our comprehensive income.

As more fully described in the notes to our financial statements, the INX Token liability is remeasured at each reporting period to fair value with changes in fair value recorded in profit or loss. Because there is no trading market for the INX Tokens, the fair value of each INX Token is currently determined by our management and the board of directors based on a valuation, derived from a draft third party share and token purchase agreement.

If a trading market were to develop for INX Tokens, the fair market value of the INX Tokens, represented by their market price, will be subject to fluctuations due to a number of factors, including fluctuations in the Company’s results of operations and macro-economic factors. Accordingly, the financial liability measured at fair market value will also fluctuate.

The remeasurement of the INX Token liability to fair value in each reporting period may have a negative effect on our equity and our comprehensive income.

As blockchain assets and blockchain technologies become more widely available, we expect the services and products associated with them to evolve. As a result, to stay current with the industry, our business model may need to evolve as well. From time to time we may modify aspects of our business model relating to our product mix and service offerings. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. We may not be able to manage growth effectively, which could damage our reputation, limit our growth and negatively affect our operating results.

We may have difficulty executing our growth strategy and maintaining our growth effectively.

Our growth requires additional investment in personnel, facilities, information technology infrastructure and financial and management systems and controls and may place a significant strain on our management and resources. Our growth strategy also may subject us to increased legal, compliance and regulatory obligations.

There is no guarantee that our efforts will be successful. We may not be able to implement important strategic initiatives in accordance with our expectations, including that the strategic initiatives could result in additional unanticipated costs, which may result in an adverse impact on our business and financial results. Unless our growth results in an increase in our revenues that is proportionate to the increase in our costs associated with our growth, our future profitability could be adversely affected.

Our senior management may be reimbursed for costs and expenses that exceed what is necessary to achieve our proposed development goals.

The Company reimburses reasonable expenses of its employees, senior management and directors that are incurred in the performance of their respective duties. Expenses incurred by employees on behalf of the Company are approved by the Company’s senior officers prior to their reimbursement. Expenses that are greater than $10,000 require Board approval.

The Company does not currently have a policy that defines what expenses would be “reasonable” or that sets a cap or ceiling on the reimbursement of out-of-pocket expenses incurred on behalf of the Company. The lack of such a policy may result in our senior management submitting costs and expenses for reimbursement that exceed what is necessary to achieve our proposed development goals. The lack of such a policy, guidelines for determining whether an expense is “reasonable” or a cap on reimbursements may also delay the Company from preventing a conflict of interest between the senior management and the Company for substantial outstanding expenses.

Continued reimbursement of substantial out-of-pocket expenses that exceed what is required to achieve our development plan could subject us to financial losses or materially harm our reputation, financial condition and operating results.

We intend to explore acquisitions, other investments and strategic alliances. We may not be successful in identifying opportunities or in integrating the acquired businesses. Any such transaction may not produce the results we anticipate, which could adversely affect our business and the price of INX Tokens.

We intend to explore and pursue acquisitions, strategic partnerships, joint ventures and other alliances to strengthen our business and grow our company.

The market for acquisitions and strategic opportunities is highly competitive, especially in light of recent merger and acquisition activity in our industry. In addition, these transactions entail numerous operational and financial risks, including but not limited to difficulties in valuing acquired businesses, combining personnel and firm cultures, integrating acquired products, services and operations, achieving anticipated synergies that were inherent in our valuation assumptions, exposure to unknown material liabilities, the potential loss of key vendors, clients or employees of acquired companies, incurrence of substantial debt or dilutive issuance of equity securities to pay for acquisitions, higher-than expected acquisition or integration costs, write-downs of assets or impairment charges, increased amortization expenses and decreased earnings, revenue or cash flow from dispositions.

We may be unable to identify strategic opportunities or we may be unable to negotiate or finance future transactions on terms favorable to us. To the extent we enter into joint ventures and alliances, we may experience difficulties in the development and expansion of the business of any newly formed ventures, in the exercise of influence over the activities of any ventures in which we do not have a controlling interest, as well as encounter potential conflicts with our joint venture or alliance partners.

We may not realize the anticipated growth and other benefits from our growth initiatives and investments, which may have an adverse impact on our financial condition and operating results.

The Company may in the future be dependent in part on the data center facilities of third parties.

The Company’s future infrastructure network may be established in whole or in part through servers which it owns and/or houses at the location facilities of third parties, and/or servers that it rents at data center facilities of third parties. If the Company is unable to secure or renew its data facility leases on commercially reasonable terms or at all, the Company may be required to transfer its servers to a new data center facility, and may incur significant costs and possible service interruption in connection with the relocation. These facilities are also vulnerable to damage or interruption from, among others, natural disasters, arson, terrorist attacks, power losses, and telecommunication failures. Additionally, the third party providers of such facilities may suffer a breach of security as a result of third party action, employee error, malfeasance or otherwise, and a third party may obtain unauthorized access to the data in such servers. The Company and the providers of such facilities may be unable to anticipate these techniques or to implement adequate preventive measures.

General global market and economic conditions may have an adverse impact on the Company’s operating performance, results of operations and/or cash flow.

The Company may be affected by general global economic and market conditions. Challenging economic conditions worldwide have from time to time, contributed, and may continue to contribute, to slowdowns in the information technology industry at large. Weakness in the economy could have a negative effect on the Company’s business, operations and financial condition, including decreases in revenue and operating cash flow, and inability to attract future equity and/or debt financing on commercially reasonable terms. Additionally, in a down-cycle economic environment, the Company may experience the negative effects of a slowdown in trading and usage of the Company’s business platform that is yet to be developed and may delay or cancel the development, structuring, licensing and/or launch of the anticipated Token functionality. Suppliers on which the Company relies for servers, bandwidth, location and other services could also be negatively impacted by economic conditions that, in turn, could have a negative impact on the Company’s operations or expenses. There can be no assurance, therefore, that current economic conditions or worsening economic conditions or a prolonged or recurring recession will not have a significant, adverse impact on the Company’s business, financial condition and results of operations, and hence, the Company’s business platform that is yet to be developed and/or the ability to develop, structure, license and/or launch any Token functionality. Any such circumstances would then correspondingly negatively impact the functionality, liquidity, and/or trading price of INX Tokens.

We have no operating history and therefore valuation of the INX Token is difficult.

We were incorporated under the laws of Gibraltar on November 27, 2017 and our operations to date have consisted of planning and developing INX Trading Solutions and the INX Token, establishing relationships with potential service providers and preparing necessary documents and filings in order to implement INX Trading Solutions and the INX Token as currently conceived. Accordingly, we have no operating history upon which an evaluation of our prospects and future performance can be made.

We believe that the value of the INX Token will be influenced by the supply of the INX Token, the market’s perception of the INX Token’s value and the liquidity for Tokens on a secondary market. The original purchase price of the INX Token in this offering may not be indicative of the market price of INX Tokens after they have been made available for trading on a market. There is also no assurance that the market price of INX Tokens will not decline below the original purchase price of this offering.

If our INX Token does not gain public acceptance or is not adopted, used or traded by a substantial number of individuals, companies and other entities, it could have a material adverse impact on the value of the INX Token.

The prospect of any holder of INX Tokens to receive any cash distributions from us is highly uncertain.

Under the INX Token Purchase Agreement, holders of INX Tokens as of March 31 of a year following a year end for which there was positive cumulative Adjusted Operating Cash Flow are entitled to receive a pro rata cash distribution equal to 40% of our cumulative Adjusted Operating Cash Flow. The pro rata distribution of our cumulative Adjusted Operating Cash Flow is not self-executing and requires that our board of directors approve the Company’s financial statements and calculate such distribution in good faith. Although such annual calculation will be based on the cash flow from operating activities reflected in the consolidated statement of cash flow of our Company that is included in the audited consolidated financial statements of our Company and its subsidiaries, neither the calculation of the cumulative Adjusted Operating Cash Flow nor any pro rata distributions thereof to holders of INX Tokens will be audited at the time of any distribution. Further, the general public will not be able to independently verify the number of INX Tokens outstanding that are entitled to share in the distribution.

Further, as of September 30, 2019, cumulative Adjusted Operating Cash Flow was a negative cash flow of approximately $5,848,000. Because each INX Token holder’s right to a pro rata distribution is based on our cumulative Adjusted Operating Cash Flow, no distribution will be made to INX Token holders, if at all, until the Company generates positive Adjusted Operating Cash Flows that exceeds this deficit. Therefore, you may not receive a pro rata distribution even in years in which we are profitable due to our historical losses. Further, we do not expect that there will be sufficient net cash flow from operating activities for any distributions to be made to INX Token holders until our business becomes commercially accepted.

In addition, we may elect to operate our business and pursue business strategies, such as acquisitions and the development of our products and services, which could adversely affect our ability to generate positive net operating cash flow. Our cumulative Adjusted Operating Cash Flow will increase or decrease based on the difference between our cash inflows and outflows. Although we may generate cash inflow from daily operations through trading fees and other services, such amount will be reduced by cash outflows from our operations, including cash payments to our suppliers, our employees, taxes, fees, and fines. To the extent that we engage in acquisitions, we may expend significant cash in order to integrate such businesses, products, technologies or personnel. As a result of our expenditures, we may never generate a positive cumulative Adjusted Operating Cash Flow and may never pay any cash distributions, which could adversely affect the value of INX Tokens.

Further, each INX Token holder’s right to the pro rata portion of the distribution for any given year is subject to reduction in an amount equal to the banking fees and/or transactions fees required to be paid with respect to the transfer of funds or Ether to such holder. Thus, with respect to any year during which the amount to be distributed to an individual INX Token holder is less than the amount of fees relating to such transfer, no distribution will be made to that individual INX Token holder.

As a result, the prospect of any holder of INX Tokens to receive any cash distributions from us is highly uncertain.

There is currently no trading market for our INX Tokens and we cannot ensure that a liquid market will occur or be sustainable.

Prior to this Offering, there has been no public market for INX Tokens. There can be no assurance that there will be an active market for INX Tokens either now or in the future. U.S. persons may only trade INX Tokens on a registered securities exchange or alternative trading system (“ATS”) that has accepted the tokens for trading or quotation. As of the date of this prospectus, no such exchange or ATS exists. There is no plan to have our INX Token trade on a national securities exchange or any other exchange or trading platform, whether within or outside the United States. In the event that the Company ever decides to seek approval to list INX Tokens for trading on a registered securities exchange, there is no assurance that such approval will be obtained or, if approval is obtained, that an active or liquid trading market will develop. Further, brokerage firms or clearing firms may not be willing to effect transactions in INX Tokens or accept INX Tokens for deposit in an account. Even if an investor finds a broker willing to effect a transaction in INX Tokens, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. As a result, purchasers in this offering, and subsequent purchasers of INX Tokens, will likely be limited in their ability to engage in secondary trading of INX Tokens.

We may, in the future, take certain steps, including utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our business. We may need to compensate consultants with cash and/or Tokens. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on our trading volume.

The offering price of the INX Tokens has been arbitrarily determined and such price should not be used by an investor as an indicator of the fair market value of the INX Tokens.

The offering price for the INX Tokens offered hereby has been arbitrarily determined by the Company’s board of directors based on market conditions at the time of pricing. The offering price does not necessarily bear any direct relationship to the assets, operations, book or other established criteria of value of the Company. Accordingly, the actual value of INX Tokens may be significantly less than the offering price. The value of INX Tokens purchased at the offering price may decline in value or have significantly less value when you attempt to sell the INX Tokens.

There is currently no trading market for the INX Token. Even if such a trading market were to develop, on the INX Securities trading platform or elsewhere, the trading price of our INX Tokens may be volatile. The INX Token is not issued by any central bank or national, supra-national or quasi-national organization, nor is it backed by any hard assets or other credit. Consequently, investors may not be able to liquidate their investment at a price that reflects the value of the business.

The volume at which the INX Tokens are traded could affect their volatility. For example, traders seeking to use the INX Token to pay for transaction fees on the INX Securities trading platform may be incentivized to artificially inflate the INX Token’s last trade execution price, the metric that we use to determine the INX Token’s value. If successful, such traders may pay fewer INX Tokens to the Company than would have otherwise been required to satisfy transaction fees for subsequent trades. If there is limited trading volume, such attempts could further increase volatility for INX Tokens.

Further, the trading price of INX Tokens could be significantly affected by any number of factors including volatility in the broader market for blockchain assets, changes in analyst earnings estimates, fluctuations in our results of operations, shifting investor perceptions, dilution (in both monetary and percentage amounts) from future sales or issuances of INX Tokens by the Company, large purchases or sales by a significant INX Token holder, the announcement of new products or the occurrence of any of the events described within this “Risk Factors” section.

Our decision to reverse or suspend promotional incentives for the use of INX Tokens to pay transaction fees on the INX Securities trading platform or for holding INX Tokens could impact the trading price of INX Tokens.

When used as payment of transaction fees on the INX Securities trading platform, the INX Token will entitle owners to, at a minimum, a ten percent (10%) discount as compared to fees paid using other currencies. From time to time, the Company or INX Services may offer additional discounts for the use of INX Tokens as payment for INX Services transaction fees such that the aggregate discount exceeds ten percent (10%). In addition, although the INX Tokens may not be used as payment for transaction fees on the INX Digital trading platform, we intend from time to time to offer promotional discounts on transaction fees on the INX Digital trading platform to record holders of INX Tokens. Such discounts, as well as discounts on the INX Securities trading platform in excess of 10%, are promotional incentives that are governed by the terms and conditions for use of the applicable trading platform and are not rights granted to the holders of INX Tokens through the INX Token Purchase Agreement or otherwise. The value and percentage of any such discount is subject to change at the sole discretion of the INX Securities trading platform, with reasonable notice to INX Token holders and participants on the INX Securities trading platform.

Decisions to set or change the transaction fees for trades executed on our trading platforms or to change the discount applied to transaction fees on our trading platforms may impact the trading price of INX Tokens or may result in increased volatility in the price of INX Tokens, especially during periods surrounding the announcement to institute or terminate any additional discount. The decision to reverse or suspend any additional discounts could negatively impact the trading price of INX Tokens and, as a result, the trading price of INX Tokens may not accurately reflect the value of the public’s perception and acceptance of other rights and characteristics of the INX Tokens. Registered exchanges may decline to list INX Tokens if this feature violates applicable listing standards or ATSs may decide not make INX Tokens available for trading.

Prior to making decisions to set the rate for the transaction fees on our trading platforms and the level of additional discounts, if any, offered to holders of INX Tokens, the Company will consider various factors such as the profitability of our trading platforms, the effect of such changes on current holders of INX Tokens, and whether such changes will discourage investors from purchasing INX Tokens in the future.

If you purchase INX Tokens in this offering, you will suffer immediate and substantial dilution in both monetary and percentage amounts.

The public offering price of the INX Tokens is substantially higher than the average price at which the INX Tokens have been sold to this date. In addition, purchasers of INX Tokens in this offering will experience immediate dilution of their investment in terms of their right to our pro rata distributions of our Adjusted Operating Cash Flow.

The issuance of additional INX Tokens in future offerings could be dilutive to purchasers in this offering if they do not invest in future offerings. Moreover, to the extent that we issue options or warrants to purchase, or securities convertible into or exchangeable for, INX Tokens in the future and those options, warrants or other securities are exercised, converted or exchanged, purchasers in this offering may experience further dilution.

Our business model depends, in part, on our ability to resell INX Tokens received as payment for transaction fees by INX Services. If we conduct resales of INX Tokens, existing holders will suffer dilution.

Under the INX Token Purchase Agreement, holders of INX Tokens will be entitled to receive a pro rata cash distribution equal to 40% of our cumulative Adjusted Operating Cash Flow. This means that the portion of any cash distribution allocated to each INX Token is in part determined by the number of outstanding INX Tokens that are not owned by the Company or any subsidiary of the Company.

We anticipate that users of the INX Securities trading platform will be incentivized to use INX Tokens as payment for transaction fees on the platform. INX Tokens received as payment for transaction fees will reduce the number of outstanding INX Tokens. However, we intend to file one or more registration statements to register these INX Tokens for re-issuance.

Large swings in the use of INX Tokens as payment for transaction fees or future issuances of INX Tokens equity or convertible debt securities, you could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of our then-existing capital stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. If we cannot raise additional funds when we need them, our business and prospects could fail or be materially and adversely affected.

Indices that are used by the Company to calculate applicable exchange rates may be discontinued or the manner in which these indices are calculated, including the exchanges that comprise these indices or the respective weights of such exchanges, may change.

We currently intend to calculate applicable conversion rates between U.S. Dollars and certain cryptocurrencies by using the exchange rates provided in Brave New Coin’s Bitcoin Liquid Index (BLX) (for BTC/USD) and Ethereum Liquid Index (ELX) (for ETH/USD). These exchange rates will be used to convert the purchase price of the INX Tokens in this offering from an amount stated in U.S. Dollars to an amount stated in bitcoin or ethereum. In addition, we also plan to use the ELX index to pay ether to INX Token holders who have not provided a bank account to the Company to satisfy our obligation to pay the annual distribution of our Adjusted Operating Cash Flow.

There can be no assurances that any indices that are used by the Company to calculate such exchange rates will continue or the method by which these indices are calculated will remain unchanged. The sponsors of these indices may have the ability from time to time to change the method by which these indices are calculated or to take actions that could adversely affect the perceived price and market value of the cryptocurrency underlying the index. Further, the sponsors of these indices can add, delete or substitute the components of these indices or make other methodological changes that could adversely affect the exchange rate. We have no control over the way these indices are calculated by the sponsors.

If the index utilized for the determination of an applicable exchange rate is no longer suitable, or if it is discontinued or suspended, our Board may substitute a comparable index as a successor. The Board will make such determination based on all available information, including the method by which such index is calculated (e.g. the exchanges that comprise the index, the volume of trades that comprise the index, etc.), the reputation of such index in the cryptocurrency and trading community, and the years of operation of such index. If the Board determines that no successor index is available, we may engage in the calculation of an applicable exchange rate based on available market data, or we may cease to accept as payment, or cease paying to others, certain cryptocurrencies. Any of these actions may adversely affect the BTC/USD or ETH/USD exchange rates used in this offering or the amounts distributed to INX Tokens holders by the Company.

INX Token holders may not have full or any recourse in the event that the Company enters into insolvency, liquidation, dissolution, reorganization or bankruptcy and the Company may incur debt that ranks equally with, or senior to, the rights of the INX Token holders.

Pursuant to the INX Token Purchase Agreement, if (i) the Company permanently discontinues all the activities of INX Solutions and there is no successor conducting a substantially similar business that assumes the obligations of the Company with regard to the INX Tokens and (ii) an “Insolvency Event” (as defined in the INX Token Purchase Agreement) occurs, then the Company shall be deemed to be in default of its obligations under the INX Token Purchase Agreement, which breach shall create a claim in favor of INX Token holders that may be asserted by INX Token holders against the Company in any proceeding arising from such Insolvency Event. The claim amount will be determined by the liquidator, a court of competent jurisdiction overseeing the liquidation, or some other authority pursuant to applicable insolvency law.

The Company intends that the INX Token holders will be unsecured creditors of the Company and would therefore rank pari passu with all the other unsecured creditors of the Company and senior to the claims of holders of the Company’s shares. Further, the Company has caused current shareholders who hold approximately 79% of its issued share capital, and shall cause its future shareholders, to enter an agreement, pursuant to which such shareholders (a) irrevocably subordinate their rights to receive any distributions and payments from the Company prior to the payment in full by the Company of all distributions owed to INX Token holders, and (b) irrevocably waive and subordinate their rights, in the event of an Insolvency Event, to any cash held in the Cash Fund. However, in the case of an Insolvency Event, a liquidator, court or other applicable authority may determine that INX Token holders are not entitled to any payment from the Company’s assets or that the INX Token holders’ claims are not senior in right to claims or interests of the Company’s shareholders, in particular the shareholders who have not agreed to subordinate their rights to the claims of Token holders. In addition, the Company may incur debt (including secured debt) that ranks equally with, or senior to, the rights of INX Token holders, as well as holders of other preferential claims under relevant insolvency laws. In the case of an Insolvency Event, holders of debt instruments ranking senior to INX Tokens may be entitled to receive payment in full before INX Token holders receive any distribution, including distributions of Adjusted Operating Cash Flow and distributions from the Cash Fund.

After repaying such senior creditors, the Company may not have sufficient assets, if any, remaining for payment of any obligations that it owes to INX Token holders. Further, if it is determined that the Company’s obligations to INX Token holders rank equally with other debt, INX Token holders may share on an equal basis with other creditors. However, the Company may not have sufficient assets, if any, remaining for payment of obligations owed to INX Token holders.

The tax characterization of INX Tokens is uncertain. You must seek your own tax advice in connection with purchasing INX Tokens, which may result in adverse tax consequences to you, including withholding taxes, income taxes and tax reporting requirements.

The treatment of INX Tokens for U.S. federal income tax purposes is uncertain. Due to the new and evolving nature of digital currencies, tokens and blockchain assets, and a general absence of clearly controlling authority with respect to these assets, many significant aspects of the U.S. federal income tax treatment of digital currencies are uncertain. It is unclear what guidance on the treatment of tokens and blockchain for U.S. federal income tax purposes may be issued in the future. Future developments regarding the treatment of tokens or blockchain assets for U.S. federal income tax purposes could adversely affect an investment in INX Tokens.

The Company does not intend to request a ruling from the Internal Revenue Service (“IRS”) on these issues. The IRS has ruled on the tax treatment of bitcoin and other cryptocurrencies. In Notice 2014-21 (the “Notice”) the Service held that digital “currencies” are treated like property and that each transaction using these currencies is a separate taxable event. The IRS stated in the Notice that, for U.S. federal income tax purposes, (i) digital currency is “property” that is not currency and (ii) digital currency may be held as a capital asset. There can be no assurance that the IRS will not alter its position with respect to digital currency in the future or that a court would uphold the treatment set forth in the Notice.

The Notice does not address other significant aspects of the U.S. federal income tax treatment of tokens or blockchain assets, including: the tax characterization of tokens which possess other non-currency-like rights or powers (so called “utility” tokens) or tokens which provide a share of profits to holders. Moreover, there is no authority on the circumstances in which profit-sharing tokens such as INX Tokens may be treated as equity or stock in the Company for U.S. federal income tax (or other tax) purposes. If INX Tokens were characterized as equity interests in the Company for U.S. federal income purposes, U.S. holders of INX Tokens would be subject additional tax consequences and related reporting considerations applicable to holders of stock in a foreign company, including the possible application of rules relating to passive foreign investment companies (or “PFICs”) and controlled foreign corporations (“CFCs”).

The tax characterization of Tokens is uncertain. You must seek your own tax advice in connection with purchasing Tokens, which may result in adverse tax consequences to you, including withholding taxes, income taxes and tax reporting requirements. Prospective investors are urged to consult their tax advisers regarding the uncertainty regarding the tax consequences of an investment in INX Tokens and in blockchain assets in general.

INX Token holders will not be afforded an opportunity to vote in the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, and may not realize any benefit from such transactions.

Although the INX Token is an equity security, as such term is defined in Section 3(a)(11) of the Exchange Act, the rights that attach to an INX Token are materially different than the rights that are typically associated with equity securities such as common shares. As holders of a non-voting security, INX Token holders have no influence over our corporate governance policies and affairs, and INX Token holders will not be afforded an opportunity to vote on any matters affecting the Company, including the election of directors, related party transactions or significant corporate transactions such as a merger, or sale of the Company or its assets. Token holders are not afforded the same protections generally as shareholders of other publicly traded companies. Further, Token holders may not benefit from a sale of the Company or its assets in the same way that our shareholders will benefit, if at all. Your only opportunity to affect an investment decision regarding the Company, if at all, may be limited to selling your INX Tokens or using your INX Tokens to pay for fees on the INX Securities trading platform.

The interests of our shareholders may conflict with the interests of INX Token holders.

Our directors are nominated and elected by a majority of our shareholders and their interests in our business may differ from the interests of Token holders. Our directors will have no fiduciary obligations to act in the interests of Token holders. Mr. Shy Datika, one of our founders, our controlling shareholder and President, controls approximately 29% of the voting power of our share capital and as such, Mr. Datika and the other shareholders of our Company have significant influence over management and affairs and all other matters of the Company, including significant corporate transactions, such as a merger or other sale of our Company or its assets.

The INX Tokens are not currently registered under the Exchange Act and therefore the Company’s reporting obligations under the Exchange Act may be suspended automatically if the INX Tokens have fewer than 300 holders of record on the first day of our fiscal year.

The INX Token is an equity security as such term is defined in Section 3(a)(11) of the Exchange Act; however, the INX Tokens are not currently registered under the Exchange Act. After consummation of this Offering, the Company will be required to file annual and other periodic reports pursuant to Section 15(d) of the Exchange Act, as required by a foreign private issuer, until the end of the fiscal year during which the registration statement of which this prospectus is a part has been declared effective. However, the Company’s obligation to file such reports will be automatically suspended unless after the last day of such fiscal year, the Company has total assets of more than $10,000,000 and record holders of the INX Tokens numbering more than 2,000 persons, or 500 persons who are not accredited investors, in accordance with Section 12(g) of the Exchange Act, in which case the Company will be required to register the INX Tokens under the Exchange Act and to continue to file such reports.

The Company intends to remain subject to the reporting requirements of the Exchange Act either through continued compliance with Section 15(d) of the Exchange Act or by registration of the INX Tokens in accordance with Section 12(g) of the Exchange Act. However, if the Company does not continue to be subject to, or voluntarily comply with, the periodic reporting and other obligations of the Exchange Act, you may not be able to access regular publicly available reports about us and you will not be entitled to the same type of disclosure in relation to critical corporate events as if we were subject to the Exchange Act.

There must be a current state blue sky registration or exemption from such registration for you to purchase or sell the INX Tokens.

Each state has its own securities laws, often called “blue sky” laws, which (i) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (ii) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or the transaction must be exempt from registration. The applicable broker of such transaction must also be registered in that state.

We cannot guarantee that we will be able to effect any required blue sky registrations or qualifications. You will have the ability to purchase and sell INX Tokens only if these securities have been qualified for sale under the laws of the state where you reside, or if they fall within an exemption from registration. We will not knowingly sell INX Tokens purchasers in jurisdictions in which such sales are not registered or otherwise qualified for issuance or exempt from registration. As a result, there may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our INX Tokens.

The INX Token Purchase Agreement includes exclusive venue and jurisdiction provisions. By purchasing INX Tokens, an investor is irrevocably consenting to these provisions regarding claims, suits, actions or proceedings, and submitting to the exclusive jurisdiction of Delaware courts. The INX Token Purchase Agreement also provides that the Company will not be responsible for any losses except those arising from the Company’s gross negligence, fraud or willful misconduct.

The INX Token Purchase Agreement is governed by Delaware law and includes exclusive venue and jurisdiction provisions designating Delaware courts as the exclusive venue for most claims, suits, actions and proceedings involving us or our officers, directors and employees.

By purchasing an INX Token, an investor is irrevocably consenting to these limitations and provisions regarding claims, suits, actions or proceedings and submitting to the exclusive jurisdiction of Delaware courts. If a dispute were to arise between an investor and us or our officers, directors or employees, the investor may be required to travel to Delaware in order to pursue its legal remedies and participate in any proceeding in Delaware courts which may be an inconvenient or distant location and which is considered to be a more corporate friendly environment. In addition, the choice of forum provision may limit an investor’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us. These provisions may have the effect of discouraging lawsuits and limiting an investors’ ability to obtain a favorable judicial forum for disputes against us and our directors and officers.

This provision does not, nor is intended to, apply to claims under the federal securities laws. By agreeing to this limitation of liability, investors will not be deemed to have waived the Company’s compliance with federal securities laws and the rules and regulations thereunder.

The INX Token Purchase Agreement also includes a provision limiting our liability, to the maximum extent permitted by applicable law, for any losses the investor may incur, except for such losses that arise from our gross negligence, fraud or willful misconduct. By purchasing an INX Token, an investor is agreeing to this limitation of liability which could reduce its ability to recover damages from us if we act in a manner that causes investors to incur losses.

It may be illegal now, or in the future, to acquire, own, hold, sell or use INX Tokens in one or more countries, and ownership of, holding or trading in our Company’s securities may also be considered illegal and subject to sanction.

The regulation of blockchain assets remains uncertain or undefined in many jurisdictions. Although we anticipate treating the INX Tokens as securities under the laws of all foreign jurisdictions and adhering to such laws with regard to the offering and sale of INX Tokens abroad, one or more foreign governmental authorities, such as those in China or Russia, may take regulatory action in the future that severely restricts the right to acquire, own, hold, sell or use blockchain assets or to exchange blockchain assets for fiat currency. Such an action may result in the restriction of ownership, holding or trading in the INX Token and other securities. Such restrictions may adversely affect an investment in the Company.

System limitations, failures, or security breaches could harm our business and may directly impact INX Token holders and other INX Trading Solutions users.

Our business depends on the integrity and performance of our computer and communications systems. If our systems cannot expand to cope with increased demand or otherwise fail to perform, we could experience unanticipated disruptions in service or slower response times. These consequences could result in trading outages, lower trading volumes, financial losses, decreased customer service and satisfaction and regulatory sanctions.

Our systems and operations also are vulnerable to damage or interruption from human error, natural disasters, power loss, cyber-attacks, sabotage or terrorism, computer viruses, unauthorized access, intentional acts of vandalism and similar events. Persons who circumvent security measures could wrongfully access and use our information or our customers’ information or cause interruptions or malfunctions in our operations. Although we intend to implement and maintain security measures designed to protect the integrity of our systems, including INX Trading Solutions user accounts, such security measures may prove inadequate. Any breach in security or system failure that allows unauthorized access, causes an interruption in service or decreases the responsiveness of our systems may result in theft and could impair our reputation, damage our brand name and negatively impact our business, financial condition and operating results.

We rely on third party contractors for the design, development and implementation of INX Trading Solutions.

We rely on third party contractors for key elements of our technology infrastructure. The design, development, implementation, modification and customization of the INX Trading Solutions model have been conducted on a work for hire basis under our contract with Y. Singer Technologies Ltd. (commercially known as Committed) (“Committed”) See “Business—Material Agreements—Committed.”

Such infrastructure and related technology under development may not be sufficient to meet the needs of our business. Further, these technologies may have material defects that may be vulnerable to damage or interruption or may compromise the confidentiality or integrity of the transmitted data. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could harm our reputation, business and operating results. We might be required to expend significant capital and other resources to develop and maintain the INX Trading Solutions infrastructure. This, in turn could divert funds available for corporate growth, expansion or future acquisitions. It could also reduce the amount of cash paid to Token holders.

We may be unable to protect our proprietary technology and to obtain trademark protection for our marks.

Our success depends to a significant degree upon the protection of our software and other proprietary intellectual property rights. We may be unable to bring enforcement actions under the laws of the US or other countries to protect our intellectual property rights, which could have a material adverse effect on our business. Further, we may not be able to secure protection for our service marks or trademarks in the United States or elsewhere as we expand internationally. Our competitors might adopt service marks or trademarks similar to our marks, or might try to prevent us from using our marks. Any claim by another party against us or customer confusion related to our trademarks, or our failure to obtain trademark registration, could have a material adverse effect on our business.

We may not be able to enforce protection of our intellectual property rights under the laws of other countries.

We do business internationally and consequently we are subject to risks of doing business internationally, including uncertainty regarding liability for the listings and other content provided by our users, and differing intellectual property laws, which may provide insufficient protection for our intellectual property. Any such difficulties could have a material adverse effect on our business.

We are a “foreign private issuer” and we cannot be certain if the reduced reporting requirements applicable to foreign private issuers will make owning INX Tokens less attractive to investors.

As a foreign private issuer, we are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Securities Exchange Act of 1934, or the Exchange Act, we will be subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue proxy statements that comply with the requirements applicable to U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors, and principal shareholders will be exempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act. These exemptions and leniencies, along with other corporate governance exemptions resulting from our ability to rely on home country rules, will reduce the frequency and scope of information and protections to which you may otherwise have been eligible in relation to a U.S. domestic reporting companies.

We would lose our foreign private issuer status if more than fifty percent of our outstanding voting securities are directly or indirectly owned of record by residents of the United States and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents; (ii) more than 50% of our assets are located in the U.S.; or (iii) our business is administered principally in the U.S. There is no public market for our voting securities, and we currently have no plans to issue our voting securities to residents of the United States, however given the level of our intended business contacts with the United States, we may lose our status as a foreign private issuer should more than fifty percent of our voting securities be held of record by residents of the United States. Although we have elected to comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic reporting company may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic reporting company forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify certain of our policies to comply with accepted governance practices associated with U.S. domestic reporting companies. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.

It may be difficult to enforce a U.S. judgment against us, our officers and directors, and the experts named in this prospectus, or to assert U.S. securities laws claims or serve process on our officers and directors and these experts.

We were incorporated in Gibraltar, and substantially all of our operations are currently located in the state of Israel. All of our assets are located outside the United States. Therefore, it may be difficult to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or Gibraltar court, or to affect service of process upon these persons in the United States.

Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in Gibraltar. This is for two principal reasons: 1) because the Gibraltar courts may regard the U.S. law in question to be a penal, revenue or public law and therefore, under Gibraltar law, not capable of direct or indirect enforcement in the Gibraltar courts, or 2) because the Gibraltar court may stay the claim on the grounds that Gibraltar is not an appropriate forum (“forum non conveniens”). If U.S. law is found to be applicable to a claim which the Gibraltar court can and is prepared to hear, the content of applicable U.S. law must be proved as a fact by expert witnesses, which can be a time-consuming and costly process. If proceedings were to be brought in Gibraltar, all procedural matters would be governed by Gibraltar law. There is little case law addressing the matters described above that would be binding case law in a Gibraltar court. For additional information, see “Enforceability of Civil Liabilities.”

Potential political, economic, and military instability in the State of Israel, where some of our senior management and our research and development facilities are located, may adversely impact our results of operations.

Our offices and operations are currently located in the State of Israel. In addition, certain of our employees, officers, and directors are residents of Israel. Accordingly, political, economic, and military conditions in Israel directly affect our business. Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel, could adversely impact our operations.

Our operations may be disrupted by the obligations of personnel to perform military service.

Certain of our employees, officers and directors are based in Israel. Some of our employees and consultants may be called upon to perform up to 36 days (and in some cases more) of annual military reserve duty until they reach the age of 40 (and in some cases, up to 45 or older) and, in emergency circumstances, could be called to immediate and unlimited active duty. In the event of severe unrest or other conflict, individuals could be required to serve in the military for extended periods of time. Our operations could be disrupted by the absence of a significant number of our employees related to military service or the absence for extended periods of one or more of our key employees for military service. Such disruption could materially adversely affect our business and results of operations.

The Company may be deemed an Israeli tax resident for tax purposes and may incur additional tax liabilities in Israel.

Under Israeli tax law, a company not incorporated in Israel will be considered an Israeli resident for tax purposes if its business and management are controlled from Israel. There is no definition of “control and management” in the Israeli tax code, however the Israeli tax authority (“ITO”) issued a Circular in 2002 which listed factors to be taken into account. These included factors such as details of shareholders and directors; protocols of board meetings; agreements with service providers; details of bank accounts, signatory rights; bookkeeping and accounts; and employees. The ITO has recently published a new draft Circular, in light of recent court decisions, which revisits the issue of control and management. The draft Circular states that it is not sufficient to rely solely on a formal (technical) analysis of the facts, but rather a full substantive analysis of all the facts and circumstances must be undertaken.

In the current technological era, the appointment of directors and physical location of board meetings are less important, rather the emphasis is on the substantive analysis of who actually makes strategic policy and day to day decisions, and from where. The draft Circular provides a list of tests (in addition to the factors listed in the 2002 Circular) which should be examined, for example: who actually controls the company, who are the managers of the company, and who takes the decisions in the company how the directors and managers were chosen and whether they have relevant experience in the company’s field of activity.

If the Company is determined to be an Israeli tax resident for tax purposes, the Company may incur additional tax liabilities in Israel.

The Company may be characterized as a CFC for Israeli tax purposes and Israeli holders of the Company’s ordinary shares and INX Tokens may be subject additional tax consequences and related reporting considerations.

Israeli tax law includes an anti-tax-deferral regime. Under this regime, an Israeli resident who is a ‘controlling shareholder’ (i.e., holding 10% of the means of control in the company) is viewed as having received as a dividend consisting of undistributed profits of a foreign company, if the foreign company meets the following conditions:

A foreign company meeting these conditions is referred to as a CFC. Effectively, the undistributed passive profits of a CFC are deemed a dividend received by the ‘controlling shareholder’ and thus subject to Israeli tax. The deemed dividend tax rate is 24% for corporations and 30% for individuals (excluding additional 3% surtax if applicable).

The quantification of undistributed profits (as defined under the Israeli CFC regime) of a company resident of a non-treaty country will be calculated in accordance with Israeli tax law. If the Company were characterized as a CFC for Israeli tax purposes, Israeli holders of the Company’s ordinary shares and INX Tokens may be subject additional tax consequences and related reporting considerations.

Some of the statements made under “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and elsewhere in this prospectus constitute forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “project,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “intends,” or “continue,” or the negative of these terms or other comparable terminology.

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans, and strategies; statements that contain projections of results of operations or of financial condition; statements relating to the research, development, and use of our products; and all statements (other than statements of historical facts) that address activities, events, or developments that we intend, expect, project, believe, or anticipate will or may occur in the future.

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate.

Important factors that could cause actual results, developments, and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors” and elsewhere in this prospectus. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this prospectus.

We estimate that the net proceeds to us from our issuance and sale of INX Tokens in this offering will range from, at a minimum, $7,500,000 to, at a maximum, $116,500,000, based on (i) an assumed initial public offering price of $0.90 per Token, the midpoint of the price range set forth on the cover page of this prospectus, and (ii) an assumed payment to A-Labs in an amount of $0, the minimum amount that would be payable by us to A-Labs if the gross proceeds of the offering does not exceed $10 million, to $500,000, the minimum amount that would be payable by us to A-Labs if we sell 130,000,000 Tokens at an assumed initial public offering price of $0.90 per Token and the gross proceeds of the offering from non-U.S. persons does not exceed $10 million.

The “net proceeds” from this offering are calculated after deducting the contingent payment payable by us to A-Labs of (i) $500,000 (if the gross proceeds of the offering to U.S. persons exceed $10 million) plus (ii) between $1 million (once the gross proceeds of the offering to non-U.S. persons exceed $10 million) and $7.52 million (if the gross proceeds of the offering to non-U.S. persons reaches a maximum $117 million, assuming an initial public offering price of $0.90 per Token, the midpoint of the price range set forth on the cover page of this prospectus). To the extent that the contingent payment payable by us to A-Labs is greater than the assumed amount of $500,000 (i.e., the gross proceeds of the offering from non-U.S. persons exceed $10 million), the net proceeds to us, and our projected use of proceeds, will be reduced.

As used in this prospectus, “net proceeds” or “net proceeds before expenses” does not reflect the deduction of expenses incurred by the Company in preparing and executing this offering (other than the contingent payment payable to A-Labs and any other payments, if any, that may be payable to other underwriters). To date, the Company has paid offering expenses using its cash on hand. As shown in the table below, we anticipate that approximately $2,500,000 of the net proceeds from the offering will also be used to pay offering expenses.

The Company plans to use net proceeds from this offering approximately as follows:

The four levels of funding above will fund incremental progress in the development of the platforms (see “Phases of Development”):

$7.5 Million: The minimum offering amount, we expect proceeds of $7.5 million to be sufficient to operate up to commencement of the launch of the INX Digital trading platform.

$21.5 Million: If we raise proceeds of $21.5 million or more in the offering, we intend to use the funds to launch and operate the INX Digital trading platform for 12 months. We also expect the proceeds to be sufficient to complete the regulatory and technical requirements for and launch the INX Securities trading platform. If there continues to be significant uncertainty regarding the application of federal and state laws and regulations to the trading of security tokens, including regulations governing market intermediaries, and this uncertainty causes significant delay in the development of our INX Securities trading platform as currently envisioned, we may use a portion of these funds to launch and operate INX Services as an introducing broker for security tokens.

$65 Million: If we raise proceeds of $65 million or more in the offering, we intend to use the funds to continue to operate the INX Digital trading platforms for two years and INX Securities trading platform for 12 months. Additionally, we intend to use 75% of the net proceeds before expenses from this offering in excess of $25 million to establish the Cash Fund that we will use to cover customer losses that result from cybersecurity breaches or theft, errors in execution of the trading platform or its technology, and counterparty defaults, including instances where counterparties lack sufficient collateral to cover losses. The Cash Fund is intended to provide additional comfort to our traders, clients and investors. See “Cash Fund.” The remaining proceeds from this offering have been allocated to Working Capital & General Corporate Purposes.

$116.5 Million: The maximum offering amount, assuming an initial public offering price of $0.90 per Token, the midpoint of the price range set forth on the cover page of this prospectus. We will use the funds to continue to operate the INX Digital and INX Securities trading platforms beyond two years. Additionally, approximately $68.6 million will be allocated to the Cash Fund and approximately $15.0 million will be allocated to Working Capital & General Corporate Purposes.

The Company plans to use net proceeds from this offering across the following categories:

Research & Development: We intend to use between $818,500 and $7.4 million for research and development of products, services, and technologies to be implemented on our platform. This may include research and development of scaling improvements to the matching engine, customizations to the trading platform and user experience, data analytics, and additional investments in our technological capabilities. We estimate that Research & Development expenses until the commencement of the launch of the INX Digital trading platform will be approximately $818,500. The $818,500 is comprised of approximately $655,000 in payroll and related expenses, $60,000 of hardware and software expenses, and $110,000 of third-party consultant expenses. Research & Development expenses are projected to increase by $3.7 million if the Company raises $21.5 million or more in the offering. The $3.7 million increase is comprised of additional direct staffing in the Research & Development department to operate the INX Digital platform and to prepare for the INX Securities launch, along with hardware, software, and infrastructure additions. Research & Development expenses are projected to rise another $1.6 million if $65 million or more is raised in the offering. The $1.6 million is comprised of a further expansion in the Research & Development department to operate both the INX Digital and INX Securities platforms, bringing total department headcount to 35 full-time employees by December 2021. This includes additional direct staffing of engineers for software, information technology systems and database development and operations, front-end and back-end developers, mobile developers, product managers, analysts, and quality assurance personnel, among others. If we raise the maximum offering amount, we plan to further increase staffing, product offerings, infrastructure, and research and development efforts of both platforms.

Sales & Marketing: We intend to use between $325,000 and $2.74 million for sales and marketing initiatives and activities, including promotional activities to attract users, direct marketing expenses, marketing representation, conference sponsorships, print and online marketing, marketing materials, and related staffing. We estimate that Sales & Marketing expenses until the commencement of the launch of the INX Digital trading platform will be approximately $325,000. The $325,000 is comprised of approximately $100,000 payroll and related expenses and $225,000 in media, branding, sponsorship, and other direct marketing expenses. Sales & Marketing expenses are projected to increase by $1.2 million if the Company raises $21.5 million or more in the offering. The $1.2 million increase is comprised of (i) 5 additional full-time hires in the department, and (ii) $415,000 in marketing expenses related to conference sponsorship and marketing materials during 2020. Sales & Marketing expenses are projected to increase an additional $975,000 if the Company raises $65 million or more in the offering. The $975,000 increase is comprised of (i) 3 additional full-time hires in the department, and (ii) $415,000 in marketing expenses related to conference sponsorship and marketing materials during 2021. If we raise the maximum offering amount, we plan to further increase staffing, press coverage, conference presence, advertising, and marketing materials for the Company.

Regulatory & Legal: We intend to use between $1.1 million and $3.0 million on regulatory and legal expenses, including legal counsel fees and expenses, filing and licensing fees, consultancy fees, and related legal and regulatory support. We estimate that Regulatory & Legal expenses until the commencement of the launch of the INX Digital trading platform will be approximately $1.1 million. The $1.1 million is comprised of approximately $445,000 in legal counsel expenses, $460,000 in licensing fees, and $195,000 in regulatory third-party consultant and related expenses. Regulatory & Legal expenses are projected to increase by $1.1 million if the Company raises $21.5 million or more in the offering. The $1.1 million increase is comprised of regulatory filing fees, regulatory consultancy fees, and related legal support for the year 2020, including $583,000 for money transmitter licensing fees and related costs. Regulatory & Legal expenses increase a further $250,000 if the Company raises $65 million or more in the offering. This $250,000 increase is comprised of ongoing regulatory fees, regulatory consultancy fees, and related legal support for continuing operations through 2021. If we raise the maximum offering amount, we plan to further increase staffing, including in-house legal counsel.

General & Administrative: We intend to use between $2.3 million and $9.6 million on general and administrative expenses, including executive and senior management compensation, human resources, facility overhead, payroll-related expenses, and insurance. We estimate that General& Administrative expenses until the commencement of the launch of the INX Digital trading platform will be approximately $2.3 million. The $2.3 million is comprised of approximately $1,425,000 of payroll and related expenses, $280,000 in overhead and facilities expenses, $220,000 in insurance-related expenses, $60,000 in auditing expenses, and $315,000 in other general and administrative expenses. General & Administrative expenses are projected to increase by $4 million if the Company raises $21.5 million or more in the offering. The $4 million increase is comprised of three additional full-time hires in 2020, and a full year of operating the INX Digital platform. General & Administrative expenses increase a further $1.6 million if the Company raises $65 million or more in the offering. This $1.6 million includes a full year (2021) of operating the INX Digital and INX Securities platforms with year-ending headcount of 16 full-time employees. If we raise the maximum offering amount, we plan to further increase staffing, including in-house strategic senior management positions, increase spending on overhead for corporate office space, and other general corporate expenses.

Product: We intend to use between $219,900 and $1.5 million for product development, design, and related expenses. Product expenses include developing product offerings on the platform based on market research and customer feedback, designing the user interface of the platform, and defining the characteristics of the platform in collaboration with both senior management and Research & Development teams. Product personnel include product managers, user experience and user interface designers, and customer behavior analysts. We estimate that Product expenses until the commencement of the launch of the INX Digital trading platform will be approximately $219,900. The $219,900 is comprised of payroll and related expenses. Product expenses are projected to increase by $650,000 if the Company raises $21.5 million or more in the offering. The $650,000 increase is comprised of additional direct staffing in the product department of seven full-time employees between December 2019 and December 2020 and related expenses. Product expenses are projected to rise another $350,000 if $65 million or more is raised in the offering. The $350,000 is comprised of the addition of one more full-time employee, bringing total department headcount to nine full-time employees by December 2021, and other product expenses. If we raise the maximum offering amount, we plan to further increase product research and offerings.

Trading Surveillance & Support: We intend to use between $132,600 and $1.7 million for trading-related staffing and expenses. These expenses include the monitoring of order books and trading activity, evaluating execution quality, investigating errors, assisting customers with order entry, and assisting the operations and customer service department with data and support for customer inquiries. We estimate that Trading Surveillance & Support expenses until the commencement of the launch of the INX Digital trading platform will be approximately $132,600. The $132,600 is comprised of payroll and related expenses. Trading Surveillance & Support expenses are projected to increase by $850,000 if the Company raises $21.5 million or more in the offering. The $850,000 increase is comprised of additional direct staffing in the trading department of five full-time employees between December 2019 and January 2021 and related expenses, bringing total department headcount to seven full-time employees. Product expenses are projected to rise another $400,000 if $65 million or more is raised in the offering. The $400,000 is comprised of the addition of one more full-time employee, bringing total department headcount to eight full-time employees by December 2021, and other trading-related expenses. If we raise the maximum offering amount, we plan to further increase trading surveillance and related support capabilities.

Operations & Customer Service: We intend to use between $105,000 and $3.3 million for back office, operations and customer service-related staffing and expenses, which includes compliance, support and KYC/AML expenses. We estimate that Operations & Customer Service expenses until the commencement of the launch of the INX Digital trading platform will be approximately $105,000. The $105,000 is comprised of $95,000 of payroll and related expenses and $10,000 of KYC/AML expenses. Operations & Customer Service expenses are projected to increase by $1.8 million if the Company raises $21.5 million or more in the offering. The $1.8 million increase is comprised of additional direct staffing in the operations and customer service department of 12 full-time employees in compliance and support functions between December 2019 and January 2021 and related expenses, bringing total department headcount to 15 full-time employees. Operations & Customer Service expenses are projected to rise another $825,000 if $65 million or more is raised in the offering. The $825,000 is comprised of the addition of two more full-time employees, bringing total department headcount to 17 full-time employees by December 2021, and other back office-related expenses. If we raise the maximum offering amount, we plan to further increase back office support and operational infrastructure.

Finance: We intend to use between $448,890 and $850,800 for finance department staffing and expenses if the Company raises $21.5 million or more in the offering. We estimate that Finance expenses for operating the INX Digital trading platform from launch through January 2021 and until the commencement of the launch of the INX Securities trading platform will be approximately $448,890. The $448,890 is comprised of approximately $400,000 in payroll and related expenses and $48,000 in other finance expenses. Finance department expenses are projected to increase by $250,000 if the Company raises $65 million or more in the offering. The $250,000 increase is comprised of additional direct staffing in the finance department of two full-time employees in 2021 and related expenses, bringing total department headcount to six full-time employees. If we raise the maximum offering amount, we plan to further increase finance department staffing.

Minimum Net Capital: We intend to use $250,000 for the minimum net capital requirements of INX Securities once it is registered as a broker-dealer, as required by Rule 15c3-1 under the Exchange Act.

Cash Fund: We plan to establish a Cash Fund comprised of 75% of the net proceeds before expenses from this offering in excess of $25 million. We will use the fund to cover customer losses that result from cybersecurity breaches or theft, errors in execution of the trading platform or its technology, and counterparty defaults, including instances where counterparties lack sufficient collateral to cover losses. The Cash Fund is intended to provide additional comfort to our traders, clients and investors. See “Business— Our Proposal: INX Trading Solutions, a Single Regulated Ecosystem for Trading Blockchain Assets.”

Offering Expenses: We intend to use approximately $2.5 million to cover expenses from the offering that have not already been paid using our cash on hand.

Working Capital & General Corporate Purposes: We intend to use the remainder of the proceeds from this offering for working capital and general corporate purposes.

These expected uses of net proceeds from this offering represent our intentions based upon our current plans and business conditions which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures may vary significantly and will depend upon numerous factors, including the progress of our development and commercialization efforts. Accordingly, our management will have significant flexibility and broad discretion in applying the net proceeds of this offering.

The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2019 (unless stated otherwise):

The as adjusted column below is illustrative only. Our cash and cash equivalents and capitalization following the closing of this offering will be adjusted based on the actual initial public offering price, the number of Tokens sold, and other terms of this offering determined at the pricing of this offering. You should read the following table in conjunction with the sections titled “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of INX Tokens,” and our financial statements and related notes included elsewhere in this prospectus.

A $0.10 increase (decrease) in the assumed initial public offering price of $0.90 per Token, the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) the as adjusted amount of each of cash and cash equivalents and restricted cash, total equity (deficit), and total liabilities and equity by approximately $13,023,000, $1,911,000 and $13,023,000, respectively, assuming that we sell the maximum number of Tokens offered by us, as set forth on the cover page of this prospectus. Similarly, an increase (decrease) of one million in the number of Tokens we are offering would increase (decrease) the as adjusted amount of cash and cash equivalents and restricted cash, total equity (deficit), and total liabilities and equity by approximately $900,000, $0 and $900,000, respectively assuming the assumed initial public offering price of $0.90 per Token.

Net tangible book value represents total tangible assets less liabilities. The INX Token is an equity security as such term is defined in Section 3(a)(11) of the Exchange Act. However, for financial reporting purposes, the INX Token is classified as a liability. Although the gross proceeds received by us in this offering will increase our tangible assets, the issuance of INX Tokens in this offering will increase our liabilities by an equivalent amount. Further, holders of the INX Token have only a contractual right to potential distributions of our Adjusted Operating Cash Flow and, under certain circumstances, from the Cash Fund. As a result of the impact of the offering and the rights associated with the INX Token, net tangible book value per INX Token is not as relevant in this offering as it otherwise would be in offerings of common equity securities.

The following table summarizes, on a pro forma as adjusted basis as of June 30, 2019, the differences between existing INX Token holders and the investors purchasing under this offering with respect to the number of INX Tokens purchased from us (assuming that all of the INX Tokens offered in this offering are purchased at an assumed $0.90 per INX Token), the total consideration paid and the average price per INX Token paid before deducting the estimated offering expenses.

(1) Information regarding commitments to issue INX Tokens as of June 30, 2019 (assuming the completion of this offering on that date) includes the following:

(2) Information regarding commitments to issue INX Tokens as of June 30, 2019 (assuming the completion of this offering on that date) does not include the following:

In addition, the following table summarizes, on a pro forma as adjusted basis as of June 30, 2019, the differences between existing INX Token holders and the investors purchasing under this offering with respect to the number of INX Tokens purchased from us (assuming only the Minimum Offering Requirement for the Closing of the INX Tokens offering in this offering are purchased at an assumed $0.90 per INX Token), the total consideration paid and the average price per INX Token paid before deducting the estimated offering expenses.

(1) Information regarding commitments to issue INX Tokens as of June 30, 2019 (assuming the completion of this offering on that date) includes the following:

(2) Information regarding commitments to issue INX Tokens as of June 30, 2019 (assuming the completion of this offering on that date) does not include the following:

You should read the following selected financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements, related notes and other financial information included elsewhere in this prospectus.

The following table sets forth a summary of our consolidated statement of comprehensive loss and summary of our consolidated balance sheet data for the periods indicated. Our consolidated financial data as of December 31, 2018 and 2017, and the related consolidated financial data for the year ended December 31, 2018 and for the period from September 1, 2017 (date of inception) through December 31, 2017, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of comprehensive loss for the six months ended June 30, 2019, and the consolidated balance sheet data as of June 30, 2019, have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a basis consistent with our audited consolidated financial statements. In the opinion of management, the unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for those periods. Results for interim periods are not necessarily indicative of results that may be expected for a full fiscal year. Our selected consolidated financial information for the periods indicated should be read in conjunction with the consolidated financial statements and the accompanying notes. Historical results are not necessarily indicative of the results expected in the future.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Financial Data” and our financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors.”

Initially, we plan to generate revenues primarily from fees received by us in connection with activities on the INX Digital trading platform. We intend to generate additional fees once we have completed the regulatory and technical requirements for the INX Securities trading platform. However, there is currently significant uncertainty regarding the application of federal and state laws to the trading of security tokens, including the application of current regulations governing the conduct of market intermediaries, and this uncertainty may cause significant delay or may prevent us from developing our INX Securities trading platform as currently envisioned. Prior to the establishment of INX Securities as an ATS, INX Services may operate exclusively as an introducing broker with an order management system and to route security token order flow to one or more third party alternative trading systems.

We were incorporated on November 27, 2017 and since our date of inception (September 1, 2017) our operations have consisted solely of planning and development of the INX Token and INX Trading Solutions. We have not generated any revenues from operations since our inception.

We will not generate any operating revenues until our trading platforms becomes operational. We will generate non-operating income in the form of interest income on cash and cash equivalents and other investments upon completion of this offering. There has been no significant change in our financial position and no material adverse change has occurred since the date of our audited financial statements.

After this offering, we expect to incur increased expenses as a result of being a public company (for legal, financial reporting, and compliance). We expect our expenses to increase substantially after the closing of this offering.

Results of Operations for the period from September 1, 2017 (inception) through December 31, 2017

Operating expenses for the reported period were $586,000. Substantially all costs incurred to date were in connection with our formation, legal services and support for the contemplated offering.

Our loss for the period from September 1, 2017 (inception) through December 31, 2017 was approximately $637,000.

Our Adjusted Operating Cash Flow for the period from September 1, 2017 (inception) through December 31, 2017 was approximately negative $588,000. The cumulative Adjusted Operating Cash Flow as of December 31, 2017 was approximately negative $588,000.

Operating expenses in the year ended December 31, 2018 were $3,664,000, and they consist of research and development, and general and administrative expenses. Research and development expenses, which amounted to $525,000, include the cost of development of our trading platform. General and administrative expenses, which amounted to $3,139,000, include costs associated with the registration of our platform, as well as legal and other services related to the offering.

Our Adjusted Operating Cash Flow for the year ended December 31, 2018 was approximately negative $3,262,000. The cumulative Adjusted Operating Cash Flow as of December 31, 2018 was approximately negative $3,850,000.

The following table provides the calculation of our cumulative Adjusted Operating Cash Flow (in U.S. Dollars) as of December 31, 2018:

Operating expenses for the six months ended June 30, 2019 were$1,461,000, and they consist of research and development, and general and administrative expenses. Research and development expenses, which amounted to $266,000, include the cost of development of our trading platform. General and administrative expenses, which amounted to $1,195,000, include costs associated with the registration of our platform, as well as legal and other services related to the offering.

Our Adjusted Operating Cash Flow for the six months ended June 30, 2019 was approximately negative $1,267,000. The cumulative Adjusted Operating Cash Flow as of June 30, 2019 was approximately negative $5,117,000.

The following table provides the calculation of our cumulative Adjusted Operating Cash Flow (in U.S. Dollars) as of June 30, 2019:

Comparison of the six months ended June 30, 2019 and the six months ended June 30, 2018

The following table presents an overview of our results of operations for the six months ended June 30, 2019 and for the six months ended June 30, 2018:

We incurred $266,000 in research and development expenses for the six months period ended June 30, 2019, compared to $204,000 for the six months period ended June 30, 2018. Research and Development expenses increased by $62,000 for the six months period ended June 30, 2019, compared to the six months period ended June 30, 2018. This increase was primarily due to increased spending in the development of our trading platform.

We incurred $1,195,000 in general and administrative expenses for the six-month period ended June 30, 2019, compared to $1,699,000 for the six-month period ended June 30, 2018, a decrease of $504,000, primarily due to a decrease in our legal costs related to this offering and registration of our platform, partially offset by an increase in our payroll costs.

Financial liabilities at fair value through profit or loss - INX Token liability:

Our balance sheet as of June 30, 2019 includes a financial liability for INX Token holders in the amount of $1,296,000. As currently there is no trading market for the INX Token, we determined its fair value based on a valuation derived from a third-party transaction (see further details in Note 3 in the financial statements). Changes in fair value of the INX Token liability are recorded in profit or loss in our consolidated statements of comprehensive loss.

A key input used in the fair value valuation includes an underlying comparison of the shareholder’s and INX Token holder’s participation rights in the Company’s earning distribution. In May 2019, our Board of Directors approved an amendment to the INX Token rights which included among other changes an increase of the INX Token holder’s distribution rate from 20% to 40% per year. As a result of this change, the INX Token’s fair value immediately prior to the change, approximately doubled its value. As a result of this amendment, as well as other updated inputs used in the fair value valuation of the INX Token as of June 30, 2019, the INX Token liability value increased from approximately $411,000 as of December 31, 2018, to approximately $1,296,000 as of June 30, 2019, resulting in a financial expense of approximately $882,000.

Loss and total comprehensive loss for the six-month period ended June 30, 2019 was $2,284,000, compared to a loss of $2,212,000 for the six-month period ended June 30, 2018, an increase of $82,000, primarily due to an increase in costs related to the fair value adjustment of the INX Token and derivative liabilities, partially offset by a decrease in our operating expenses.

Adjusted Operating Cash Flow for the six-month period ended June 30, 2019 was negative $1,267,000, compared to an Adjusted Operating Cash Flow of negative $1,260,000 for the six-month period ended June 30, 2018, an increase in net cash outflows of $7,000.

Comparison of the Fiscal Year Ended December 31, 2018 and the Period from Inception (September 1, 2017) to December 31, 2017

The following table presents an overview of our results of operations for the year ended December 31, 2018 and for the period from inception (September 1, 2017) to December 31, 2017:

We incurred $525,000 in research and development expenses for the fiscal year ended December 31, 2018, compared to $56,000 for the period from inception (September 1, 2017) to December 31, 2017. Research and Development expenses increased by $469,000 for the year ended December 31, 2018 compared to the period from inception (September 1, 2017) to December 31, 2017. This increase was primarily due to increased spending in the development of our trading platform.

We incurred $3,139,000 in general and administrative expenses for the fiscal year ended December 31, 2018, compared to $530,000 for the period from inception (September 1, 2017) to December 31, 2017, an increase of $2,609,000, primarily due to increased spending in the registration of our platform, as well as legal and other services related to this offering.

Financial liabilities at fair value through profit or loss - INX Token liability:

Our balance sheet as of December 31, 2018 includes a financial liability for INX Token holders in the amount of $411,000. As currently there is no trading market for the INX Token, we determined its fair value based on a valuation derived from a third-party transaction (see further details in Note 3 in the financial statements). Changes in fair value of the INX Token liability are recorded in profit or loss in our consolidated statements of comprehensive loss.

Loss and total comprehensive loss for the fiscal year ended December 31, 2018 was $4,010,000, compared to net loss of $637,000 for the period from inception (September 1, 2017) to December 31, 2017, an increase of $3,373,000.

Adjusted Operating Cash Flow for the fiscal year ended December 31, 2018 was negative $3,262,000, compared to an Adjusted Operating Cash Flow of negative $588,000 for the period from inception (September 1, 2017) to December 31, 2017, an increase in net cash outflows of 2,674,000.

In accordance with IFRS, in preparing our financial statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of net revenues and expenses during the reported period. We develop and periodically change these estimates and assumptions based on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates.

The critical accounting policies requiring estimates, assumptions and judgments that we believe have the most significant impact on our financial statements are described below.

Financial liabilities at fair value through profit or loss - INX Token liability:

Based on the terms of the INX Token, the INX Token is a hybrid financial instrument. The host instrument is a financial liability due to the right of the INX Token holder to effectively redeem the INX Token in consideration as payment for services. The INX Token is considered a puttable instrument which is a financial liability in accordance with IAS 32, Financial Instruments: Presentation.

The Company’s obligation to distribute annually to the INX Token holders 40% of the Company’s Adjusted Operating Cash Flow is an embedded derivative. The Company views the Company’s operating cash flows as a financial variable, and therefore, the embedded derivative requires bifurcation pursuant to IFRS 9 (IAS 39 for the period to December 31, 2017). The Company elected in accordance with IAS 39 (which election remains in effect upon adoption of IFRS 9) to designate the entire financial liability (including the embedded derivative) at fair value through profit and loss.

Accordingly, the INX Token liability is remeasured to fair value at the end of each reporting period. The changes in fair value are recognized in profit or loss. IFRS 9, Financial Instruments, replaces IAS 39 for annual periods beginning on January 1, 2018 and accordingly starting January 1, 2018, the Company applied IFRS 9 retrospectively, without adjusting the comparative information, which continues to be reported under IAS 39. According to IFRS 9, changes in the fair value of a financial liability designated as at fair value through profit or loss which are attributable to the change in credit risk of that liability are presented in other comprehensive income. All other changes in fair value of that liability are presented in profit or loss. The change in the fair value of the INX Token liability attributable to changes in credit risk, excluding those changes in credit risk attributable to the embedded derivative, are immaterial for all reported periods and therefore no amounts have been included in other comprehensive income in respect of credit risk.

When the INX Token is used to pay for services provided by the Company, the respective portion of the INX Token liability is derecognized and revenue is recognized. The fair value of INX Tokens issued in consideration for services to be provided to the Company is recognized as compensation expense as the services are provided.

To date, we have generated no cash from operations. We have financed our operations through debt issuances and equity investments made by our shareholders. See “Certain Relationships and Related Party Transactions.” We expect to require additional cash to fund our ongoing operational needs, particularly our development and marketing expenses and employee salaries.

Our future expenditures and capital requirements will depend on numerous factors, including: the success of this offering, the progress of our development efforts and the rate at which we can get our trading platforms up and running. We are dependent upon funds raised from this offering to satisfy our working capital requirements. Our business does not presently generate any cash.

We believe that if we raise the maximum amount in this Offering, we will have sufficient capital to finance our operations for at least 24 months; however, if we do not sell the maximum amount or if our operating and development costs are higher than expected, we may need to obtain additional financing prior to that time. Pending these uses, we intend to invest the net proceeds in low-risk, high-quality, investment-grade instruments, certificates of deposit, or direct or guaranteed obligations of the U.S. government or other governments, or hold as cash.

The audited financial statements, included in this prospectus, have been prepared assuming that the Company will continue as a going concern. For the period ended from inception (September 1, 2017) through June 30, 2019, we have incurred a loss from operations and have an accumulated deficit of $6,931,000. We have not yet generated cash from operations and we require financing resources to support the ongoing operations, particularly development, marketing and operational costs. Our future expenditures and capital requirements will depend on numerous factors, including: the success of this offering, the progress of our development efforts and timely launch of the operations of INX Trading Solutions.

We are dependent upon the funds expected from this offering to satisfy our working capital requirements in the coming 12 months. If the proceeds from this offering will be less than the required working capital, or if development and other operation costs will be higher than expected, we may need to obtain additional funding to support our operation in the coming 12 months. Furthermore, we believe that regardless of the funds from this offering, we may need additional funding to finance our operations beyond the coming 12 months, until positive cash flows from operations is achieved.

We are not currently required to maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act and prior to the closing of this Offering, we have not completed an assessment, nor have our auditors tested, our systems of internal controls. We will be required to comply with the internal control requirements of the Sarbanes-Oxley Act for the fiscal year ending December 31, 2020. Only in the event that we are deemed to be a large accelerated filer or an accelerated filer would we be required to comply with the independent registered public accounting firm attestation requirement. Further, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirement.

Prior to the closing of this offering, we have not completed an assessment, nor have our auditors tested our systems, of internal controls. We may have internal controls that need improvement in areas such as:

Because it will take time, management involvement and perhaps outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements and market expectations for our operation of a blockchain asset exchange business, we may incur significant expenses in meeting our public reporting responsibilities, particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also take longer than we expect, thus increasing our exposure to financial fraud or erroneous financial reporting.

The following summarizes our significant contractual obligations as of June 30, 2019 (U.S. Dollars in thousands):

We have entered into an agreement with A-Labs Finance and Advisory Ltd. pursuant to which A-Labs will promote this offering to non-U.S. persons only. Subject to the completion of an offering under which the Company has raised from non-U.S. persons not less than $10,000,000, A-Labs will receive a cash payment of no less than 6.25% of the aggregate gross proceeds of INX Tokens sold to non-U.S. persons, and as high as 10% of such gross proceeds for the initial $30 million raised from sales to non-U.S. persons. A-Labs will also receive a payment for non-broker services in an amount of $500,000 upon the Company selling at least $10 million worth of INX Tokens to U.S. persons. These contingent payments were not recorded on the balance sheet due to the uncertainty of the payments.

Through June 30, 2019, the Company had signed management agreements with key management personnel, according to which the personnel received no cash compensation for services provided to the Company until the Company raises a certain minimum amount in an initial public offering of INX Tokens. Upon achieving the minimum amount, the management personnel will receive a yet to be determined compensation amount.

Pursuant to the management agreements, as amended, six months following the date a registration statement in connection with the above described initial public offering is declared effective by the SEC, the management personnel are entitled to receive a one-time cash bonus in an aggregate amount of $724,000.

In addition, certain individuals are entitled to receive a one-time bonus in aggregate amount of $200,000 six months following the date the registration statement in connection with this Offering is declared effective by the SEC. See also Note 9 to the financial statements for details regarding one-time bonus commitments.

As of June 30, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) (ii) of Regulation S-K.

We have not been exposed to material risks due to changes in foreign exchange rates, and we have not used any derivative financial instruments to manage our foreign exchange risk exposure.

We have not been exposed to material risks due to changes in market interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure.

After completion of this offering, we may invest the net proceeds we receive from the offering in interest-earning instruments. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.

We are exposed to credit risk from our financing activities, including deposits with banks and financial institutions and other financial instruments. As a result, we are subject concentrations of credit risk. As of June 30, 2019, substantially all of our cash and cash equivalents were held at major financial institutions. We believe that these financial institutions are of high credit quality and continually monitor the credit worthiness of these financial institutions.

With less than $1.07 billion in revenues during our last fiscal year, we qualify as an emerging growth company under the JOBS Act. An emerging growth company may take advantage of specified provisions in the JOBS Act that provide exemptions or reductions of its regulatory burdens related to reporting and other requirements that are otherwise applicable generally to public companies. These provisions include an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act. In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, we are deemed to be a large accelerated filer, or we issue more than $1.0 billion of non-convertible debt over a three-year period.

We are developing INX Trading Solutions, a regulated solution for trading blockchain assets, that will initially include a cryptocurrency trading platform operated by INX Digital, for which we have obtained money transmitter licenses or otherwise qualified to operate in 7 US states, with the intention of being licensed or otherwise qualified to operate in most US states by June 2021. We also presently intend to establish INX Securities to be operated by INX Services, which we plan to register as a licensed broker-dealer. However, there is currently significant uncertainty regarding the application of federal and state laws to the trading of security tokens, including the application of current regulations governing the conduct of market intermediaries, and this uncertainty may cause significant delay or may prevent us from developing our INX Securities trading platform as currently envisioned. Prior to the establishment of INX Securities as an ATS, INX Services may operate exclusively as an introducing broker with an order management system and to route security token order flow to one or more third party alternative trading systems.

Our vision is to establish two trading platforms and a security token that provides regulatory clarity to the blockchain asset industry. We plan to achieve this by: (1) differentiating between security and non-security blockchain asset classes and providing trading opportunities for each class; (2) obtaining appropriate regulatory licenses and approvals, including money transmitter licenses, a U.S. broker-dealer license and subsequent registration as an ATS; (3) issuing our security token, the INX Token, and maintaining the INX Registry, which reflects a real time list of INX Token holders; (4) requiring that all INX Token holders comply with KYC/AML procedures; and (5) granting certain rights and benefits to the holders of INX Tokens.

In the future, the Company intends to establish a platform for the trading of derivatives such as futures, options and swaps. We have taken no steps towards the establishment of such a platform, which will require the development of technological solutions as well as federal and state regulatory approvals; accordingly, there is no assurance that such a trading platform will ever be developed. We also intend that our subsidiary in Gibraltar will apply to the Gibraltar Financial Services Commission for licenses under the Financial Services (Markets in Financial Instruments) Act 2018 and the Financial Services (Distributed Ledger Technology Providers) Regulations 2017 for our European-based operations. We have also created the INX Token, which is offered pursuant to this prospectus.

The architecture for the INX Digital and INX Securities trading platforms is based on a sequential processing and storage, meaning that transactions can be processed only one after the other and not in parallel. In order to facilitate liquidity and support a vibrant trading market on our trading platforms, we intend to offer incentives to attract high volume traders and establish strategic partnerships with market makers. We also envision that our trading platforms will enable trading via web portal and application programming interface (“API”) solutions. As we further develop our trading platforms, broker-dealers or other appropriately regulated third parties may route their customers’ trades to our trading platforms using API.

The INX Token is an ERC20 blockchain asset that is programmed using a smart contract that is compatible with the Ethereum blockchain.

After the INX Securities trading platform becomes operational, holders of INX Tokens will be able to use the INX Token to pay transaction fees on the INX Securities trading platform. When paying for transaction fees, INX Tokens will be entitled to, at a minimum, a 10% discount to other forms of payment. See “Description of INX Tokens - Uses of the INX Token on the INX Platforms.” We intend to offer record holders of INX Tokens promotional discounts on transaction fees on the INX Digital trading platform. However, such discounts are promotional and not a right associated with ownership of the INX Token. INX Tokens may not be used as payment for transaction fees on the INX Digital trading platform. We do not currently accept INX Tokens as payment for our services and, until the INX Securities trading platform becomes operational, purchasers of INX Tokens will have no guarantee that their INX Tokens can be used as payment for any of our services. In addition, holders of INX Tokens will be entitled to receive an annual pro rata distribution of 40% of the Adjusted Operating Cash Flow. Commencing in 2021, the distribution will be calculated on an annual basis and paid on or before April 30 to parties (other than the Company or its subsidiaries) that hold INX Tokens on the preceding March 31. Each annual distribution will be based on the Company’s cumulative Adjusted Operating Cash Flow (net of cash flows which have already formed the basis for a prior distribution), calculated as of December 31 of the year prior to the distribution. However, because each INX Token holder’s right to a pro rata distribution is based on our cumulative Adjusted Operating Cash Flow, no distribution will be made to INX Token holders, if at all, until the Company generates positive cumulative Adjusted Operating Cash Flows. As of September 30, 2019, cumulative Adjusted Operating Cash Flow was a negative cash flow of approximately $5,848,000. See “Description of INX Tokens - Participation Right in Adjusted Operating Cash Flow.”

In order to verify that INX Tokens are transferred between KYC/AML-vetted holders, transfers of INX Tokens will be executed by the INX Token smart contract under conditional permission that the wallet addresses of both the sender and receiver of INX Tokens are listed on the Whitelist Database. If either the sender or receiver wallet address is not listed in the Whitelist Database (or if the Company has “frozen” the sender or receiver wallet address), the smart contract rejects the transfer and the INX Token Distributed Ledger is not updated. The transferor of INX Tokens will be responsible for payment of the transfer fees on the Ethereum blockchain. For example, in 2018, Ethereum average daily transfer fees varied between $0.15 and $5.528. In 2019, Ethereum average daily transfer fees varied between $0.05 and $0.1235. The average time to record transfers (new blocks on the Ethereum blockchain) has been 3 minutes. For additional information regarding that transfer of INX Tokens, see “Description of INX Tokens - Holding and Transferring INX Tokens”.

INX Limited’s registered office is located at Unit 1.02, 1st Floor, 6 Bayside Road Gibraltar, GX11 1AA and its telephone number is +350 200 79000. INX Limited has an office located in Israel, where a majority of its senior officers are currently based. After the INX Digital trading platform becomes fully operational, INX Limited intends to relocate its principal office to the United States.

This lack of a single point of data collection is believed to enhance the security of traditional blockchain networks and blockchain assets. Nonetheless, blockchain assets and blockchain trading platforms remain susceptible to security breaches and cybercrime. Since 2011, more than $1.7 billion has been publicly reported stolen from cryptocurrency exchanges and investors. For example, in January 2018, about $500 million worth of blockchain assets were stolen from a major Japanese trading platform⁹. Variations on traditional blockchain networks include “permissioned” blockchains, in which a limited number of pre-selected users monitor and validate transactions (or add “blocks” to the chain). In a fully centralized blockchain, one organization monitors and validates transactions. Such blockchain ledgers may be viewable by the public or viewing ledger information may be restricted.

We have identified and targeted our business operations around two emerging blockchain asset classes: cryptocurrencies and security tokens.

The market for blockchain assets has grown dramatically including through dramatic volatility since blockchain assets were first introduced in 2009 with the launch of Bitcoin. According to CoinMarketCap.com¹⁰, on December 31, 2016, global market capitalization for all blockchain assets was approximately $17 billion. By December 31, 2017, global market capitalization grew to approximate $612 billion, then fell sharply through 2018. As of December 31, 2018, blockchain assets had a total market capitalization of approximately $125 billion. As of December 31, 2019, blockchain assets had a total market capitalization of approximately $190 billion.

The volatility in market capitalization of blockchain assets correlates with an increase in ICOs, whereby new blockchain assets are sold for the first time. According to CoinSchedule.com¹¹, approximately $6.5 billion in the aggregate was raised through ICOs during 2017. During 2018, aggregate proceeds from ICOs increased to approximately $21 billion, although offerings slowed significantly in the second half of 2018. This downward trend continued into 2019 and aggregate proceeds from ICOs during the year only amounted to approximately $3.2 billion.¹²

In addition, some blockchain industry participants have reported that a significant percentage of blockchain asset trading activity is artificial or non-economic in nature and may represent attempts to manipulate the price of certain blockchain assets. For example, in a report published by Bitwise Asset Management¹³, Bitwise claimed that 95% of bitcoin trading activity appearing on 81 blockchain asset trading platforms is fake. Bitwise’s report further stated that trading platforms and blockchain asset developers are incentivized to artificially inflate trading volumes so that their platform or asset rises in league tables and gains prominence in the industry. As a result, trading platforms or blockchain assets may seek to inflate demand for a specific blockchain assets, or blockchain assets generally, which could increase the volatility of that asset or blockchain asset trading prices generally.

Despite the volatility of blockchain market prices, adoption of blockchain technology has continued. For example, in February 2019, JPMorgan launched its own cryptocurrency, JPM Coin, which it initially plans to use for settlement of international payments for large corporate clients, securities transactions and for larger corporations that use JP Morgan’s treasury services. In June 2019, Facebook announced that it would launch a cryptocurrency, the Libra coin, and develop payment and other financial services and products around its Libra network. In addition, in connection with the release of the Framework, FinHub, through the SEC Division of Corporation Finance, issued a no action letter to TKJ stating that it will not recommend any enforcement action against TKJ if it offers and sells its “tokenized” jet card without registration under the federal securities laws. The no action letter is the first of its kind to analyze whether a blockchain asset is a security under the federal securities laws.

According to CoinMarketCap.com¹⁴, over 200 blockchain asset trading platforms provide basic buy and sell services for one or more blockchain assets. On January 14, 2020 approximately 80 of those trading platforms had 30-day trailing average daily trading volumes over $20,000,000 and more than 50 trading platforms had 30-day trailing average daily trading volumes over $100,000,000. Top blockchain asset trading platforms, based on USD 30-day trading volume, include BKEX, LBank, Huoboi Global, Coinsbit, BiKi, Binance, OKEx, P2P2B and BitZ. The majority of blockchain assets traded on these platforms are considered to be cryptocurrencies.

There has been growing institutional interest in operating regulated blockchain asset exchanges and trading platforms and utilizing blockchain assets in bank financing practices.

As blockchain assets are sorted into cryptocurrencies and security tokens, the need and demand for regulated trading solutions for each asset class continues to grow.

However, current platforms or exchange markets that permit the trading of blockchain assets have the following shortcomings:

Our Proposal: INX Trading Solutions, a Single Regulated Ecosystem for Trading Blockchain Assets

We are designing our trading platforms to provide clients with a multi-currency non-biased execution trading solution and to function as broker, execution, and clearing agent. We plan to provide trading of different types of digital blockchain assets, including cryptocurrencies and security tokens, with the optionality for execution of trades in both traditional fiat currencies and digital assets.

Our goal in the development of INX Trading Solutions is to offer professionals in the financial services community a comprehensive, interactive platforms that allow for seamless integrated trading, real-time risk management and reporting and administration tools. We plan to develop INX Trading Solutions as a series of centralized platforms that facilitate peer-to-peer professional trading services. These trading platforms will help our customers automate and coordinate front-office trading functions, middle-office risk management and reporting functions, and back-office accounting functions.

We will ensure that appropriately qualified individuals will act on behalf of each of our platforms and these functions will be separated by entity as follows:

The trading platform to be operated by each entity will support “straight through processing” of orders received from customers. As such, orders and resulting trades will be recorded on internal databases and will be reflected in customer accounts without any intervention. Both INX Digital Inc. and INX Services, Inc. will employ staff to monitor trading activity and support customers. Each entity will also employ supervising managers to oversee the trading and settlement process. The staff of both entities will be able to process trade corrections, but this activity will require management approvals and audit reports will be reviewed to monitor this activity.

Neither INX Digital, Inc. nor INX Services, Inc. will extend credit to customers. Further, our proprietary order management software, which will be utilized by both INX Digital, Inc. and INX Services, Inc. has a rules engine that ensures sufficient funds or fully paid assets are available to cover orders, prior to their submission.

We are currently preparing the required applications and supporting materials to register INX Digital as a money transmitter. We have registered INX Digital with FinCEN as a federal money service business. In addition, we have submitted notifications to California, Massachusetts, Missouri, Montana, Pennsylvania, Utah and Wisconsin and INX Digital is now eligible to operate as proposed in those jurisdictions. We anticipate that we will be able to obtain money transmitter licenses or otherwise qualify to operate in most US states by June 2021. We expect to commence operations twelve months after reaching the minimum offering amount of $7,500,000.

The architecture for the INX Digital platform is based on sequential processing and storage, allowing transactions to be processed one after the other, and not in parallel.

Transaction fees on the INX Digital platform may be paid using US dollars, BTC or ETH.

INX Digital receives custody services for cryptocurrencies held on behalf of the clients of our INX Digital trading platform from BitGo Trust as the custodian. BitGo Trust is a “qualified custodian” as defined in Rule 206(4)-2 promulgated under the Investment Advisers Act of 1940. We believe that BitGo Trust, together with its affiliate BitGo Inc., is the leading provider of custody and wallet services for cryptocurrency trading, with the ability to support both “hot” and “cold” storage with a high degree of electronic and physical security, as well as transaction processing and reporting.

BitGo Trust offers cold storage technology in bank-grade Class III vaults and storage solutions for more than 100 digital assets, and together with BitGo Inc., offers sophisticated controls and policies enforcement solutions, including multiple approvals, spending limits, and whitelists, as well as customizable user roles and controls to align with our organizational structure.

BitGo offers two types of services; a hot wallet solution and a cold storage solution. INX Digital, Inc. plans to use both services. A hot wallet is a multi-signature storage solution, which requires two of three private keys to transfer digital assets. In our arrangement, INX will hold two of the keys and BitGo Inc. will hold the other key. Two keys will be created whenever we establish a BitGo hot wallet, a primary key (used to authorize transactions) and a backup key (used to recover the wallet, if the wallet password is lost or if BitGo Inc. ceases operations). The third key is used by BitGo Inc. to cosign transactions; this key is created by BitGo’s servers and is known only to BitGo Inc. to mitigate the risk of an unauthorized transfer of assets. INX policy will require that INX and BitGo Inc. must act together to transfer assets. INX Digital, Inc. will maintain an omnibus wallet at BitGo Inc. for each type of asset to be traded on our platform, which will be designated for the exclusive benefit of customers.

BitGo Trust’s cold storage solution outsources key management and security to BitGo Trust. Cold storage is offline storage; it is the most secure way to store digital assets, as it is never connected to a network. INX Digital, Inc. will transfer cryptocurrency assets from its hot wallet to cold storage at BitGo Trust; BitGo Trust, as custodian, will safeguard cryptocurrency assets for INX customers. To initiate a transfer from cold storage to an INX hot wallet, INX will specify the amount to transfer and submit the request to BitGo Trust. BitGo Trust will contact INX, to conduct an out-of-band video verification to confirm the transfer is legitimate and that an INX authorized signatory approves it. BitGo Trust will then generate the transaction and sign it securely offline with the user key that BitGo Trust holds in custody. Once half-signed, BitGo Trust will bring the transaction back online, and upload it to the platform. After key policies are evaluated and satisfied, BitGo Inc. will then sign the transaction with the BitGo Inc. key. Once completely signed, BitGo Inc. will broadcast the transaction to the blockchain, and the cryptocurrency assets will be transferred from cold storage to the appropriate INX hot wallet. This separation of functions makes our operations more secure because, among other reasons, we only need to keep a hot wallet sufficiently funded to service withdrawals. We will use cold storage to store the majority of the cryptocurrency assets held by us, because cold storage provides greater asset protection through policies and physical security.

BitGo Trust’s custodial services are provided pursuant to a custodial services agreement (the “Custodial Services Agreement”) between INX Digital and BitGo Trust. For its custodial services, BitGo Trust will receive an onboarding fee of $ and will receive a monthly custody fee equal to annualized % of the market value of the assets under custody (subject to a minimum monthly charge). BitGo Trust also receives various transaction-based fees. The Custodial Services Agreement is for an initial term of one year, and will be automatically extended for one-year periods, unless terminated by either party by delivery of a written notice at least 60-days prior to the expiration of the then-current term. The Company may also terminate the Custodial Services Agreement (i) during the initial term, within 30 days following written notice a breach of a material term of the Custodial Services Agreement without cure of such breach within the 30 days; or (ii) after the initial term, for any reason upon 30 days’ prior written notice.

The foregoing description of the Custodial Services Agreement summarizes the material terms of the Custodial Services Agreement, but is not a complete description. For more details about the Custodial Services Agreement, you should reference to the full text of the Custodial Services Agreement, which is attached as Exhibit 10.25 hereto, and is incorporated herein by reference.

We intend to register INX Services as a broker-dealer and operate the INX Securities trading platform as an ATS for security tokens; however, at least initially, INX Services may operate as an introducing broker and offer clients the ability to buy and sell security tokens in their brokerage accounts. As an introducing broker, INX Services will act in an agency capacity and will seek to obtain best execution by routing orders to one or more market centers and/or alternative trading systems.

The architecture for the INX Securities trading platform is based on sequential processing and storage, allowing transactions to be processed one after the other, and not in parallel.

Transaction fees on the INX Securities trading platform may be paid using US dollars.

INX Services has yet to identify a clearing firm to serve as a custodian which satisfies the requirements of Rule 15c3-3. There is currently significant uncertainty regarding the application of Rule 15c3-3 and other federal securities laws and regulations to the conduct of market intermediaries that seek to facilitate the trading of security tokens. If we are not able to identify such an arrangement, or if the FINRA delays in approving our broker-dealer license as a result of our custodial relationship, such failure or delay could prevent us from developing the INX Securities trading platform or other operations of INX Services as currently envisioned. We will not be able to commence trading of security tokens on the INX Securities trading platform until we identify such a firm and receive approval from FINRA.

We have currently developed the INX Token. After the INX Securities trading platform is operational, prospective investors who have been duly identified through KYC/AML procedures may purchase and trade INX Tokens on the INX Securities trading platform. INX Token holders will be able to use the INX Token to pay INX Securities trading platform transaction fees, which are entitled to, at a minimum, a 10% discount to other forms of payment. The INX Tokens may not be used as payment for transaction fees on the INX Digital trading platform, but we intend from time to time to offer promotional discounts on transaction fees on the INX Digital trading platform to record holders of INX Tokens. Holders of INX Tokens will also be entitled to receive an annual pro rata distribution of 40% of the Company’s cumulative Adjusted Operating Cash Flow. Commencing in 2021, the distribution will be calculated on an annual basis and paid on or before April 30 to parties (other than the Company or its subsidiaries) that hold INX Tokens on the preceding March 31. Each annual distribution will be based on the Company’s cumulative Adjusted Operating Cash Flow (net of cash flows which have already formed the basis for a prior distribution), calculated as of December 31 of the year prior to the distribution. However, because each INX Token holder’s right to a pro rata distribution is based on our cumulative Adjusted Operating Cash Flow, no distribution will be made to INX Token holders, if at all, until the Company generates positive cumulative Adjusted Operating Cash Flows. As of September 30, 2019, cumulative Adjusted Operating Cash Flow was a negative cash flow of approximately $5,848,000. See “Description of INX Tokens.”

We expect the development of INX Trading Solutions to occur in the following phases.

Phase 1. During this phase, we intend to create the INX Digital trading platform to permit trading in Bitcoin, Ether and other cryptocurrencies. We plan on developing our secure trading/matching engine which will have high frequency transaction capabilities and support for a range of standard order types. We also plan on developing an API interface for broker-dealers, traders, and market makers. In this phase, we also plan to further develop technology for our clearing operations which will support large scale, automated transactions. We expect to introduce such services in jurisdictions in which our subsidiary, INX Digital, is licensed or otherwise permitted to act as a money transmitter.

Development of the INX Digital trading platform is progressing and the Company is currently in the process of testing the trading capabilities of the platform. We are currently preparing the required applications and supporting materials for INX Digital to apply for applicable licenses or otherwise permissibly act as a money transmitter/exchanger in the selected jurisdictions. We have submitted notifications and are eligible to operate as proposed in California, Massachusetts, Missouri, Montana, Pennsylvania, Utah and Wisconsin and we intend that we will be registered or otherwise qualified to commence operations in 14 US states by September 2020. We intend to register or otherwise qualify in most US states by June 2021. We expect that we will incur approximately $5 million of expenses to complete Phase 1 of development.

Phase 2. During this phase, we plan to develop the INX Securities trading platform for the trading of securities tokens. We expect to provide these services following the registration of INX Services as a broker-dealer and registration of the INX Securities trading platform as an ATS. We intend to submit a Form BD to FINRA once the SEC has provided guidance on our proposed custodial relationship. We expect to introduce these services following receipt of FINRA and SEC approvals. We intend to complete Phase 2 and begin trades on the INX Securities trading platform in January 2021. If there continues to be significant uncertainty regarding the application of federal and state laws and regulations to the trading of security tokens, including regulations governing market intermediaries, and this uncertainty causes significant delay in the development of our INX Securities trading platform as currently envisioned, we intend to launch and operate INX Services as an introducing broker for security tokens. We expect that we will incur approximately $19 million of expenses to complete the development of Phases 1 and 2.

Subsequent to Phase 2, the Company intends to establish a platform for the trading of derivatives such as futures, options and swaps. We have taken no steps towards the establishment of such a platform, which will require both the development of technological solutions as well as applicable regulatory approvals, and accordingly, there is no assurance that such a trading platform will ever be developed.

The Company anticipates that the net proceeds to the Company, before deducting any offering expenses, will range from, at a minimum, $7,500,000 to, at a maximum, $116,500,000 (based on (i) an assumed initial public offering price of $0.90 per Token, the midpoint of the price range set forth on the cover page of this prospectus, and (ii) an assumed payment to A-Labs in an amount of $0, the minimum amount that would be payable by us to A-Labs if the gross proceeds of the offering does not exceed $10 million, to $500,000, the minimum amount that would be payable by us to A-Labs if we sell 130,000,000 Tokens at an assumed initial public offering price of $0.90 per Token and the gross proceeds of the offering from non-U.S. persons does not exceed $10 million.

Because the Offering is being made subject to a minimum offering amount of $7,500,000, the Company may close on committed purchases without obtaining funds for all purposes set forth below. In the event that the Company raises only the minimum of $7,500,000 in the Offering, the Company will be able to finalize Phase 1 as described above. The Company plans to use net proceeds from this offering approximately as follows:

We believe that as INX Trading Solutions completes each phase of development, which we expect will increase the number of high-volume blockchain assets included on our platforms, our business operations will grow and enable us to launch several growth strategies, including the following:

We face intense competition in the blockchain asset trading market on a global level. As of January 14, 2020, top blockchain asset trading platforms, based on USD 30-day trading volume, include BKEX, LBank, Huoboi Global, Coinsbit, BiKi, Binance, OKEx, P2P2B and BitZ.¹⁵

An ever-growing number of previously unregulated trading platforms have announced intentions to operate as a regulated broker-dealers, or as otherwise regulated entities either under the federal securities laws, U.S. state or local laws or, as applicable, the laws of other jurisdictions (outside the U.S.) such as the EU. The market for trading blockchain assets has generated considerable interest and is continually evolving with new entrants to the market. In addition, established financial institutions have expressed interest in operating regulated blockchain asset exchanges or trading platforms and utilizing blockchain assets in bank financing practices.

For example, in January 2019, t0.com, Inc. announced that its security token trading platform was operational and began trading tZERO token, in compliance with SEC and FINRA regulations. In November 2018, the Gibraltar Blockchain Exchange, a subsidiary of the Gibraltar Stock Exchange, secured a license from the Gibraltar Financial Services Commission (GFSC) to operate as a crypto blockchain exchange and currently supports trading in six digital assets, including Bitcoin, Ethereum, EOS and the exchange’s native Rock token. Coinbase and Uphold, two blockchain asset trading platforms, have each announced plans to SEC approval to operate trading platforms for trading blockchain assets that are securities.

In addition, there has been growing institutional interest in operating regulated blockchain asset exchanges and utilizing blockchain assets in bank financing practices. In January 2017, UBS, BNY Mellon, Deutsche Bank, Santander, NEX and blockchain startup Clearmatics announced their own blockchain asset issuances with the intent to incorporate blockchain assets in currency-related transactions, encourage regulation by central banks and create fiat-like asset-collateralized networks on custom blockchain platforms that apply “permissioned” and centralized blockchain technology. In December 2017, Bank of America was awarded a patent for an automated digital currency exchange system. Also in December 2017, the Chicago Board of Exchange began trading in bitcoin futures, and was joined shortly thereafter by CME Group, also offering bitcoin futures. In February 2019, JPMorgan launched its own cryptocurrency, JPM Coin, which it initially plans to use for settlement of international payments for large corporate clients, securities transactions and for larger corporations that use JP Morgan’s treasury services.

The market for trading blockchain assets is developing and we anticipate new entrants to the market and competition to intensify in the future. Our future competitors may have greater resources than us and there can be no assurance that we will have the financial and operational resources necessary to carry out our business plan and successfully compete with our competitors.

On September 1, 2017, two shareholders of the Company: Triple-V (1999) Ltd, a limited liability company registered under the laws of the state of Israel, controlled and wholly owned by Mr. Shy Datika, one of our founders, our controlling shareholder and President; and A-Labs Finance and Advisory Ltd., a private company incorporated under the laws of the state of Israel, controlled by Mr. Doron Cohen, entered into a Founders’ Agreement which set forth the initial terms for the inception and incorporation of the Company for developing a marketplace for virtual currencies. The Founders’ Agreement was later amended by the Addendum to Founders’ Agreement dated December 28, 2017 and Addendum 2 to Founders’ Agreement dated December 31, 2017 (as amended, the “Founders’ Agreement”).

Share Capital of the Company. Pursuant to the Founders’ Agreement, Triple-V was to have been allocated 3,666,666 ordinary shares of the Company, A-Labs was to have been allocated 1,120,000 ordinary shares of the Company, and 417,000 ordinary shares of the Company were to have been reserved for issuance upon the conversion of employee options.

Rights to Appoint Members of the Board of Directors. The Founders’ Agreement provides that the board of directors of the Company shall include no less than one board member and no more than seven board members, unless otherwise determined by the shareholders. The Founders’ Agreement further entitles Triple-V to appoint, remove or replace six board members and to appoint the Chief Executive Officer of the Company, subject to board approval. The Founders’ Agreement grants A-Labs the right to appoint, remove or replace one board member. Effective December 31, 2017, the Founders’ Agreement was amended to provide that, upon the effectiveness of the registration statement of which this prospectus is a part, members of the board of directors of the Company will be elected by the vote of the holders of a majority of the shares equity of the Company. In addition, Addendum 2 to the Founders’ Agreement provides that the right to appoint members of the Board of Directors of the Company shall be in accordance with the Amended and Restated Articles of Association of the Company and not as set forth in the Founders’ Agreement, and that all the parties to the Founders’ Agreement waived their rights in this regard accordingly.

Non-Competition and Non-Solicitation. Pursuant to the Founders’ Agreement the parties agree to non-compete and non-solicit restrictions under which they may not compete or assist others to compete with the Company in any engagement or activity related to the development of a marketplace for virtual currencies and further they may not solicit or attempt to solicit any employee or service provider of the Company or any person to whom the Company provided services for products that would compete with the Company. The non-compete and non-solicit restrictions expire for each party one year after such party ceases to be a shareholder of the Company.

Termination. The Founders’ Agreement shall terminate upon the earlier of (i) the merger or consolidation of the Company with another corporation, (ii) the initial underwritten public offering by the Company of its ordinary shares pursuant to an effective registration under the Securities Act or any equivalent law of another jurisdiction, or (iii) the written agreement of Triple-V and A-Labs.

The foregoing description of the Founders’ Agreement summarizes the material terms of the Founders’ Agreement, as amended, but is not a complete description. For more details about the Founders’ Agreement, you should reference to the full text of the Founders’ Agreement, which is attached as Exhibits 10.1, 10.2 and 10.3 hereto, and is incorporated herein by reference.

On June 25, 2018, the Company entered into an amended and restated Consultancy Agreement with Triple-V (1999) Ltd. (the “Triple-V Consultancy Agreement”) pursuant to which Triple-V (1999) Ltd. will provide consultancy services and will have such duties, authorities and responsibilities as shall be determined by our board of directors) through the personal services of Mr. Shy Datika.

Term. Pursuant to the Triple-V Consultancy Agreement, Triple-V’s engagement with the Company commenced as of October 1, 2017, and will continue until such time as either Triple-V or the Company terminates its engagement pursuant to the terms of the Triple-V Consultancy Agreement, including by 30 days written notice.

Compensation. Pursuant to the Triple-V Consultancy Agreement, as of May 1, 2018, Triple-V will receive a monthly fee in the amount of $12,000 and a one-time bonus of $250,000 six months following the date the registration statement in connection with this Offering is declared effective by the SEC. In addition, the Company will reimburse Triple-V for out of pocket expenses reasonably required in the performance of the services under the Triple-V Consultancy Agreement. The Triple-V Consultancy Agreement does not provide for benefits upon the termination of the services, other than payment of fees and other obligations owed during the required notice period.

Terms of Proprietary Rights, Confidentiality and Non-Competition. The Triple-V Consultancy Agreement contains terms to protect the proprietary rights of the Company in the Company’s technology, intellectual property and inventions to which Triple-V is exposed during the course of the engagement. Triple-V is also subject to terms of confidentiality. Notwithstanding the foregoing, nothing in the Triple-V Consultancy Agreement prevents Triple-V from further engagements in activities related to virtual coins outside the scope of the technology and confidential information owned by the Company.

The foregoing description of the Triple-V Consultancy Agreement summarizes the material terms of the Triple-V Consultancy Agreement, as amended, but is not a complete description. For more details about the Triple-V Consultancy Agreement, you should reference to the full text of the Triple-V Consultancy Agreement, which is attached as Exhibit 10.4 hereto, and is incorporated herein by reference.

On December 26, 2017, in connection with the appointment of Mr. Oran Mordechai as the Company’s Chief Financial Officer, the Company entered into a Financial Services Agreement with Insight Finance Ltd. (supplemented on February 14, 2018) (the “Insight Service Agreement”) pursuant to which Insight Finance Ltd. will provide certain bookkeeping and accounting services to the Company, including that Mr. Oran Mordechai shall serve as the Company’s Chief Financial Officer.

Term. Pursuant to the Insight Service Agreement, Insight’s engagement with the Company will continue until terminated according to its terms. The Company may terminate the Insight Management Agreement upon notice to Insight.

Compensation. Pursuant to the Insight Service Agreement, Insight will receive a quarterly fee for bookkeeping and accounting services and will be compensated at an hourly rate for other services, or as shall be agreed in advance. In addition to and separate from such fees, the Company will reimburse Insight for certain out of pocket expenses reasonably required in the performance of the services under the Insight Service Agreement. The Insight Service Agreement does not provide for benefits upon the termination of the services, other than payment of fees and other obligations owed.

Limitation of Liability. Insight’s liability in connection with the Insight Service Agreement, is limited to the total annual fees actually paid to Insight under the Insight Service Agreement (the “Limit of Liability”). The Company shall indemnify and compensate Insight for all costs incurred by Insight arising out of, resulting from or in any way connected to the performance of its obligations under the Insight Service Agreement that exceed the Limit of Liability.

Terms of Proprietary Rights, Confidentiality and Non-Solicitation. Insight is subject to terms of confidentiality to protect the proprietary rights of the Company in the Company’s technology, intellectual property and inventions to which Insight is exposed during the course of the engagement. The Company also agreed that it will not hire, recruit or solicit any employee of Insight without Insight’s written consent.

The foregoing description of the Insight Service Agreement summarizes the material terms of the Insight Service Agreement, as amended, but is not a complete description. For more details about the Insight Service Agreement, you should reference to the full text of the Insight Service Agreement, which is attached as Exhibit 10.5 hereto, and is incorporated herein by reference.

On December 28, 2017, the Company entered into Second Amended and Restated Engagement Agreement with A-Labs effective as of September 26, 2017 pursuant to which A-Labs agreed to provide the Company with certain services, including the development, planning, management, execution, and branding with relation to the initial public offering of the INX Tokens on behalf of the Company. The Engagement Agreement was further amended on January 31, 2018 (as amended, the “A-Labs Engagement Agreement”).

Term. A-Labs’s engagement with the Company will continue until terminated in accordance with the terms of the A-Labs Engagement Agreement. The A-Labs Engagement Agreement will terminate: (i) upon the completion of this offering and the payment to A-Labs of all fees payable thereunder, (ii) if the Company does not provide a notice to A-Labs confirming the release of INX Tokens to their buyers and acceptance of INX Token payments by the end of the Offering Period, as defined under the A-Labs Agreement, (iii) if the sale of Tokens or any other activity contemplated under the A-Labs Agreement is banned or otherwise declared illegal by any applicable law or regulation, or (iv) upon 30 days prior written notice by either party.

Compensation. Pursuant to the A-Labs Engagement Agreement, A-Labs is entitled to receive:

(ii) a grant of 4,550,000 INX Tokens, subject to a repurchase option by the Company, under which the Company is entitled to repurchase INX Tokens for $0.01 per Token;

(iii) a cash payment of $500,000 payable upon the completion of an offering under which the Company has raised from U.S. persons not less than $10,000,000; and

(iv) a cash payment for the sale of INX Tokens to non-U.S. persons subject to the completion of an offering under which the Company has raised from non-U.S. persons not less than $10,000,000. If the threshold for proceeds raised from non-U.S. persons is met, A-Labs is entitled to the following percentage of the proceeds raised from sales to non-U.S. persons:

(1) 10% of the first $30 million raised from sales to non-U.S. persons (up to $3 million);

(2) 5% of the next $70 million raised from sales to non-U.S. persons (up to $3.5 million);

(3) 6% of the next $100 million raised from sales to non-U.S. persons (up to $6 million); and

(4) 7.5% of proceeds raised from sales to non-U.S. persons in excess of $200 million.

Subsequent to entry into the A-Labs Engagement Agreement, the Company unilaterally waived its rights to exercise the repurchase option. Except as described above, A-Labs is not entitled to any sales royalties, commissions or other consideration in connection with the contemplated offering to U.S. persons.

Services. Pursuant to the A-Labs Engagement Agreement A-Labs shall provide the Company with the following services: (i) on a best efforts basis, outside the United States and with respect to non-US persons only, to utilize its global contacts with the investment community to engage institutional and accredited investors to participate as investors in the public offering of the INX Tokens; and (ii) provide the Company with support in its branding and marketing activities, including the design of electronic and printed brand and marketing materials, the design of a website for the offering, and other promotional materials.

Services in the United States. With respect to operations in the United States or in connection with any U.S. person, A-Labs shall provide advisory services only. Such advisory services shall include advice on the offering and token brands, story and style guide, and consultancy with respect to the drafting of the whitepaper (which was not issued).

A-Labs represents that it shall not, directly or indirectly, by itself, by a related party or by any person acting on its behalf, perform, assist, promote, or otherwise be involved in any activity related to solicitation or advertising to the U.S. market nor in direct sale efforts or distribution of INX Tokens in the U.S. or to U.S. persons.

Terms of Proprietary Rights, Confidentiality and Non-Competition. Pursuant to the A-Labs Engagement Agreement, the Company shall be the sole and exclusive owner of all intellectual property created by A-Labs as part of or otherwise in connection with the A-Labs Engagement Agreement, including all developments, systems and components created and/or used by it as part of or during the provision of the thereunder. Notwithstanding the foregoing, A-labs shall have and retain all right, title and interest in and to all (i) existing intellectual property rights owned, obtained and/or developed by them prior to the effective date of the A-Labs Engagement Agreement; and (ii) intellectual property rights created by them during the performance of the Services thereunder and which are general capabilities not related to the services provided to the Company under the A-Labs Engagement Agreement. A-Labs and the Company are subject to terms of confidentiality. A-Labs shall have no limitations to offer and provide to third parties, services similar to the services provided to the Company under the A-Labs Engagement Agreement.

The foregoing description of the A-Labs Engagement Agreement summarizes the material terms of the A-Labs Engagement Agreement, as amended, but is not a complete description. For more details about the A-Labs Engagement Agreement, you should reference to the full text of the A-Labs Engagement Agreement, as amended, which is attached as Exhibits 10.6 and 10.7 hereto, and is incorporated herein by reference.

On May 9, 2018, the Company entered into an amended and restated Exchange Software Agreement, as amended by the first amendment on June 27, 2018 (effective as of October 1, 2017) with Y. Singer Technologies Ltd (commercially known as Committed), an Israeli company (the “Software Services Agreement”), pursuant to which Committed shall provide the Company with services, including the design, development, implementation, modification and customization of the INX Trading Solutions platform software, and related support services.

Term. The Software Services Agreement between the Company and Committed has terminated under its terms as a result of the Company’s failure to raise $5,000,000 by September 30, 2018; however, as of the date hereof, Committed continues to perform the services provided for in the Software Services Agreement.

Compensation. Pursuant to the Software Services Agreement, Committed received a cash payment of approximately $500,000 for its services. Committed also received a warrant to purchase 68,173 ordinary shares of the Company (subject to adjustment in the event of any share dividend, share split, issuance of bonus shares, combination or similar recapitalization affecting such shares), at an exercise price of GBP 0.001 per share exercisable for a period of 48 months from the date the warrants were granted.

Support Services. In addition to the initial design, development, implementation, modification and customization of the INX Trading Solutions platform software, Committed will provide support services to the INX Trading Solutions platform for the three (3) month period beginning on the date of delivery and installation of the exchange software on Company’s server. Committed shall provide Company with maintenance and support services in accordance with the service level agreement entered into under the Committed Agreement, including 24/7 software support. After the initial three-month support period, the Company may elect to renew Committed support services for additional three-month periods, at an annual rate equal to 25% of the agreed original price.

Terms of Proprietary Rights and Confidentiality. Committed is subject to terms of confidentiality to protect the proprietary rights of the Company in the Company’s technology, intellectual property and inventions. The Company shall be the sole and exclusive owner of all intellectual property created by Committed during the performance of its services under the Software Services Agreement. Committed will assign and convey to Company all rights and title to all intellectual property, including all Moral Rights therein, together with the source code, and any and all related patents, copyrights, trademarks, trade names, and/or other intellectual property rights and applications thereof.

The foregoing description of the Software Services Agreement summarizes the material terms of the Software Services Agreement, as amended, but is not a complete description. For more details about the Software Services Agreement, as amended, you should reference to the full text of the Software Services Agreement, which is attached as Exhibits 10.8 and 10.9 hereto, and is incorporated herein by reference.

Committed is an experienced software development company with over 10 years of experience providing technological, architecture and design consultation and research and development services with regard to fin-tech, medical, and digital technology industries. Committed has developed and deployed several blockchain based products and services including ERC20 token smart contracts, digital wallets, and decentralized applications (“DApps”), as well as matching engines used in the financial industry.

On April 23, 2018, the Company and INX Services entered into a services agreement (effective as of April 1, 2018) with Fidelis LLC (“Fidelis”), as amended by the Amended and Restated Executive Services Agreement dated June 25, 2018 (the “Fidelis Services Agreement”), pursuant to which Mr. Matt Rozzi shall provide operations and compliance consultancy services to the Company and INX Services. It is intended that Mr. Rozzi will enter into an engagement agreement with INX Services to serve as its Chief Operating Officer and Chief Compliance Officer (the “Employment Agreement”) six months following the date the registration statement in connection with this offering is declared effective by the SEC.

Term. The Fidelis Services Agreement will continue until six months following the date the registration statement in connection with this offering is declared effective by the SEC, after which the Fidelity Services Agreement would terminate and Mr. Rozzi would enter into an employment agreement with INX Services, the terms of which are as described below. Both parties may agree on renewal of the Fidelis Services Agreement at any time prior to its termination, and each party may terminate the Fidelis Services Agreement upon 60 days written notice to the other party.

Compensation. Mr. Rozzi will receive a monthly fee of $12,500 (for no less than 80 hours of services per month). In addition, upon the registration of INX Services as a broker-dealer with FINRA, Mr. Rozzi shall be granted a one-time bonus of $60,000. In addition to and separate from such payments, the Company will reimburse Mr. Rozzi for certain out of pocket expenses reasonably required in the performance of the services under the Fidelis Services Agreement. The Fidelis Services Agreement does not provide for any other benefits upon the termination of the services.

Terms of Proprietary Rights, Confidentiality. The Fidelis Services Agreement contains terms to protect the proprietary rights and confidentiality of the Company to technology, intellectual property and inventions to which Mr. Rozzi is exposed during the course of the engagement.

The terms of the Employment Agreement to be entered into are intended to be as follows:

Term. Mr. Rozzi and INX Services intend to enter into the Employment Agreement six months following the date the registration statement in connection with this offering is declared effective by the SEC. The Employment Agreement will continue for no less than one year following its effective date, unless terminated for cause.

Compensation. Mr. Rozzi will receive a monthly salary in the amount of $25,000 and benefits appropriate to an executive level employee (including a retirement plan). Mr. Rozzi shall also receive additional bonus payments up to $90,000 upon to the achievement of certain performance targets and objectives as determined by the board of directors of INX Services. Six months following the date the registration statement in connection with this offering is declared effective by the SEC, Mr. Rozzi will receive an option to purchase 350,000 INX Tokens in consideration for $3,500. Upon the adoption of a share ownership plan and option plan by the Company, the Company will grant Mr. Rozzi, equity compensation as follows: (a) an option to purchase a number of option shares constituting 0.5% of the share capital of the Company (on a fully diluted basis and subject to future dilutions) at a price per share equal to the FMV of the Company’s shares. One quarter of the option shall vest upon each anniversary of the effective date of the Employment Agreement, such that the option shall be fully vested upon the fourth anniversary of the effective date of the Employment Agreement, subject to Mr. Rozzi’s continuous engagement with INX Services.

The foregoing description of the Fidelis Services Agreement summarizes the material terms of the Fidelis Services Agreement, as amended, but is not a complete description. For more details about the Fidelis Services Agreement, you should reference to the full text of the Fidelis Services Agreement, which is attached as Exhibit 10.10 hereto, and is incorporated herein by reference.

In connection with the appointment of Ms. Naor as the Company’s VP, Product, as of May 1, 2018, Ms. Naor provides services to the Company pursuant to a services agreement entered into between the Company and Shiran Communications Ltd. (“Shiran”), an Israeli company, as amended on July 29, 2018, January 1, 2019 and July 1, 2019 (the “Shiran Services Agreement”). Prior to that, Ms. Naor provided services to the Company pursuant to a services agreement entered into between the Company and Ms. Naor dated November 1, 2017 as amended by the Amended and Restated Consultancy Agreement with Ms. Naor dated June 25, 2018 and terminated on 29 July 2018 (the “Naor Consultancy Agreement”), which contained terms and conditions materially similar to the terms of the current Shiran Services Agreement, as further detailed below.

Term. The Shiran Services Agreement is effective as of May 1, 2018 and shall terminate on December 31, 2019.

Compensation. In consideration for the services rendered by Shiran, Shiran shall be entitled to a fee in the amount of $94,000, to be paid in 8 equal monthly installments commencing as of May 1, 2018 and ending December 31, 2018. Such fee constitutes full reimbursement for the project detailed in the Shiran Services Agreement. After December 31, 2018, Shiran is paid a monthly consultant fee of $11,750 (plus VAT, to the extent applicable). On July 29, 2018, the Shiran Services Agreement was amended such that a one-time bonus payment in the amount $114,000 will be paid to Shiran subject to and following the lapse of six months after the declaration of the SEC of the effectiveness of the offering contemplated hereunder.

Terms of Proprietary Rights, Confidentiality and Non-Competition. The Shiran Services Agreement contains terms to protect the proprietary rights of the Company to technology, intellectual property and inventions to which Ms. Naor is exposed during the course of the engagement.

The foregoing description of the Naor Consultancy Agreement and the Shiran Services Agreement summarizes the material terms of the Naor Consultancy Agreement and the Shiran Services Agreement, as amended, but is not a complete description. For more details about the Naor Consultancy Agreement and the Shiran Services Agreement, you should reference to the full text of the Naor Consultancy Agreement and the Shiran Services Agreement, which is attached as Exhibit 10.11 and Exhibit 10.12, respectively, hereto, and is incorporated herein by reference.

On November 27, 2017, in connection with the appointment of Mr. Azeroual as the Company’s Vice President, Blockchain Asset Strategy, the Company entered into a Management Agreement with Mr. Azeroual, as amended by the Amended and Restated Consultancy Agreement with Mr. Azeroual dated June 25, 2018 (the “Azeroual Consultancy Agreement”).

Term. Pursuant to the Azeroual Consultancy Agreement, Mr. Azeroual’s engagement with the Company will continue until such time as either Mr. Azeroual or the Company terminates her engagement pursuant to the terms of the Azeroual Consultancy Agreement, including by 30 days written notice.

Compensation. Pursuant to the Azeroual Consultancy Agreement, Mr. Azeroual will receive a monthly fee for his services in the amount of $7,000, commencing as of May 1, 2018. Six months following the date the registration statement in connection with this offering is declared effective by the SEC, Mr. Azeroual will receive: a one-time bonus in the amount of $150,000; a to-be-determined monthly fee as compensation for his services; and an annual bonus payment contingent upon achievement of milestones and targets predetermined by the Company. In addition, the Company will reimburse Mr. Azeroual for out of pocket expenses reasonably required in the performance of the services under the Azeroual Consultancy Agreement. The Azeroual Consultancy Agreement does not provide for benefits upon the termination of the services, other than payment of fees and other obligations owed during the required notice period.

Terms of Proprietary Rights, Confidentiality and Non-Competition. The Azeroual Consultancy Agreement contains terms to protect the proprietary rights of the Company to technology, intellectual property and inventions to which Mr. Azeroual is exposed during the course of the engagement. Mr. Azeroual is also subject to terms of confidentiality. Notwithstanding the foregoing, nothing in the Azeroual Consultancy Agreement prevents Mr. Azeroual from further engagements in activities related to virtual coins outside the scope of the technology and confidential information owned by the Company.

The foregoing description of the Azeroual Consultancy Agreement summarizes the material terms of the Azeroual Consultancy Agreement, as amended, but is not a complete description. For more details about the Azeroual Consultancy Agreement, you should reference to the full text of the Azeroual Consultancy Agreement, which is attached as Exhibit 10.13 hereto, and is incorporated herein by reference.

On June 25, 2018, Mr. Silbert and INX Services entered into an Amended and Restated Executive Employment Agreement (effective March 1, 2018) as amended effective as of November 1, 2019 (the “Silbert Employment Agreement”), pursuant to which Mr. Silbert will provide services to INX Services and the Company, including that Mr. Silbert shall serve as a member of the Board of Directors of the Company and Executive Managing Director of U.S. Operations of INX Services.

Term. Pursuant to the Silbert Employment Agreement, Mr. Silbert’s engagement with the Company will continue until such time as either Mr. Silbert or the Company terminates the engagement pursuant to the terms of the Silbert Employment Agreement, including by 30 days written notice or immediately for cause.

Compensation. Pursuant to the Silbert Employment Agreement, Mr. Silbert receives a base salary of $132,000 and, effective November 1, 2019, will receive a base salary of $12,500 per month. Six months following the date the registration statement in connection with this offering is declared effective by the SEC, Mr. Silbert’s base salary shall increase to a monthly rate of $20,000 and Mr. Silbert shall be eligible to earn an annual performance based bonus in the amount of $150,000 upon the achievement of certain performance based targets which shall be established by the Board of Directors of INX Services. In addition, six months following the effectiveness of the registration statement in connection with this offering, Mr. Silbert shall be granted an option to purchase 500,000 INX Tokens at a price of $0.01 per Token. Upon and subject to the adoption of a Share Ownership and Option Plan by the Company, Mr. Silbert shall receive an option to purchase Ordinary Shares of the Company constituting 3% of the share capital of the Company on a fully diluted basis, at a price per share equal to the fair market value per share. 25% of the option shares will vest upon each anniversary of Mr. Silbert’s employment with INX Services, such that the options will be fully vested and exercisable upon the 4^th anniversary of such employment. Unvested options shall be subject to accelerated vesting upon change of control of the Company. In addition, the INX Services will reimburse Mr. Silbert for out of pocket expenses reasonable required in the performance of services under the Silbert Employment Agreement. If the Silbert Employment Agreement is terminated without cause or good reason, as such terms are defined in the Silbert Employment Agreement, INX Services shall continue to pay Mr. Silbert a base salary for twelve months following the termination date.

Terms of Proprietary Rights, Confidentiality and Non-Competition. In connection with entering into the Silbert Employment Agreement, the Company and Mr. Silbert entered into an Employee Invention Assignment and Confidentiality Agreement which contains terms to protect the proprietary rights of the Company to technology, intellectual property and inventions to which Mr. Silbert is exposed during the course of the engagement. Mr. Silbert is also subject to terms of confidentiality.

The foregoing description of the Silbert Employment Agreement summarizes the material terms of the Silbert Employment Agreement, as amended, but is not a complete description. For more details about the Silbert Employment Agreement, you should reference to the full text of the Silbert Employment Agreement, which is attached as Exhibit 10.14 hereto, and is incorporated herein by reference.

Effective September 1, 2019, Mr. Borthwick and INX Services entered into an Amended and Restated Consultancy and Employment Agreement (the “Borthwick Employment Agreement”), pursuant to which Mr. Borthwick will provide services to INX Services and the Company, including that Mr. Borthwick shall serve as Chief Marketing and Business Development Officer of INX Services.

Term. Pursuant to the Borthwick Employment Agreement, Mr. Borthwick’s engagement with the Company will continue until such time as either Mr. Borthwick or the Company terminates the engagement pursuant to the terms of the Borthwick Employment Agreement, including by 30 days written notice or immediately for cause.

Compensation. Pursuant to the Borthwick Employment Agreement, Mr. Borthwick receives a base monthly salary of $1,000. On the effective date of the Borthwick Employment Agreement, Mr. Borthwick was granted an option to purchase 103,929 INX Tokens at an exercise price of $0.065 per INX Token. Six months following the date the registration statement in connection with this offering is declared effective by the SEC, Mr. Borthwick shall be entitled to a one-time bonus in the amount of $200,000 and an option to purchase additional 259,821 INX Tokens at an exercise price of $0.065 per INX Token. In addition, upon and subject to the adoption of a Share Ownership and Option Plan by the Company, Mr. Borthwick shall receive an option to purchase Ordinary Shares of the Company constituting 1.5% of the share capital of the Company on a fully diluted basis, at a price per share equal to the fair market value per share. 50% of the option shares will vest on the effective date of the Borthwick Employment Agreement. Thereafter, on each anniversary of Mr. Borthwick’s employment with INX Services, 1/3 of the remaining unvested portion of the options shall vest, such that, subject to the continuous engagement of Mr. Borthwick with the Company at such time, the options will be fully vested and exercisable upon the 3^rd anniversary of such employment. In addition, the INX Services will reimburse Mr. Borthwick for out of pocket expenses reasonable required in the performance of services under the Borthwick Employment Agreement. If the Borthwick Employment Agreement is terminated without cause or good reason, as such terms are defined in the Borthwick Employment Agreement, INX Services shall continue to pay Mr. Borthwick a base salary for twelve months following the termination date.

Terms of Confidentiality and Non-Competition. In connection with entering into the Borthwick Employment Agreement, the Company and Mr. Borthwick entered into a Confidentiality and Non-Competition Agreement which contains terms to protect the proprietary rights of the Company to technology, intellectual property and inventions to which Mr. Borthwick is exposed during the course of the engagement. Mr. Borthwick is also subject to terms of confidentiality.

The foregoing description of the Borthwick Employment Agreement summarizes the material terms of the Borthwick Employment Agreement, as amended, but is not a complete description. For more details about the Borthwick Employment Agreement, you should reference to the full text of the Borthwick Employment Agreement, which is attached as Exhibit 10.32 hereto, and is incorporated herein by reference.

On March 8, 2018, in connection with the appointment of Mr. James Crossley as a member of the Company’s Board of Directors, the Company entered into a Services Agreement with Bentley Limited, as amended effective as of August 1, 2018 and January 7, 2019 (the “Bentley Services Agreement”) pursuant to which Bentley Limited will provide services to the Company including that James Crossley shall serve as a board member of the Company.

Term. Pursuant to the Bentley Services Agreement, Bentley Limited’s engagement with the Company will continue until such time as either Bentley Limited or the Company terminates its engagement pursuant to the terms of the Bentley Services Agreement, including by 30 days written notice.

Compensation. Pursuant to the Bentley Services Agreement, Bentley will receive a monthly consulting fee of GBP 1,600 + VAT per month. In addition, Bentley received the option to purchase 10,000 INX Tokens per month at the price of $0.01 per Token, subject to a maximum of 100,000 INX Tokens.

On January 7, 2019, the Bentley Services Agreement was amended to include the grant of options to Bentley Limited to purchase additional 7,500 INX Tokens per month at the price of $0.01 per Token (the “Bentley Option Rights”). The Bentley Option Rights commenced on December 1, 2018 and shall lapse on the first of the month in which the Company raises $10,000,000 in a public offering of INX Tokens. Bentley Limited has exercised all options to purchase INX Tokens that have been granted pursuant to the Bentley Services Agreement as of the date hereof.

In addition, the Company will reimburse Bentley Limited for out of pocket expenses reasonably required in the performance of the services under the Bentley Services Agreement. The Bentley Services Agreement does not provide for benefits upon the termination of the services.

Terms of Proprietary Rights, Confidentiality and Non-Competition. The Bentley Services Agreement contains terms to protect the proprietary rights of the Company to technology, intellectual property and inventions to which Bentley (and/or Mr. Crossley) is exposed during the course of the engagement. Bentley Limited is also subject to terms of confidentiality.

The foregoing description of the Bentley Services Agreement and the Bentley Option Rights summarizes the material terms of the Bentley Services Agreement and Bentley Option Rights, but is not a complete description. For more details about the Bentley Services Agreement, you should reference to the full text of the Bentley Services Agreement, which is attached as Exhibits 10.15, 10.16 and 10.17 hereto, and is incorporated herein by reference.

On March 21, 2018, the Company entered into an engagement agreement in connection with the appointment of Mr. Weild as a member of the Board of Directors of INX Limited (effective as of April 15, 2018). Such agreement was amended on June 25, 2018 by the Amended and Restated letter of invitation to serve as a member of the Board of Directors the Company (the “Weild Engagement Letter”).

Term. Pursuant to the Weild Engagement Letter, Mr. Weild’s engagement with the Company will continue until such time as either Mr. Weild or the Company terminates the engagement by written notice with immediate effect.

Compensation. Mr. Weild will receive a monthly fee of $1,500 for the term of the engagement. Six months following the date the registration statement in connection with this offering is declared effective by the SEC, Mr. Weild shall be entitled to purchase 3,500 INX Tokens per month in consideration for $0.01 per Token on a monthly basis during his tenure as director, as well as an option to purchase 350,000 INX Tokens at a price of $0.01 per Token. In addition to and separate from such fees, the Company will reimburse Mr. Weild for certain out of pocket expenses reasonably required in the performance of the services under the Weild Engagement Letter.

Terms of Proprietary Rights and Confidentiality. The Weild Engagement Letter contains terms to protect the proprietary rights of the Company to technology, intellectual property and inventions to which Mr. Weild is exposed during the course of the engagement. Mr. Weild is also subject to terms of confidentiality.

The foregoing description of the Weild Engagement Letter summarizes the material terms of the Weild Engagement Letter, as amended, but is not a complete description. For more details about the Weild Engagement Letter, you should reference to the full text of the Weild Engagement Letter, which is attached as Exhibit 10.18 hereto, and is incorporated herein by reference.

On July 10, 2018, the Company, under a letter of invitation, engaged Mr. Thadaney as a member of the Board of Directors of INX Limited (effective as of September 28, 2018) (the “Thadaney Engagement Letter”).

Term. Pursuant to the Thadaney Engagement Letter, Mr. Thadaney’s engagement with the Company will continue until such time as either Mr. Thadaney or the Company terminates the engagement by written notice with immediate effect.

Compensation. Mr. Thadaney will receive a monthly fee of $1,500 for the term of the engagement. Six months following the date the registration statement in connection with this offering is declared effective by the SEC, Mr. Thadaney shall be entitled to purchase 3,500 INX Tokens per month in consideration for $0.01 per Token on a monthly basis during his tenure as director, as well as an option to purchase 350,000 INX Tokens at a price of $0.01 per Token. In addition to and separate from such fees, the Company will reimburse Mr. Thadaney for certain out of pocket expenses reasonably required in the performance of the services under the Thadaney Engagement Letter.

Terms of Proprietary Rights and Confidentiality. The Thadaney Engagement Letter contains terms to protect the proprietary rights of the Company to technology, intellectual property and inventions to which Mr. Thadaney is exposed during the course of the engagement. Mr. Thadaney is also subject to terms of confidentiality.

The foregoing description of the Thadaney Engagement Letter summarizes the material terms of the Thadaney Engagement Letter, but is not a complete description. For more details about the Thadaney Engagement Letter, you should reference to the full text of the Thadaney Engagement Letter, which is attached as Exhibit 10.22 hereto, and is incorporated herein by reference.

On August 20, 2018, the Company, under a letter of invitation, engaged Mr. Ashar as a member of the Board of Directors of INX Limited (effective as of September 1, 2018) (the “Ashar Engagement Letter”).

Term. Pursuant to the Ashar Engagement Letter, Mr. Ashar’s engagement with the Company will continue until such time as either Mr. Ashar or the Company terminates the engagement by written notice with immediate effect.

Compensation. Mr. Ashar will receive a monthly fee of $1,000 for the term of the engagement. Six months following the date the registration statement in connection with this offering is declared effective by the SEC, Mr. Ashar shall be entitled to purchase 3,500 INX Tokens per month in consideration for $0.01 per Token on a monthly basis during his tenure as director, as well as an option to purchase 350,000 INX Tokens at a price of $0.01 per Token. In addition to and separate from such fees, the Company will reimburse Mr. Ashar for certain out of pocket expenses reasonably required in the performance of the services under the Ashar Engagement Letter.

Terms of Proprietary Rights and Confidentiality. The Ashar Engagement Letter contains terms to protect the proprietary rights of the Company to technology, intellectual property and inventions to which Mr. Ashar is exposed during the course of the engagement. Mr. Ashar is also subject to terms of confidentiality.

The foregoing description of the Ashar Engagement Letter summarizes the material terms of the Ashar Engagement Letter, but is not a complete description. For more details about the Ashar Engagement Letter, you should reference to the full text of the Ashar Engagement Letter, which is attached as Exhibit 10.23 hereto, and is incorporated herein by reference.

On September 21, 2018, the Company, under a letter of invitation, engaged Mr. Lewis as a member of the Board of Directors of INX Limited (effective as of September 28, 2018) (the “Lewis Engagement Letter”).

Term. Pursuant to the Lewis Engagement Letter, Mr. Lewis’ engagement with the Company will continue until such time as either Mr. Lewis or the Company terminates the engagement by written notice with immediate effect.

Compensation. Mr. Lewis will receive a monthly fee of $1,500 for the term of the engagement. Six months following the date the registration statement in connection with this offering is declared effective by the SEC, Mr. Lewis shall be entitled to purchase 3,500 INX Tokens per month in consideration for $0.01 per Token on a monthly basis during his tenure as director, as well as an option to purchase 350,000 INX Tokens at a price of $0.01 per Token. In addition to and separate from such fees, the Company will reimburse Mr. Lewis for certain out of pocket expenses reasonably required in the performance of the services under the Lewis Engagement Letter.

Terms of Proprietary Rights and Confidentiality. The Lewis Engagement Letter contains terms to protect the proprietary rights of the Company to technology, intellectual property and inventions to which Mr. Lewis is exposed during the course of the engagement. Mr. Lewis is also subject to terms of confidentiality.

The foregoing description of the Lewis Engagement Letter summarizes the material terms of the Lewis Engagement Letter, but is not a complete description. For more details about the Lewis Engagement Letter, you should reference to the full text of the Lewis Engagement Letter, which is attached as Exhibit 10.24 hereto, and is incorporated herein by reference.

On November 27, 2017, the Company entered into a Loan Agreement with Ms. Naor (the “Naor Loan Agreement”) pursuant to which the Company borrowed $40,635 from Ms. Naor. The term of the loan is five years, and the outstanding balance shall become due and payable on the five-year anniversary of the Naor Loan Agreement or upon the sooner of an IPO or a Deemed Liquidation Event (as such terms are defined in the Company’s Articles of Association). The interest rate on the principal of the loan is an annual rate of 2% compounded annually (subject to adjustment from time to time by the applicable Income Tax Ordinance).

Pursuant to the Naor Loan Agreement, Ms. Naor is entitled, at any time and at her sole discretion, to convert outstanding principal and interest amounts of the loan agreement into 333,333 ordinary shares of the Company. Under the terms of the Naor Loan Agreement, Ms. Naor also purchased 937,499 INX Tokens issued by the Company at a price of $0.01 per INX Token.

The foregoing description of the Naor Loan Agreement summarizes the material terms of the Naor Loan Agreement but is not a complete description. For more details about the Naor Loan Agreement, you should reference to the full text of the Naor Loan Agreement, which is attached as Exhibit 10.19 hereto, and is incorporated herein by reference.

On November 27, 2017, the Company entered into a Loan Agreement with Ms. Ayelet Horn (the “Horn Loan Agreement”) pursuant to which the Company borrowed $37,984 from Ms. Horn. The term of the loan is five years, and the outstanding balance shall become due and payable on the five-year anniversary of the Horn Loan Agreement or upon the sooner of an IPO or a Deemed Liquidation Event (as such terms are defined in the Company’s Articles of Association). The interest rate on the principal of the loan is an annual rate of 2% compounded annually (subject to adjustment from time to time by the applicable Income Tax Ordinance).

Pursuant to the Horn Loan Agreement, Ms. Horn is entitled, at any time and at her sole discretion, to convert outstanding principal and interest amounts of the loan agreement into 311,500 ordinary shares of the Company. Under the terms of the Horn Loan Agreement, Ms. Horn also purchased 876,562 INX Tokens issued by the Company at a price of $0.01 per INX Token.

Ms. Ayelet Horn is the wife of Mr. Yuval Horn, a senior partner at Horn & Co. Law Offices, Tel Aviv, Israel, which firm is serving as legal counsel for this offering for matters relating to Israeli law.

The foregoing description of the Horn Loan Agreement summarizes the material terms of the Horn Loan Agreement but is not a complete description. For more details about the Horn Loan Agreement, you should reference to the full text of the Horn Loan Agreement, which is attached as Exhibit 10.20 hereto, and is incorporated herein by reference.

On November 27, 2017, the Company entered into a Loan Agreement with Mr. Yaniv Segev (the “Segev Loan Agreement”) pursuant to which the Company borrowed $37,984 from Mr. Segev. The term of the loan is five years, and the outstanding balance shall become due and payable on the five-year anniversary of the Segev Loan Agreement or upon the sooner of an IPO or a Deemed Liquidation Event (as such terms are defined in the Company’s Articles of Association). The interest rate on the principal of the loan is an annual rate of 2% compounded annually (subject to adjustment from time to time by the applicable Income Tax Ordinance).

Pursuant to the Segev Loan Agreement, Mr. Segev is entitled, at any time and at his sole discretion, to convert outstanding principal and interest amounts of the loan agreement into 311,500 ordinary shares of the Company. Under the terms of the Segev Loan Agreement, Mr. Segev also purchased 876,562 INX Tokens issued by the Company at a price of $0.01 per INX Token.

The foregoing description of the Segev Loan Agreement summarizes the material terms of the Segev Loan Agreement but is not a complete description. For more details about the Segev Loan Agreement, you should reference to the full text of the Segev Loan Agreement, which is attached as Exhibit 10.21 hereto, and is incorporated herein by reference.

Each of the individuals who provide services to us does so through a management, services, consulting or similar agreement.

By the end of our two phases of development, we intend to employ approximately 30 to 40 employees in positions of management, compliance, marketing and development.

The Company currently does not own or hold any tangible fixed assets, including real property, plant or equipment, whether by leasehold or otherwise.

To facilitate the operation of the INX Digital trading platform, INX Digital intends to file applications for licenses, or otherwise qualify to act, or to otherwise qualify to operate as a money transmitter/exchanger in various U.S. states. To facilitate the operation of the INX Securities trading platform, INX Services intends to file applications with FINRA for registration as a broker-dealer and subsequently to file applications with the SEC to register INX Securities as an ATS; prior to such ATS registration, INX Services may, at least initially, act as an introducing broker and offer clients the ability to buy and sell security tokens in their brokerage accounts. Our subsidiary in Gibraltar intends to apply to the Gibraltar Financial Services Commission for licenses under the Financial Services (Markets in Financial Instruments) Act 2018 and the Financial Services (Distributed Ledger Technology Providers) Regulations 2017 for its European-based operations. INX Services also is in compliance with the Gibraltar Proceeds of Crime Act 2015, which implements EU legislation in this field, and which was amended to extend specifically to digital tokenized assets.

The financial services industry is subject to extensive regulation under both federal and state laws. Regulators that oversee our business activities are charged with ensuring the integrity of the financial markets and the protection of customers and other third parties who engage in the financial markets. Registration as a money transmitter, broker-dealer, and alternative trading system will subject our subsidiaries to laws and regulations covering all aspects of financial services, including sales methods, trade practices, use and safekeeping of clients’ funds and other assets, minimum capital requirements, record keeping, financing of securities purchases and conduct of directors, officers and employees.

The vast majority of States maintain “money transmitter”, “money service business” or “check casher” licensing and regulatory regimes, which generally govern entities that are in the business of taking possession of, providing non-bank storage services for and transferring funds. These state licensing regimes vary from jurisdiction to jurisdiction and, while certain states have issued guidance indicating that its licensing requirements do not apply to virtual currency, the majority of states have either affirmatively stated that certain virtual currency activities are covered by their licensing regime or have been silent on the issue. Many jurisdictions maintain exemptions and/or exceptions to their respective licensing regimes.

At a federal level, the activity regulated by state licenses also may make the relevant actor a “money transmitter” or “provider of prepaid access,” each of which is considered a “money service business” (“MSB”) that must be registered with FinCEN unless otherwise exempt. MSBs are subject to regulatory oversight and enforcement by FinCEN. MSBs are subject to the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 (“BSA”). MSBs must register with FinCEN and implement a compliance program appropriately tailored to the MSBs’ money laundering and financial crime risks. An MSB’s compliance program must incorporate relevant reporting, recordkeeping and anti-money laundering controls and processes, including, to the extent applicable to the MSB’s business know-your-customer controls, transaction monitoring, filing of suspicious activity reports (“SARs”), and sharing information with other financial institutions under Section 314(b) of the USA PATRIOT Act, the “Funds Transfer Rule,” or the “Funds Travel Rule.” On March 18, 2013 and May 9, 2019, FinCEN issued guidance concerning virtual currency and MSB licensing requirements in which FinCEN identified “administrators” or “exchangers” of virtual currencies as MSBs, unless an exemption applies. There are various exemptions to the MSB registration requirements. For example, entities that are “registered with, and functionally regulated or examined by, the SEC or the CFTC” are exempt from federal MSB registration and reporting obligations.

Larger money transmitters may also be subject to direct supervision by the Consumer Financial Protection Bureau (the “CFPB”) and are required to provide additional consumer information and disclosures, adopt error resolution standards and adjust refund procedures for international transactions originating in the United States in a manner consistent with the Remittance Transfer Rule (a rule issued by the CFPB pursuant to the Dodd-Frank Act). In addition, the CFPB may adopt other regulations governing consumer financial services, including regulations defining unfair, deceptive, or abusive acts or practices, and new model disclosures. In addition, money transmitters may be subject to periodic examination by the CFPB.

We have submitted an application to register INX Digital with FinCEN as a federal MSB and we have notified or intend to notify and/or register with state regulators in compliance with state money transmitter requirements. We do not currently intend to rely on any state or federal exemptions to registering as an MSB, including any exemptions relating to registration with and regulation by the SEC or CFTC, and we intend to monitor all legislative and regulatory developments with respect to the BSA, including the publication of further rulings or guidance by FinCEN, and to make revisions to INX Digital’s compliance program when appropriate.

In the United States, the SEC is the federal agency responsible for the administration of the federal securities laws, with certain standard setting and monitoring responsibilities delegated to self-regulatory organizations (“SROs”). Of these SROs, the regulation of broker-dealers is principally the function of FINRA and every firm and broker that sells securities to the public in the United States must be licensed and registered by FINRA. National securities exchanges, such as the New York Stock Exchange, also regulate and monitor broker-dealer activity. In addition to federal and SRO oversight, securities firms are also subject to regulation by state securities administrators in those states in which they conduct business.

Broker-dealers, like other securities market participants, must comply with the general “antifraud” provisions of the federal securities laws. The “antifraud” provisions prohibit misstatements or misleading omissions of material facts, and fraudulent or manipulative acts and practices, in connection with the purchase or sale of securities, and broker-dealers must conduct their activities to avoid these kinds of practices.

Broker-dealers must also comply with many requirements that are designed to maintain high industry standards. Broker-dealers owe their customers a duty: a) of fair dealing, b) to recommend only those specific investments or overall investment strategies that are suitable, c) to seek to obtain the most favorable terms available under the circumstances for its orders (best execution), d) to provide at or before the completion of transaction certain information (including the identifying the securities involved in the transaction and compensation related to the transaction), and e) to provide notice about purchasing securities on credit, among other disclosure requirements.

Broker-dealers are also subject to broad obligations under the Bank Secrecy Act to guard against money laundering and terrorist financing which include requirements to file reports or retain records relating to suspicious transactions, customer identity, large cash transactions, cross-border currency movement, foreign bank accounts and wire transfers, among other things.

Every U.S.-registered broker-dealer is also subject to the Uniform Net Capital Requirements. The Uniform Net Capital Requirements are designed to ensure financial soundness and liquidity by prohibiting a broker or dealer from engaging in business at a time when it does not satisfy minimum net capital requirements.

In the United States, net capital is essentially defined as net worth (assets minus liabilities), plus qualifying subordinated borrowings and less certain mandatory deductions that result from excluding assets that are not readily convertible into cash and from conservatively valuing certain other assets, such as a firm’s positions in securities. Among these deductions are adjustments, which are referred to as “haircuts,” in the market value of securities positions to reflect the market risk of such positions prior to their liquidation or disposition. The Uniform Net Capital Requirements also impose a minimum ratio of equity to subordinated debt which may be included in net capital.

Regulations have been adopted by the SEC that prohibit the withdrawal of equity capital of a broker-dealer, restrict the ability of a broker-dealer to distribute or engage in any transaction with a parent company or an affiliate that results in a reduction of equity capital or to provide an unsecured loan or advance against equity capital for the direct or indirect benefit of certain persons related to the broker-dealer (including partners and affiliates) if the broker-dealer’s net capital is, or would be as a result of such withdrawal, distribution, loan or advance, below specified thresholds of excess net capital. In addition, the SEC’s regulations require certain notifications to be provided in advance of such withdrawals, distributions, reductions, loans and advances that exceed in the aggregate 30% of excess net capital within any 30 day period, and the SEC has the authority to restrict, for up to 20 business days, such withdrawal, distribution or reduction of capital if the SEC concludes that it may be detrimental to the financial integrity of the broker-dealer or may expose its customers or creditors to loss. Notice is required following any such withdrawal, distribution, reduction, loan or advance that exceeds in the aggregate 20% of excess net capital within any 30 day period. The SEC’s regulations limiting withdrawals of excess net capital do not preclude the payment to employees of “reasonable compensation.”

Compliance with the Uniform Net Capital Requirements may limit the extent and nature of our operations requiring the use of our registered broker-dealer subsidiaries’ capital, and could also restrict or preclude our ability to withdraw capital from our broker-dealer subsidiaries.

Regulation ATS permits a U.S. ATS to match orders submitted by buyers and sellers without having to register as a national securities exchange. An ATS, although functionally an exchange, is regulated as a broker-dealer. In order to acquire the status of an ATS, a firm must first be registered as a broker-dealer, and then file an initial operation report with respect to the trading system on Form ATS. The Form ATS must provide detailed information regarding the types of subscribers it expects to admit to the system, the securities it expects to trade, the manner in which the system operates, including how orders are entered and transactions executed, reported, cleared and settled, as well as all relevant infrastructure and procedures concerning system access, capacity, supervision, security, contingency planning and subscriber compliance.

The initial operation report must be accurate and kept current. The Commission does not issue approval orders for Form ATS filings; however, the Form ATS is not considered filed unless it complies with all applicable requirements under Regulation ATS. Regulation ATS contains provisions concerning the system’s operations, including: fair access to the trading system; fees charged; the display of orders and the ability to execute orders; system capacity, integrity and security; record keeping and reporting; and procedures to ensure the confidential treatment of trading information.

An ATS must also comply with any applicable SRO rules and with state laws relating to alternative trading systems and relating to the offer or sale of securities or the registration or regulation of persons or entities effecting securities transactions.

The CFTC is the federal agency primarily responsible for the administration of federal commodities laws, including the adoption of rules applicable to Futures Commissions Merchants, Designated Contract Markets and Swap Execution Facilities. The operations of U.S. futures exchanges, clearing houses, swap data repository and swap execution facilities are subject to extensive regulation by the CFTC. The CFTC carries out the regulation of the futures and swaps markets and clearing houses in accordance with the provisions of the Commodity Exchange Act as amended by, among others, the Commodity Futures Modernization Act and Dodd-Frank.

The following is a summary of recent demonstrations of regulatory action taken with regard to blockchain assets. We believe that these actions will impact the Company; however, regulation of the blockchain industry is evolving rapidly. The regulatory landscape may differ from country to country, but we expect for the foreseeable future that regulators will maintain an increased focus on blockchain assets. In addition, the SEC, FINRA, and courts have continued, and likely will continue, to promulgate statements, enforcement actions and rulings, as applicable, interpreting the characterization of blockchain assets, the issuance of blockchain assets and regulating behavior in the market. It is likely that there will be many additional developments between the date of this statement and the issue of the INX Tokens.

Regulation of blockchain assets by U.S. federal and state governments, foreign governments and self-regulatory organizations remains in its early stages. As blockchain assets have grown in popularity and in market size, the Federal Reserve Board, U.S. Congress and certain U.S. agencies such as the SEC, the CFTC, FinCEN and the Federal Bureau of Investigation, have begun to examine the nature of blockchain assets and the markets on which they are traded.

The SEC has taken various actions against persons or entities misusing blockchain assets, including virtual currencies, in connection with fraudulent schemes, inaccurate and inadequate publicly disseminated information, and the offering of unregistered securities. In addition, on July 25, 2017, the SEC issued Release No. 81207 (“the DAO Report”), in which it analyzed a certain issuance of tokens, and indicated that “whether or not a particular transaction involves the offer and sale of a security – regardless of the terminology used – will depend on the facts and circumstances, including the economic realities of the transaction”. The SEC clarified that the registration requirements “apply to those who offer and sell securities in the United States, regardless whether the issuing entity is a traditional company or a decentralized autonomous organization, regardless whether those securities are …distributed in certificated form or through distributed ledger technology…”. On December 4, 2017, and December 11, 2017, the SEC announced enforcement actions relating to the PlexCoin and Munchee token launches, respectively. Also on, December 11, 2017, SEC Chairman Jay Clayton published a public statement entitled “Cryptocurrencies and Initial Coin Offerings.” The SEC has made a concerted effort to monitor the ICO market and address—through the DAO Report and the more recent SEC guidance—transactions and behaviors it believes are both inconsistent with and in violation of U.S. securities laws. In early 2018, media reports indicated that the SEC has subpoenaed around 80 cryptocurrency firms as part of a targeted probe. On March 7, 2018 the Divisions of Enforcement and Trading and Markets issued a public statement stating that many digital assets are likely to be securities under the federal securities laws, and urged investors to use platforms for trading such assets that are registered with the SEC, such as a national securities exchange, ATS, or broker-dealer. Since March 2018, the SEC has continued to bring enforcement actions and make public statements which further supports its view that blockchain assets should be treated as securities in almost all cases.

Gibraltar	6200	Not Applicable
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification No.)

Title of Each Class of Securities to be Registered		Amount to be Registered				Proposed Maximum Offering Price per Share (2)				Proposed Maximum Aggregate Offering Price (2)				Amount of Registration Fee (3)
INX Token (1)			130,000,000			$	1.00			$	130,000,000			$	16,874.00

	Offering Price Per Token	Total Minimum		Total Maximum
Initial public offering price	$	$	7,500,000	$
Underwriter’s discounts and commissions⁽¹⁾⁽²⁾	$	$	0	$
Net Proceeds to us (before expenses)	$	$	7,500,000	$

PROSPECTUS SUMMARY		1
RISK FACTORS		15
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		38
USE OF PROCEEDS		39
CAPITALIZATION		42
DILUTION		43
SELECTED FINANCIAL DATA		45
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		46
BUSINESS		53
MANAGEMENT		77
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		88
PRINCIPAL SHAREHOLDERS		92
DESCRIPTION OF OUR MEMORANDUM AND ARTICLES OF ASSOCIATION		95
DESCRIPTION OF INX TOKENS		99
TOKENS ELIGIBLE FOR FUTURE SALE		111
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES		113
PLAN OF DISTRIBUTION		115
SUITABILITY STANDARDS		122
EXPENSES RELATED TO THIS OFFERING		123
LEGAL MATTERS		123
ENFORCEABILITY OF CIVIL LIABILITIES		123
EXPERTS		124
WHERE YOU CAN FIND MORE INFORMATION		124
GLOSSARY OF DEFINED TERMS		125
INDEX TO FINANCIAL STATEMENTS		F-1

Use	$7.5 Million		%		$21.5 Million		%		$65 Million		%		$116.5 Million		%
Research & Development	$	818,500		10.9	$	4,518,500		21.0	$	6,118,500		9.4	$	7,448,414		6.4
Sales & Marketing	$	325,000		4.3	$	1,525,000		7.1	$	2,500,000		3.9	$	2,739,059		2.4
Regulatory & Legal	$	1,090,000		14.5	$	2,190,000		10.2	$	2,440,000		3.8	$	2,970,357		2.5
General & Administrative	$	2,309,000		30.8	$	6,309,000		29.3	$	7,909,000		12.2	$	9,628,096		8.3
Product	$	219,900		2.9	$	869,900		4.1	$	1,219,900		1.9	$	1,485,057		1.3
Trading Surveillance & Support	$	132,600		1.8	$	982,600		4.6	$	1,382,600		2.1	$	1,683,121		1.4
Operations & Customer Service	$	105,000		1.4	$	1,906,110		8.9	$	2,731,110		4.2	$	3,324,742		2.8
Finance	$	0		0	$	448,890		2.1	$	698,890		1.1	$	850,800		0.7
Minimum Net Capital	$	0		0	$	250,000		1.2	$	250,000		0.4	$	250,000		0.2
Cash Fund	$	0		0	$	0		0	$	30,000,000		46.2	$	68,625,000		58.9
Offering Expenses	$	2,500,000		33.3	$	2,500,000		11.6	$	2,500,000		3.9	$	2,500,000		2.2
Working Capital & General Corporate Purposes	$	0		0	$	0		0	$	7,250,000		11.1	$	14,995,354		12.9
TOTAL	$	7,500,000			$	21,500,000			$	65,000,000			$	116,500,000

	●	Global blockchain asset supply;

	●	Global blockchain asset demand, which can be influenced by the growth of retail merchants’ and commercial businesses’ acceptance of blockchain assets like cryptocurrencies as payment for goods and services, the security of online blockchain asset trading platforms and digital wallets that hold blockchain assets, the perception that the use and holding of blockchain assets is safe and secure, and the regulatory restrictions on their use;

	●	Changes in the software, software requirements or hardware requirements underlying the blockchain networks;

	●	Changes in the rights, obligations, incentives, or rewards for the various participants in blockchain networks;

	●	The cost of trading and transacting in blockchain assets, and whether such costs may become fixed or standardized;

	●	Investors’ expectations with respect to the rate of inflation;

	●	Interest rates;

	●	Currency exchange rates, including the rates at which blockchain assets may be exchanged for fiat currencies;

	●	Fiat currency withdrawal and deposit policies of blockchain asset trading platforms and liquidity on such platforms;

	●	Interruptions in service or other failures of major blockchain asset trading platforms;

	●	Investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in blockchain networks or blockchain assets;

	●	Monetary policies of governments, trade restrictions, currency devaluations and revaluations;

	●	Regulatory measures, if any, that affect the use of blockchain assets;

	●	The maintenance and development of the open-source software utilized in blockchain networks;

	●	Global or regional political, economic or financial events and situations; or

	●	Expectations among blockchain network participants that the value of such blockchain assets will soon change.

	●	our ability to develop INX Digital and INX Securities trading platforms as contemplated, or at all;

	●	the slowing or stopping of the development or acceptance of blockchain assets;

	●	the limitations of blockchain technology, which remains largely novel and untested;

	●	the legal framework of regulations applicable to blockchain technologies, cryptocurrencies, security tokens and token offerings;

	●	our ability to identify a custodial relationship arrangement that FINRA or the SEC will approve as meeting the requirements of Rule 15c3-3 and to obtain a broker-dealer license;

	●	changes in how we are taxed;

	●	the lack of any existing marketplace for blockchain assets;

	●	our lack of an operating history;

	●	the impact of competition and new technologies;

	●	our ability to obtain government regulations and approvals;

	●	industry developments affecting our business, financial condition and results of operations;

(U.S, Dollars in thousands except share and per share data)	June 30, 2019 (unaudited)			As Adjusted for the Offering (minimum)			As adjusted for the Offering (maximum)
Cash and cash equivalents		239			5,218			45,592
Restricted cash		-						68,625
Total liabilities		1,877			26,058			135,482
Equity:
Ordinary shares of GBP 0.001 par value - Authorized: 100,000,000 shares; Issued and Outstanding: 11,412,930 shares, as of June 30, 2019		15			15			15
Share premium		5,694			5,852			5,852
Receivable on account of shares		(76	)		(76	)		(76	)
Conversion option of convertible loan		46			-			-
Accumulated deficit		(6,931	)		(26,247	)		(26,671	)
Total equity (deficit)		(1,252	)		(20,456	)		(20,880	)
Total liabilities and equity	$	625			5,603			114,602

(U.S, Dollars in thousands except INX Token and per token data)	INX Tokens Purchased					Total Consideration					Average Price
	Number		Percent			Amount		Percent			Per INX Token
Original INX Token holders		18,847,062		12.18	%	$	38		0.03	%	$	0.002
Commitments to issue INX Tokens^{(1) (2)}		5,907,750		3.82	%	$	285		0.24		$	0.05
New investors		130,000,000		84.00	%	$	117,000		99.72	%	$	0.90
Total		154,754,812		100.00	%	$	117,323		100.00	%	$	0.76

	●	Up to 4,559,821 INX Tokens issuable upon the exercise of options to directors, employees and members of our Advisory Board with a weighted average exercise price per share of approximately $0.01 per Token (which options are not exercisable until six months following the date the registration statement in connection with this offering is declared effective by the SEC)
	●	15,000 INX Tokens issuable upon the exercise of options granted to Shay Laboratory Ltd. pursuant to the Consulting Agreement with Shay Laboratory Ltd., dated October 1, 2017, in connection with the services of Mr. Or Kaplinsky, option to purchase INX Tokens equaling in the aggregate 0.1% of the registered INX Tokens which were not sold in this offering, at the price of $0.01 per Token; provided that, such number of INX Tokens shall not exceed 100,000 and shall not be less than 15,000.
	●	Up to 84,000 INX Tokens issuable upon the exercise of options granted to certain directors within one year following the date the registration statement in connection with this offering is declared effective by the SEC at an exercise price of $0.01 per Token (which options are not granted and not exercisable until six months following the date the registration statement in connection with this offering is declared effective by the SEC)

	●	Up to 7,500 INX Tokens issuable per month (for periods after June 30, 2019) upon the exercise of options granted to Bentley Limited at an exercise price of $0.01 per Token (which options shall lapse on the first of the month in which the Company raises $10,000,000 in a public offering of INX Tokens)
	●	Up to 14,000 INX Tokens issuable per month upon the exercise of options granted to certain directors after one year following the date the registration statement in connection with this offering is declared effective by the SEC at an exercise price of $0.01 per Token (which options are not granted and not exercisable until six months following the date the registration statement in connection with this offering is declared effective by the SEC)

	●	Up to 4,559,821 INX Tokens issuable upon the exercise of options granted to directors, employees and members of our Advisory Board with a weighted average exercise price per share of approximately $0.01 per Token (which options are not exercisable until six months following the date the registration statement in connection with this offering is declared effective by the SEC)
	●	100,000 INX Tokens issuable upon the exercise of options granted to Shay Laboratory Ltd. pursuant to the Consulting Agreement with Shay Laboratory Ltd., dated October 1, 2017, in connection with the services of Mr. Or Kaplinsky, option to purchase INX Tokens equaling in the aggregate 0.1% of the registered INX Tokens which were not sold in this offering, at the price of $0.01 per Token; provided that, such number of INX Tokens shall not exceed 100,000 and shall not be less than 15,000.
	●	Up to 84,000 INX Tokens issuable upon the exercise of options granted to certain directors within one year following the date the registration statement in connection with this offering is declared effective by the SEC at an exercise price of $0.01 per Token (which options are not granted and not exercisable until six months following the date the registration statement in connection with this offering is declared effective by the SEC)

	June 30, 2019			December 31,		December 31,
	(unaudited)			2018		2017
Total Assets		625			1,021		517
Working Capital		(1,252	)		54		62
Total Liabilities		1,877			967		455
Total Equity		(1,252	)		54		62

Cumulative Adjusted Operating Cash Flow as of December 31, 2017	(588,000	)

Less: Net cash used in operating activities in the year ended December 31, 2018	(3,262,000	)

Less: $0 in cumulative Adjusted Operating Cash Flow as of December 31, 2017 that formed the basis of distribution paid to INX Token holders on April 30, 2018 (there was no distribution)	-

Plus: Proceeds from INX Tokens in the year ended December 31, 2018	7,000

Less: Proceeds from initial sale of INX Tokens in the year ended December 31, 2018	(7,000	)

Cumulative Adjusted Operating Cash Flow as of December 31, 2018	(3,850,000	)

	For the Year Ended December 31, 2018		For the Period from the Inception (September 1, 2017) to December 31, 2017
Operating expenses:
Research and development expense		525		56
General and administrative expenses		3,139		530

Loss from operations		3,664		586

Fair value adjustment of INX Token and derivative liabilities		340		50
Finance expense		6		1

Loss and total comprehensive loss		4,010		637

Loss per share, basic and diluted		0.50		0.13

Weighted average number of shares outstanding, basic and diluted		7,948,935		4,917,166

	●	staffing for financial, accounting and external reporting areas, including segregation of duties;

	●	reconciliation of accounts;

	●	proper recording of expenses and liabilities in the period to which they relate;

	●	evidence of internal review and approval of accounting transactions;

	●	documentation of processes, assumptions and conclusions underlying significant estimates; and

	●	documentation of accounting policies and procedures.

	Payments due by period
	Less than 1 year		Total
Accounts Payable		469		469
INX Token Liability		1,296		1,296
Convertible Loans		112		112

Total		1,877		1,877

	¹⁰	https://coinmarketcap.com/charts/
	¹¹	https://www.coinschedule.com/stats
	¹²	https://www.coinschedule.com/stats

	¹³	https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf
	¹⁴	https://coinmarketcap.com/rankings/exchanges/

	●	Decentralization. Record-keeping of transfers is performed in real time using a distributed ledger, with no need for third party or intermediary validation.

	●	Traceability. Full historical data of all transfers of INX Tokens is recorded on the Ethereum blockchain.

	●	Immutability. Data is written into the blockchain to allow it to be shared publicly while ensuring its immutability. There are no known methods for changing a blockchain once it has been written.

	●	High Availability. Because the Ethereum blockchain is based on thousands of nodes in a peer-to-peer network, and data is replicated and updated on each and every node, the distributed ledger becomes highly available.

	●	Privacy. Personal information of INX Token holders is stored in an encrypted form and only available to the Company and will be provided to regulatory and governmental authorities as required by law.

	●	Active expansion of institutional blockchain asset trading and large-scale block transactions. The Company plans to promote our trading platforms and related services with institutional and other accredited investors such as family offices, hedge funds and others who require access to platforms for trading cryptocurrencies or security tokens, including trades in large-scale block transactions.

	●	Fully monetize market data and connectivity. We plan to serve as a hub for blockchain asset traders, institutional investors, commercial banks and individuals trading blockchain assets. As we attract more clients, we expect that we will accumulate non-proprietary big-data relating to trading behavior and related market statistics. We plan to use this data for internal use and as a product to be sold to institutional investors and trade analysts.

	●	Strategic opportunities. Upon completion of development phases, we plan to pursue strategic alliances with commercial banks and other licensed and regulated blockchain asset trading platforms for the expansion of our business. In addition, we believe that a part of our future growth strategy will include the acquisitions and integration of other blockchain service providers under INX Trading Solutions.

Company⁽¹⁾	Location	Management			Financing		Development			Administration and Other Positions		Total

INX Limited (Gib.)	Israel		3	⁽²⁾		1		3	⁽³⁾		3		10

INX Services, Inc. (US)	United States		3			-		-			1		4

Total			6			1		3			4		14