NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 1: GENERAL
A.
Organizational Background
Viewbix
Inc. (formerly known as Virtual Crypto Technologies, Inc.) (the “Company”) was incorporated in the State of Delaware on August
16, 1985, under a predecessor name, The InFerGene Company (“InFerGene Company”). On August 25, 1995, a wholly owned subsidiary
of InFerGene Company merged with Zaxis International, Inc., an Ohio corporation, which following such merger, the surviving entity, InFerGene
Company, changed its name to Zaxis International, Inc (“Zaxis”). In 2015, the Company changed its name to Emerald Medical Applications Corp.
On
January 17, 2018, the Company formed a new wholly-owned subsidiary under the laws of the State of Israel, Virtual Crypto Technologies
Ltd. (“VCT Israel”), to develop and market software and hardware products facilitating and supporting the purchase and/or
sale of cryptocurrencies. Effective as of March 7, 2018, the Company’s name was changed from Emerald Medical Applications Corp.
to Virtual Crypto Technologies, Inc. to reflect its new operations and business focus.
On
February 7, 2019, the Company entered into a share exchange agreement (the “Share Exchange Agreement” or the “Recapitalization
Transaction”) with Gix Internet Ltd., a company organized under the laws of the State of Israel (“Gix” or “Parent
Company’’), pursuant to which, Gix assigned, transferred and delivered its 99.83%
holdings in Viewbix Ltd., a company organized under the laws of the State of Israel (“Viewbix Israel”), to the Company in
exchange for shares of the Company, which resulted in Viewbix Israel becoming a subsidiary of the Company. In connection with the Share
Exchange Agreement, effective as of August 7, 2019, the Company’s name was changed from Virtual Crypto Technologies, Inc. to Viewbix
Inc.
B.
Definitions
In
these financial statements:
The
Company – Viewbix Inc.
The
Group – Viewbix Inc. and its subsidiaries
The
Parent Company or Gix – Gix Internet Ltd.
Gix
Media – Gix Media Ltd.
Cortex
– Cortex Media Group Ltd.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 1: GENERAL (Cont.)
C.
Reorganization Transaction
On
December 5, 2021, the Company entered into a certain Agreement and Plan of Merger with Gix Media, an Israeli company and the majority-owned
subsidiary of Gix, the Parent Company and Vmedia Merger Sub Ltd., an Israeli company and wholly-owned subsidiary of the Company (“Merger
Sub”), pursuant to which, Merger
Sub merged with and into Gix Media, with Gix Media being the surviving entity and a wholly-owned subsidiary of the Company (the “Reorganization
Transaction”).
On
September 19, 2022, (the “Closing Date”) the Reorganization Transaction was consummated and as a result, all outstanding
ordinary shares of Gix Media, having no par value (the “Gix Media Shares”) were delivered to the Company’s in
exchange for the Company’s shares of common stock. Prior to the closing of the Reorganization Transaction, Gix Media was a
majority-owned subsidiary of Gix. As a result of
the Reorganization Transaction, the former holders of Gix Media Shares, who previously held
approximately 69% of the Company’s shares on a fully diluted basis, hold 90% of the Company’s Common Stock on a fully diluted basis, and
Gix Media became a wholly-owned subsidiary of the Company , which holds 100% of its share capital.
As
the Company and Gix Media Ltd. were consolidated by the same parent and ultimate parent, Gix Internet Ltd. and Medigus Ltd., respectively,
before and after the Reorganization Transaction, the Reorganization Transaction was accounted for as a transaction between entities under
common control. Accordingly, the combined financial information of the Company and Gix Media Ltd. is presented in these financial statements,
for all periods presented, reflecting the historical cost of the Company and Gix Media Ltd., as it is reflected in the consolidated financial
statements of the direct parent, Gix Internet Ltd., for all periods preceding March 1, 2022, the date Medigus Ltd. obtained control in
Gix Internet Ltd., and as it is reflected in the consolidated financial statements of Medigus Ltd. for all periods subsequent to March
1, 2022.
Share
and per share data in these financial statements have been retrospectively adjusted, for all periods preceding the Reorganization Transaction,
to reflect the equivalent number of shares of the Company corresponding to the combined financial information of the Company and Gix
Media Ltd.
D. Business Overview
The
Group, through its subsidiaries Gix Media Ltd. and Cortex Media Group Ltd., operates in the field of digital advertising. The Group
has two main activities that are reported as separate business segments: the search segment and the digital content segment.
The
search segment develops a variety of technological software solutions, which perform automation, optimization and monetization of internet
campaigns, for the purposes of acquiring and routing internet user traffic to its customers. The search segment activity is operated by Gix Media.
The
digital content segment is engaged in the creation and editing of content, in different languages, for different target audiences,
for the purposes of generating revenues from leading advertising platforms, including Google, Facebook, Yahoo and Apple, by
utilizing such content to obtain internet user traffic for its customers. The digital content activity is operated by Cortex. Gix
Media holds 70% of Cortex’s share capital.
The
Group’s technological tools allow advertisers and website owners to earn more from their advertising campaigns and generate additional
profits from their websites.
E.
Reverse Stock Split
In
connection with the Closing of the Reorganization Transaction, the Company filed an Amended and Restated Certificate of
Incorporation (the “Amended COI”) with the Secretary of State of Delaware, effective as of August 31, 2022, pursuant to
which, concurrently with the effectiveness of the Amended COI, the Company, among other things, effected a reverse stock split of its
Common Stock at a ratio of 1-for-28. Share and per share data in these financial statements have been retrospectively adjusted to reflect the reverse
stock split for all periods presented.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation and Principles of Consolidation:
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries
and were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
All
intercompany accounts and transactions have been eliminated in consolidation.
B. Unaudited Interim Financial Information
The
Company’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and pursuant to
the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with U.S .GAAP have been condensed or omitted from this report, as is
permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction
with the audited financial statements as of and for the year ended December 31, 2021 and the notes thereto included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 17, 2022 (the “2021 Annual Report”).
The results for any interim period are not necessarily indicative of results for any future period.
In the
opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments
that are necessary to present fairly the Company’s financial position and results of operations for the interim periods presented.
The results for the nine months ended September 30, 2022, are not necessarily indicative of the results for the year ending December
31, 2022, or for any future period.
As
of September 30, 2022, following the retrospective presentation of the combined financial information of the Company and Gix Media
Ltd., the Company adopted the significant accounting policies described in Note 2 in these unaudited condensed consolidated
financial statements. Other than these significant accounting policies, there have been no material changes in the Company’s
significant accounting policies from those that were disclosed in the 2021 Annual Report.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
C. Use of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions
that affect the amounts reported of assets and liabilities and disclosure at the date of the consolidated financial statements and
the reported amounts of income and expense during the reporting period. The Company evaluates on an ongoing basis its assumptions,
including those related to contingencies, income taxes, deferred taxes, share-based compensation and leases. Actual results could
differ from those estimates.
D. Functional Currency and Foreign Currency Transactions
Most
of the revenues of the Company are received in U.S. dollars. In addition, a substantial portion of the costs of the Company are incurred
in U.S. dollars. Therefore, the Company’s management believes that the U.S. dollar is the currency of the primary economic environment
in which the Company and each of its subsidiaries operates. Thus, the functional and reporting currency of the Company is the U.S. dollar.
Accordingly,
monetary balances denominated in currencies other than the U.S. dollar are re-measured into U.S. dollars in accordance with Statement
of the Accounting Standard Codification (“ASC”) No. 830 “Foreign Currency Matters” (“ASC No. 830”).
Transactions
and balances originally denominated in U.S. dollars are presented at their original amounts. Balances in non U.S. dollar currencies are
translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-U.S.
dollar transactions and other items in the statements of operations (indicated below), the following exchange rates are used: (i) for
transactions exchange rates at transaction dates and (ii) for other items (derived from non-monetary balance sheet items such as depreciation
and amortization) historical exchange rates. Currency transaction gains and losses are presented in the financial income or expenses,
as appropriate
E. Cash and cash equivalents
The
Company considers all short-term investments, which are highly liquid investments with original maturities of three months or less at
the date of purchase, to be cash equivalents.
F. Restricted Deposits
Restricted
cash held in interest bearing saving accounts which are used as a security for the Group’s credit card and lease obligations.
G. Accounts receivable and allowance for credit losses
Accounts
receivables are recorded at the invoiced amount, net of an allowance for credit losses. The Group evaluates its outstanding accounts
receivables and establishes an allowance for credit losses based on information available on their credit condition, current aging, historical
experience, future economic and market conditions. These allowances are reevaluated and adjusted periodically as additional information
is available. Changes in the allowance for expected credit losses are recorded under general and administrative expenses in the condensed
consolidated statements of income.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
H. Fixed assets
Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line basis over the
estimated useful lives, at the following annual rates:
SCHEDULE
OF ESTIMATED USEFUL LIVES
| | |
% | |
| Computers and peripherals equipment | |
| 33 | |
| Office furniture and equipment | |
| 6-15 | |
| Leasehold improvements | |
| (*) | |
| |
(*) |
Over the shorter of the lease term (including options if any
that are reasonably certain to be exercised estimated useful life). |
I. Leases
In
accordance with ASC No. 842 “Leases”, the Company determines if an arrangement is a lease at inception. If an arrangement
is a lease, the Company determines whether it is an operating lease or a finance lease at the lease commencement date. Operating leases
are included in operating lease assets, operating lease liabilities – current, and non-current operating lease liabilities in the
Company’s condensed consolidated balance sheets.
Operating
lease assets represent the Company’s right to control the use of an underlying asset for the lease term and lease liabilities represent
the Company’s obligation to make lease payments arising from the estimated lease.
Operating
lease assets and liabilities are recognized on the commencement date based on the present value of lease payments over the lease term.
The
Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value
of the lease payments. The incremental borrowing rate is estimated based on factors such as the lease term, credit standing and the economic
environment of the location of the lease.
Variable
lease payments, including payments based on an index or a rate, are expensed as incurred and are not included within the operating lease
asset and operating lease liabilities. The Company does not separate non-lease components from lease components for its leases of real
estate.
The
Company’s lease terms are the noncancelable periods, including any rent-free periods provided by the lessor, and include options
to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. At lease inception, and in
subsequent periods as necessary, the Company estimates the lease term based on its assessment of extension and termination options that
are reasonably certain to be exercised. Lease costs are recognized on a straight-line basis over the lease term.
The
Company does not recognize operating lease asset and operating lease liabilities for leases with terms shorter than 12 months. Lease
costs for short-term leases are recognized on a straight-line basis over the lease term.
The
Company has material non-functional currency leases. Lease liabilities in respect of leases denominated in a foreign currency
are remeasured using the exchange rate at each reporting date. Lease assets are measured at historical rates,
which are not affected by subsequent changes in the exchange rates.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
J. Revenue Recognition
As
described in note 1.d the Company generates revenues from obtaining internet user traffic and routing such traffic to its customers.
The Company is entitled to receive consideration for its service upon each individual internet user traffic routed to and is
monetized by its customers.
The
Company’s revenues are measured according to the ASC 606, “Revenue from Contracts with Customers” (“ASC 606”).
Under ASC 606, revenues are measured according to the amount of consideration that the Company expects to be entitled in exchange for
transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties, such as VAT taxes. Revenues
are presented net of VAT. The Company’s payments terms are less than one year. Therefore, no finance component is recognized.
The
Company recognizes revenues upon routing of internet users’ traffic that is monetized by its customers. As the Company
operates as the primary obligor in its arrangements and has sole discretion in determining to which of its customers internet user
traffic is to be routed, revenues are presented on a gross basis.
K. Traffic-acquisition and related costs
Traffic acquisition and related costs consist primarily of fees paid to
suppliers in connection with the Company’s internet traffic sources, as well as internal costs incurred in connection with the acquisition
of such traffic. Traffic acquisition costs are expensed as incurred.
L. Research and development expenses
Research
and development costs are charged to the condensed consolidated statements of income as incurred, except for certain costs relating to
internally developed software, which are capitalized.
The
Company capitalizes certain internal software development costs, consisting of direct subcontractors’ costs associated with creating
the internally developed software. Software development projects generally include three stages: (i) the preliminary project stage (all
costs expensed as incurred); (ii) the application development stage (costs are capitalized) and (iii) the post implementation/operation
stage (all costs expensed as incurred).
The
costs capitalized in the application development stage primarily include the costs of designing the application, coding and testing of
the system. Capitalized costs are amortized using the straight-line method over the estimated useful life of the software, once it is
ready for its intended use.
The
Company believes that the straight-line recognition method best approximates the manner in which the expected benefit will be derived.
Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances
occur that could impact the recoverability of these assets.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
M. Income taxes
The
Company accounts for income taxes in accordance with ASC 740, “Income Taxes”, and (“ASC 740”). ASC 740 prescribes
the use of the asset and liability method whereby deferred tax asset and liability account balances are determined based on differences
between the financial reporting and tax bases of assets and liabilities and for carry forward tax losses. Deferred taxes are measured
using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation
allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more-likely-than-not that some portion
or all of the deferred tax asset will not be realized.
Uncertain
tax positions are accounted for in accordance with the provisions of ASC 740-10, under which a company may recognize the tax benefit
from an uncertain tax position claimed or expected to be claimed on a tax return only if it is more likely than not that the tax position
will be sustained on examination by the taxation authorities, based on the technical merits of the position, at the largest benefit that
has a greater than fifty percent likelihood of being realized upon ultimate settlement. Interest and penalties, if any, related to unrecognized
tax benefits, are recognized in tax expense.
N. Fair Value of Financial Instruments
The
carrying amounts of cash and cash equivalents, restricted deposits, accounts receivable, loan to parent company, other current assets,
current maturities of long-term loan, accounts payable, other payables and short-term loans approximate their fair value due to
the short-term maturities of such instruments.
The
carrying amount of the variable interest rate long-term loan is approximates to its fair value as it bears interest at
approximate market rate.
O. Business Combinations
The
Company accounts for its business combinations in accordance with ASC 805, “Business Combinations” (“ASC 805”).
ASC 805 specifies the accounting for business combinations and the criteria for recognizing and reporting intangible assets apart from
goodwill. ASC 805 requires recognition of assets acquired, liabilities assumed and any non-controlling interest at the acquisition date,
measured at their fair values as of that date.
Acquisition-related
intangible assets result from the Company’s acquisitions of businesses accounted for under the purchase method and consist of the
fair value of identifiable intangible assets including customer relations, technology, as well as goodwill. Goodwill is the amount by
which the acquisition cost exceeds the fair values of identifiable acquired net assets on the date of purchase. Acquisition-related definite
lived intangible assets are reported at cost, net of accumulated amortization.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
P. Goodwill
The
Company’s goodwill reflects the excess of the consideration paid or transferred including the fair value of contingent consideration
over the fair values of the identifiable net assets acquired.
Goodwill
is not amortized but instead is tested for impairment, in accordance with ASC 350, “Intangibles – Goodwill and Other”
(“ASC 350”), at the reporting unit level, at least annually at December 31 each year, or more frequently if events or changes
in circumstances indicate that the carrying value may be impaired.
The
goodwill impairment test is performed by evaluating an initial qualitative assessment of the likelihood of impairment. If this step indicates
that the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is
required. If it does result in a more likely than not indication of impairment, the impairment test is performed.
In
the impairment test, the Company compares the fair value of the reporting unit to the carrying value of the reporting unit. If the fair
value of the reporting unit exceeds the carrying value of the net assets allocated to that unit, goodwill is not impaired, and no further
testing is required. If the fair value is less than the carrying value of the reporting unit, then the second step of the impairment
test is performed to measure the amount of the impairment.
Q. Intangible assets, other than goodwill
Intangible
assets are identifiable non-monetary assets that have no physical substance. Intangible assets with indefinite useful lives are not amortized
and are tested for impairment once a year, or whenever there is a sign indicating that impairment may have occurred, in accordance with
ASC 350. An estimate of the useful life of intangible assets with an indefinite useful life is examined at the end of each reporting
year. A change in the estimated useful life of an intangible asset that changes from indefinite to defined is treated prospectively.
Intangible
assets with a defined useful life are amortized in a straight line over their estimated useful life subject to impairment testing. A
change in the estimated useful life of an intangible asset with a defined useful life is treated prospectively.
The
useful life used to amortize intangible assets with a defined useful life is as follows:
SCHEDULE
OF AMORTIZE INTANGIBLE ASSETS
| | |
% | |
| Customer relations | |
| 14.3 | |
| Technology | |
| 16.7-22 | |
| Internal software | |
| 33 | |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
R. Impairment of long-lived assets
The
Company’s long-lived assets to be held or used, including property and equipment, right of use assets and intangible assets subject
to amortization are reviewed for impairment in accordance with ASC 360, “Property, Plants and Equipment” (“ASC 360”),
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the
asset. If such asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount
of the asset exceeds the fair value of the asset.
S. Severance Pay
The
Company’s liability for severance pay for some of its Israeli employees is calculated pursuant to Israeli Severance Pay Law, 1963
(the “Israeli Severance Pay Law”) based on the most recent salary of the employee multiplied by the number of years of employment,
as of the balance sheet date. These employees are entitled to one month’s salary for each year of employment or a portion thereof.
The Company records the liability as if it were payable at each balance sheet date on an undiscounted basis. The liability is classified
based on the expected date of settlement and therefore is usually classified as a long-term liability unless the cessation of the employees
is expected during the upcoming year.
The
Company’s liability for these Israeli employees is partially covered by monthly deposits for insurance policies and the remainder
by an accrual. The deposited funds for these policies are recorded as an asset in the Company’s balance sheet and include profits
and losses accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation
pursuant to the Israeli Severance Pay Law or labor agreements. The value of the deposited funds is based on the cash redemption value
of these policies.
With
respect to other Israeli employees, the Company acts pursuant to the general approval of the Israeli Ministry of Labor and Welfare, pursuant
to the terms of Section 14 of the Israeli Severance Pay Law (“Section 14”), according to which the current deposits with
the pension fund and/or with the insurance company exempt the Company from any additional obligation to these employees for whom the
said depository payments are made. As a result, the Company does not recognize any liability for severance pay due to these employees
and the deposits under Section 14 are not recorded as an asset in the Company’s balance sheet.
Severance
expenses for the nine months ended September 30, 2022, and September 30, 2021, amounted to $101
and $120,
respectively.
T. Share-based compensation
The
Company accounts for share-based compensation in accordance with ASC 718, “Stock Compensation” (“ASC 718”), which
requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value
of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods, which is
generally the vesting period, in the Company’s condensed consolidated statement of income.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
T. Share-based compensation (Cont.)
The
Company selected the Black-Scholes option pricing model as the most appropriate fair value method for its share-options awards. The option-pricing
model requires several assumptions, of which the most significant are the expected share price volatility and the expected option term.
The
Company accounts for forfeitures as they occur.
U. Net earnings per share
In
accordance with ASC 260, “Earnings Per Share” (“ASC 260”), basic net earnings per share is computed by dividing
net earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted
net earnings per share reflects the potential dilution that could occur if share options, warrants or other commitments to issue ordinary
shares were exercised or equity awards vested, resulting in the issuance of ordinary shares that could share in the net earnings of the
Company.
V. Segment reporting
The
Company reports financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations
of operating segments that meet specified criteria as defined in ASC 280, “Segments Reporting”.
Operating
segments are distinguishable components of an entity for each of which a separate financial information is available and is reported
in a manner consistent with the internal reporting provided to the entity’s Chief Operating Decision Maker (“CODM”)
in making decisions about how to allocate resources and in assessing performance.
The review of the CODM is carried out according to the results of the segment’s
activity. His review does not include certain expenses that are not related specifically to the activity of each of the segments. Those
expenses are presented as reconciliation between segments operating results to total operating results in financial statements.
W. Recent accounting pronouncements
ASU
2019-12, Income Taxes
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in
this ASU simplify the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies
certain aspects of the current guidance to improve consistent application among reporting entities. ASU 2019-12 is effective for annual
periods beginning after January 1, 2022 and interim periods within annual periods beginning after January 1, 2023, and early adoption
was permitted.
The
Company currently does not expect the adoption of this accounting standard will have a material impact on its consolidated financial
statements
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (Cont.)
W.
Recent accounting pronouncements (cont.)
ASU
2019-10, Financial Instruments—Credit Losses (Topic 326)
In
September 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Financial Instruments –
Credit Losses (Topic 326)” (“ASU 2016-13”), which requires the immediate recognition of management’s estimates
of current and expected credit losses. In November 2018, the FASB issued ASU 2018-19, which makes certain improvements to Topic 326.
In April and May 2019, the FASB issued ASUs 2019-04 and 2019-05, respectively, which adds codification improvements and transition relief
for Topic 326. In November 2019, the FASB issued ASU 2019-10, which delays the effective date of Topic 326 for Smaller Reporting Companies
to interim and annual periods beginning after December 15, 2022, with early adoption permitted. In November 2019, the FASB issued ASU
2019-11, which makes improvements to certain areas of Topic 326. In February 2020, the FASB issued ASU 2020-02, which adds an SEC paragraph,
pursuant to the issuance of SEC Staff Accounting Bulletin No. 119, to Topic 326.
The
amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal
years, and early adoption is permitted.
The Company currently does not expect that
the adoption of this accounting standard will have a material impact on its consolidated financial statements
ASU
2021-08, Business Combinations
In
October 2021 the FASB issued ASU 2021-08, “Business Combinations (Topic 805) – Accounting for Contract Assets and Contract
Liabilities from Contracts with Customers”. The amendments in this update require that an entity (acquirer), recognize and measure
contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an
acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve
this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts.
The
amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal
years, and early adoption is permitted.
The Company currently does not expect that
the adoption of this accounting standard will have a material impact on its consolidated financial statements
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 3: OTHER RECEIBALES
Composition:
SCHEDULE OF OTHER ACCOUNTS RECEIVABLES COMPOSITION
| | |
As of September 30 | | |
As of December 31 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Prepaid expenses | |
$ | 301 | | |
$ | 350 | |
| Government authorities | |
$ | 513 | | |
$ | 624 | |
| Other receivables | |
$ | - | | |
$ | 30 | |
| Other
accounts receivables | |
| 814 | | |
| 1,004 | |
NOTE 4: PROPERTY AND EQUIPMENT, NET
Composition:
SCHEDULE
OF PROPERTY AND EQUIPMENT, NET
| | |
As of
September 30 | | |
As of December 31 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Cost: | |
| | | |
| | |
| Computers and peripheral equipment | |
$ | 490 | | |
$ | 436 | |
| Office furniture and equipment | |
$ | 134 | | |
$ | 134 | |
| Leasehold improvements | |
$ | 273 | | |
$ | 273 | |
| | |
| | | |
| | |
| Total cost | |
$ | 897 | | |
$ | 843 | |
| Less: accumulated depreciation | |
| (580 | ) | |
| (509 | ) |
| Property and equipment, net | |
| 317 | | |
| 334 | |
Depreciation
expenses totaled to $71 and $54 for the nine months ended September 30, 2022, and September 30 2021, respectively.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
5: LEASES
On February 25, 2021, Gix Media entered into a lease agreement for a new corporate office of 479 square meters in
Ramat Gan, Israel, at a monthly rent fee of $10. The lease period is for 36 months (the “initial lease period”) with an option
by the Company to extend for two additional terms of 24 months each. In accordance with the lease agreement, the Company made leasehold
improvements in exchange for a rent fee discount of $67 which will be spread over the initial lease period.
The Company includes
renewal options that it is reasonably certain to exercise in the measurement of the lease liabilities.
Leases
recorded on the balance sheet consist of the following:
SCHEDULE OF LEASE
| | |
As of September 30 | | |
As of
December 31 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Assets | |
| | | |
| | |
| Right-of-use assets | |
$ | 505 | | |
$ | 569 | |
| | |
| | | |
| | |
| Liabilities | |
| | | |
| | |
| Operating lease – current | |
$ | 93 | | |
$ | 91 | |
| Operating lease – non-current | |
$ | 433 | | |
$ | 491 | |
| Total lease liabilities | |
$ | 526 | | |
$ | 582 | |
Weighted-average
remaining lease term and discount rate were as follows:
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES
| | |
As of
September 30,
2022 | |
| | |
| |
| Operating leases weighted average remaining lease term (in years) | |
| 5.42 | |
| Operating leases weighted average discount rate | |
| 3.10 | % |
Maturities
of operating lease liabilities as of September 30, 2022 and December 31, 2021, are as follows:
SCHEDULE
OF MATURITIES OF OPERATING LEASE LIABILITIES
| | |
As of September 30 | | |
As of
December 31 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| 2022 | |
$ | 22 | | |
$ | 99 | |
| 2023 | |
$ | 88 | | |
$ | 100 | |
| 2024 | |
$ | 88 | | |
$ | 100 | |
| 2025 | |
$ | 88 | | |
$ | 100 | |
| Thereafter | |
$ | 251 | | |
$ | 285 | |
| Total lease payments | |
| 537 | | |
| 684 | |
| Less: imputed interest | |
| (11 | ) | |
| (102 | ) |
| Present value of lease liabilities | |
| 526 | | |
| 582 | |
Operating
lease expenses amounted to $77 and $60 for the nine months ended September 30, 2022, and September 30, 2021, respectively.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
6: GOODWILL AND INTANGIBLE ASSETS
SCHEDULE
OF GOODWILL AND INTANGIBLE ASSETS
| | |
(*) | | |
| | |
| | |
| | |
| |
| | |
Internal Software (*) | | |
Customer Relations | | |
Technology | | |
Goodwill | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| |
| Cost: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance as of January 1, 2022 | |
| 449 | | |
| 10,720 | | |
| 4,790 | | |
| 12,483 | | |
| 28,442 | |
| Adjustments to ultimate parent company earning
values (see note 1.c) | |
| - | | |
| 2,356 | | |
| 6,958 | | |
| 5,132 | | |
| 14,446 | |
| Additions | |
| 14 | | |
| - | | |
| - | | |
| - | | |
| 14 | |
| Acquisitions | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance as of September 30, 2022 | |
| 463 | | |
| 13,076 | | |
| 11,748 | | |
| 17,615 | | |
| 42,902 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Accumulated amortization: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance as of January 1, 2022 | |
| - | | |
| 4,261 | | |
| 3,284 | | |
| - | | |
| 7,545 | |
| Amortization recognized during the period | |
| 85 | | |
| 667 | | |
| 1,228 | | |
| - | | |
| 1,980 | |
| Balance as of September 30, 2022 | |
| 85 | | |
| 4,928 | | |
| 4,512 | | |
| - | | |
| 9,525 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Amortized cost: | |
| | | |
| | | |
| | | |
| | | |
| | |
| As of September 30, 2022 | |
| 378 | | |
| 8,148 | | |
| 7,236 | | |
| 17,615 | | |
| 33,377 | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
Internal Software (*) | | |
Customer Relations | | |
Technology | | |
Goodwill | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| |
| Cost: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance As of January 1, 2021 | |
| 180 | | |
| 6,080 | | |
| 3,117 | | |
| 2,902 | | |
| 12,279 | |
| Cost: beginning balance | |
| 180 | | |
| 6,080 | | |
| 3,117 | | |
| 2,902 | | |
| 12,279 | |
| Acquisition of Cortex (see note 7) | |
| - | | |
| 4,640 | | |
| 1,673 | | |
| 9,581 | | |
| 15,894 | |
| Additions | |
| 269 | | |
| - | | |
| - | | |
| - | | |
| 269 | |
| Balance as of December 31, 2021 | |
| 449 | | |
| 10,720 | | |
| 4,790 | | |
| 12,483 | | |
| 28,442 | |
| Cost: ending balance | |
| 449 | | |
| 10,720 | | |
| 4,790 | | |
| 12,483 | | |
| 28,442 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Accumulated amortization: | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance as of January 1, 2021 | |
| - | | |
| 3,274 | | |
| 2,424 | | |
| - | | |
| 5,698 | |
| Accumulated amortization: beginning balance | |
| - | | |
| 3,274 | | |
| 2,424 | | |
| - | | |
| 5,698 | |
| Amortization recognized during the year | |
| - | | |
| 987 | | |
| 860 | | |
| - | | |
| 1,847 | |
| Balance as of December 31, 2021 | |
| - | | |
| 4,261 | | |
| 3,284 | | |
| - | | |
| 7,545 | |
| Accumulated amortization: ending balance | |
| - | | |
| 4,261 | | |
| 3,284 | | |
| - | | |
| 7,545 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Amortized cost: | |
| | | |
| | | |
| | | |
| | | |
| | |
| As of December 31, 2021 | |
| 449 | | |
| 6,459 | | |
| 1,506 | | |
| 12,483 | | |
| 20,897 | |
| Amortized cost: | |
| 449 | | |
| 6,459 | | |
| 1,506 | | |
| 12,483 | | |
| 20,897 | |
|
(*)
During 2020, Gix Media engaged with a subcontractor for the development of an internal software (the “Software”). Gix
Media capitalized its developments costs.
Total
expenses capitalized as of September 30, 2022, and December 31, 2021, were $463 and $449, respectively.
Since
March 1, 2022, the Software is available for use. Accordingly, Gix Media recognized amortization expenses over the estimated useful
life of the Software determined to be three years. For the period from March 1, 2022, until September 30, 2022, Gix Media recorded
amortization expenses of $85. The Company estimates the useful life of the software to be amortized over 36 months. |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
7: BUSINESS COMBINATION
Cortex
Acquisition
On
October 13, 2021, Gix Media acquired 70% (on a fully diluted basis) of the shares of Cortex (“Cortex Transaction”), a private
company operating in the field of online media and advertising. In consideration for Cortex Transaction, Gix Media paid NIS 35 million
in cash (approximately $11 million), out of which an amount of $0.5 million was deposited in trust for a period of 12 months from the
closing date.
The
Cortex Transaction also included the following main terms:
| ● | Gix
Media will acquire 30% of Cortex’s shares in three equal stages, (at the beginning
of 2023, at the beginning of 2024 and at the beginning of 2025) (the “Remaining Balance
Shares”), so that following the completion of the acquisition of all of the Remaining
Balance Shares, Gix Media will hold 100% of Cortex’s share capital on a fully diluted
basis. |
| | | |
| ● | The
obligation (and right) to acquire the Remaining Balance Shares will expire in the event of
an initial public offering of Cortex’s shares or in the event of a 50% or more decrease
in Cortex’s annual net income, for a period of 12 consecutive months, compared to the
net income during the period of 12 months ended July 31, 2021. As of the date of filling of these financial statements,
this right and obligation has not expired. |
| | | |
| ● | If
Gix Media does not fulfill its obligation to acquire the Remaining Balance Shares, within
90 days from the Designated Acquisition Date as stated above, the selling shareholders of
Cortex (the original shareholders of Cortex) will be released from their obligation not to
sell or transfer their holdings in Cortex to a third party, in relation to the same stage
of the balance of the shares not acquired as aforesaid. If Gix Media does not fulfilled its
obligation to acquire the Remaining Balance Shares in a certain stage, its right to acquire
the Remaining Balance Shares in the subsequent stage, will be conditioned upon the acquisition
of the Remaining Balance Shares not purchased by it in the previous stage as
well, provided that the Remaining Balance Shares were not transferred or pledged by the selling
shareholders of Cortex to a third party. |
The
Cortex Transaction was financed by Gix Media’s existing cash balances and substantially by debt through a bank financing in
the aggregate amount of $9.5
million, that consists of a line of credit of up to $3.5
million and a long-term loan of $6
million (see note 10).
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
7: BUSINESS COMBINATION (Cont.)
Cortex
Acquisition (Cont.)
Fair
Value of Cortex’s Identifiable Assets and Liabilities:
SCHEDULE
OF BUSINESS COMBINATION OF ASSETS AND LIABILITIES
| | |
| | |
| Cash and cash equivalents | |
| 775 | |
| Restricted deposits | |
| 29 | |
| Trade receivables | |
| 10,662 | |
| Other accounts receivables | |
| 346 | |
| Property and Equipment, net | |
| 9 | |
| Goodwill arising from the acquisition | |
| 9,581 | |
| Intangible assets | |
| 6,134 | |
| Total assets | |
| 27,716 | |
| | |
| | |
| Accounts payables | |
| 8,906 | |
| Short-term loan | |
| 1,500 | |
| Accrued expenses and other current liabilities | |
| 854 | |
| Deferred taxes and taxes payable | |
| 758 | |
| Non-Controlling Interests | |
| 4,709 | |
| Total liabilities | |
| 16,727 | |
| | |
| | |
| Total acquisition cost | |
| 10,989 | |
Gix
Media recorded acquisition costs in the amount of $197 with respect to Cortex Transaction.
Net
Cash Flow from the Cortex Transaction:
| | |
| | |
| Consideration paid in cash | |
| 10,989 | |
| Less cash and cash equivalents and restricted deposits received from acquisition of Cortex | |
| (804 | ) |
| Total net cash paid | |
| 10,185 | |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
8: ACCOUNTS PAYABLE
SCHEDULE
OF ACCOUNTS PAYABLE
| | |
As of September 30 | | |
As of December 31 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Trade payables | |
$ | 11,665 | | |
$ | 10,491 | |
| Accrued expenses | |
$ | 4,479 | | |
$ | 6,185 | |
| Accounts
payable | |
| 16,144 | | |
| 16,676 | |
NOTE
9: OTHER PAYABLES
SCHEDULE
OF OTHER ACCOUNTS PAYABLE
| | |
As of September 30 | | |
As of December 31 | |
| | |
2022 | | |
2021 | |
| Dividend declared | |
$ | 1,000 | | |
$ | - | |
| Government authorities | |
$ | 155 | | |
$ | 615 | |
| Employees and payroll accruals | |
$ | 567 | | |
$ | 655 | |
| Other accounts payable | |
$ | 140 | | |
$ | 116 | |
| Accounts
payable other | |
| 1,862 | | |
| 1,386 | |
NOTE
10: LOANS
Bank
Financing:
On
the the closing date of the Cortex Transaction, Gix Media entered into a financing agreement with Bank Leumi Le Israel Ltd
(“Leumi”), an Israeli bank, for the provision of a line of credit in the total amount of up to $3.5
million and a long-term loan totaling $6
million, which Gix Media used to finance the Cortex Transaction (see note 9) (the “Financing Agreement”).
The
Financing Agreement included the following main terms:
| 1) | A
loan of $6 million to be provided to Gix Media for a period of 48 months at an annual interest
rate of LIBOR + 4.12%. |
| | | |
| 2) | A
renewable monthly line of credit, of up to $3.5
million to be provided to Gix Media, which will be available for utilization for a period of two years and will be determined on a
monthly basis, at 80%
of Gix Media’s accounts receivable balance (“Line of Credit”). The amounts that will be withdrawn from the
Line of Credit will bear annual interest of LIBOR
+ 3.2%. |
| | | |
| 3) | Gix
Media undertook to meet financial covenants over the life of the loans as follows: (1)
the ratio of debt to EBITDA, based on the Gix Media’s consolidated financial statements in all 4 consecutive quarters, will
not exceed 2.4 in the first two years and will not exceed 1.75 in the following two years. As of September 30, 2022, and
December 31, 2021, Gix Media is in compliance with the financial covenants in connection with the Financing Agreement. |
| | | |
| 4) | As
part of the Financing Agreement, Gix Media and the Company provided several liens in favor of Leumi (see
Note 12). |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
10: LOANS (Cont.)
On
April 7, 2022, Cortex and Leumi entered into an addendum to an existing loan agreement between the parties, dated August 15, 2021. As
part of the addendum to the loan agreement, Leumi provided Cortex with a monthly renewable credit line (the “Additional Credit
Line”) in the amount of up to $1,000, which is an addition to the existing credit
line of $1,500. The aggregate amount of the credit lines is $2,500 (the “Total Credit Line”). The Total Credit Line was available
for utilization by Cortex until September 24, 2022. The Total Credit Line was determined every month at the level of 70%
of Cortex’s customers’ balance. The amounts that were drawn from the Additional Credit Line bear an annual interest of SOFR
+ 3.52% (Overnight Financing Rate Secured, guaranteed
daily interest as determined in accordance with the Federal Bank in New York). The Additional Credit Line was required for the purpose
of increasing the traffic-acquisition and related costs and as part of the continuation growth trend in Cortex’s business
activity. As of September 30, 2022, the Additional Credit Line was not renewed.
On
July 25, 2022, Gix Media and Leumi entered into an addendum to the Financing Agreement, according to which, Leumi will provide Gix
Media with a loan of $1,500,
to be withdrawn at the discretion of Gix Media no later than January 31, 2023 (the “Additional Loan”).
The
Additional Loan will bear an annual interest of SOFR
+ 5.25% to be repaid in 42 equal monthly payments starting from the date of the Additional Loan’s receipt. The Additional Loan will be used to
purchase an additional 10%
of Cortex’s shares in accordance with Cortex Transaction.
As of the date of issuance of these financial statements, no
amounts under the Additional Loan were withdrawn.
Composition
of long-term loans, short-term loans and line of credit of the Group:
The
following is the composition of the balance of the Group’s loans according to their nominal value:
SCHEDULE
OF COMPOSITION OF THE BALANCE OF THE GROUP’S LOANS
| | |
| | | |
| | | |
| | |
| | |
| | |
As of | |
| | |
Interest rate (*) | | |
| | |
| |
| Short-term bank loan – Gix Media | |
| LIBOR + 3.20% | | |
| 3,500 | | |
| 3,500 | |
| Short-term bank loan – Cortex | |
| SOFR + 3.52% | | |
| 1,500 | | |
| 1,500 | |
| Long-term bank loan, including current maturity – Gix Media | |
| LIBOR + 4.12% | | |
| 4,725 | | |
| 5,770 | |
| | |
| | | |
| | | |
| | |
| Bank Loan | |
| | | |
| 9,725 | | |
| 10,770 | |
| (*) | The LIBOR interest
rate will continue to be published until June 2023 and then will be replaced by the Secured Overnight Financing Rate (“SOFR”). |
Maturities
of the Group’s bank loans as of September 30, 2022, are as follows:
SCHEDULE OF MATURITIES OF DEBT
| | |
| | |
| 2022 | |
| 6,500 | (*) |
| 2023 | |
| 1,500 | |
| 2024 | |
| 1,500 | |
| 2025 | |
| 225 | |
| Total | |
| 9,725 | |
| (*) | Includes a sum of $5,000 which is a renewable monthly credit line. |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
11: INCOME TAXES
A.
Tax rates applicable to the income of the Company:
Viewbix
Inc. is taxed according to U.S. tax laws.
On
December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which among other provisions, reduced the U.S.
corporate tax rate from 35% to 21%, effective January 1, 2018.
Viewbix
Israel is taxed according to Israeli tax laws. The Israeli corporate
tax rate is 23% in the years 2022, 2021 and onwards.
Gix
Media and Cortex are recognized as a “Preferred-Technology Enterprise” in accordance with Section 51 of the Encouragement
of Capital Investments Law, 1959 and are taxed at a reduced corporate tax rate of 12%.
B. Tax
assessments:
As
of September 30, 2022, Gix Media has a final tax assessment for tax years prior to and including the tax year ended December 31, 2014.
Cortex
has a final tax assessment for tax years prior to and including the tax year ended December 31, 2018.
Viewbix
Israel has a final tax assessment for tax years prior to and including the tax year ended December 31, 2015.
During
2022, the Israeli tax authority commenced a tax assessment of Gix Media for the tax years 2017 to 2020. As of the date of issuance of these financial statements, tax assessment have not been completed.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
11: TAXES ON INCOME (Cont.)
C.
Deferred taxes are comprised of the following components:
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Deferred
taxes are comprised of the following components:
SCHEDULE OF DEFERRED INCOME TAXES
| | |
| | |
| |
| | |
As of
September 30 | | |
As of
December 31 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Deferred tax assets | |
| | | |
| | |
| Deferred research and development expenses | |
$ | 34 | | |
$ | 38 | |
| Employee compensation and benefits | |
$ | 12 | | |
$ | 19 | |
| Operating loss carryforward | |
$ | 7,672 | | |
$ | 7,479 | |
| Operating lease right of use asset | |
$ | 61 | | |
| 68 | |
| Accrued severance pay | |
$ | 12 | | |
$ | 13 | |
| | |
| | | |
| | |
| Total deferred tax assets | |
$ | 7,791 | | |
$ | 7,617 | |
| | |
| | | |
| | |
| Deferred tax liabilities: | |
| | | |
| | |
| Differences between tax basis and carrying values of loans | |
$ | - | | |
$ | 184 | |
| Operating lease right of use liability | |
$ | 63 | | |
| 70 | |
| Intangible assets associated with business combinations | |
$ | 1,853 | | |
$ | 1,026 | |
| Total deferred tax liabilities | |
$ | 1,916 | | |
| 1,280 | |
| | |
| | | |
| | |
| Net deferred tax assets before valuation allowance | |
$ | 5,875 | | |
$ | 6,337 | |
| Valuation allowance | |
| (7,666 | ) | |
| (7,230 | ) |
| Net deferred tax liabilities | |
$ | 1,791 | | |
$ | 893 | |
As
of September 30, 2022, the Company has recorded a valuation allowance of $7,666
in respect of the deferred tax assets resulting primary from tax loss carryforward of Viewbix Inc., as management currently believes these deferred tax assets will not be released in the foreseeable
future.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
11: TAXES ON INCOME (Cont.)
Income
tax expenses are comprised as follows:
SCHEDULE
OF COMPONENTS OF INCOME TAX EXPENSE (BENEFITS)
| | |
2022 | | |
2021 | |
| | |
For the nine months ended
September 30 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Current tax expenses | |
$ | 393 | | |
$ | 78 | |
| Tax benefit in respect of prior years | |
$ | (102 | ) | |
$ | (54 | ) |
| Deferred tax income | |
$ | (227 | ) | |
$ | (65 | ) |
| Total | |
$ | 63 | | |
$ | (41 | ) |
| | |
2022 | | |
2021 | |
| | |
For the three months ended
September 30 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Current tax expenses | |
$ | 130 | | |
$ | (23 | ) |
| Taxes expenses (benefit) in respect of previous years | |
$ | 21 | | |
$ | (18 | ) |
| Deferred tax income | |
$ | (96 | ) | |
$ | (40 | ) |
| Total Income tax expenses | |
$ | 55 | | |
$ | (81 | ) |
D. Reconciliation of the theoretical tax expenses to the actual tax expenses:
A
reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the
Company, and the actual tax expense as reported in the statement of operations is as follows:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| | |
2022 | | |
2021 | |
| | |
For the nine months ended
September 30 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Income before income taxes as reported in the consolidated statements of operations | |
$ | 33 | | |
$ | 44 | |
| Statutory tax rate in USA | |
| 21 | % | |
| 21 | % |
| Theoretical tax expense | |
$ | 7 | | |
$ | 9 | |
| Increase (decrease) in tax expenses resulting from: | |
| | | |
| | |
| Lower tax rates for preferred technology enterprises | |
| (322 | ) | |
| (29 | ) |
| Non-deductible expenses | |
| 5 | | |
| 1 | |
| Tax benefits in respect of prior years | |
| (102 | ) | |
| (54 | ) |
| Change in valuation allowance | |
| 436 | | |
| 58 | |
| Others | |
| 39 | | |
| (26 | ) |
| Taxes on income | |
$ | 63 | | |
$ | (41 | ) |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE 11: TAXES ON INCOME (Cont.)
E.
Available carryforward tax losses:
As
of September 30, 2022 Viewbix Israel incurred operating losses of approximately $15,015 which may be carried forward and offset against
taxable income in the future for an indefinite period.
As
of June 30, 2022 the Company generated net operating losses in the U.S. of approximately $19,000. Net operating losses in the U.S. are
available through 2035. Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the “change
in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in
the expiration of net operating losses before utilization.
F.
Loss from continuing operations, before taxes on income, consists of the following:
SCHEDULE OF LOSS (INCOME) FROM CONTINUING OPERATIONS, BEFORE TAXES ON INCOME
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
For
the nine months ended September 30 | | |
For
the three months ended September 30 | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| USA | |
$ | 385 | | |
$ | 69 | | |
$ | 190 | | |
$ | 27 | |
| Israel | |
| 574 | | |
| 185 | | |
| 432 | | |
| 71 | |
| Total loss before taxes
on income | |
$ | 959 | | |
$ | 254 | | |
$ | 622 | | |
$ | 98 | |
NOTE
12: COMMITMENTS AND CONTINGENCIES
Liens:
As
of September 30, 2022, the Company has provided several liens under Gix Media’s Financing Agreement with Leumi in connection
with the Cortex Transaction, as follows: (1) a guarantee to Bank Leumi of all of Gix Media’s obligations and undertakings to
Bank Leumi unlimited in amount; (2) a subordination letter signed by the company to Leumi Bank; (3) A first ranking all asset charge
over all of the assets of the Company; and (4) a Deposit Account Control Agreement over the Company’s bank
accounts.
Gix
Media has provided several liens under the Financing Agreement with Leumi in connection with the acquisition of Cortex Transaction, as
follows: (1) a floating lien on Gix Media’s assets; (2) a lien on Gix Media’s bank account in Leumi; (3) a lien on
Gix Media’s rights under the Cortex Transaction; (4) a fixed lien on Gix Media’s intellectual property; and (5) a lien on
Gix Media’s full holdings in Cortex.
Gix
Media restricted deposits in the amount of $195
are used as a security in respect of
credit cards, bank guaranties, office lease agreement and hedge transactions on the USD exchange rate.
Cortex
has a restricted deposit in the amount of $27 which is used as a security in respect of its leased offices.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
13: SHAREHOLDERS’ EQUITY
A. Ordinary Shares:
Ordinary
shares confer the right to: (i) participate in the general meetings, to one vote per share for any purpose, to an equal part, on share
basis, (ii) in distribution of dividends and (iii) to equally participate, on share basis, in distribution of excess of assets and funds
from the Company and will not confer other privileges unless stated hereunder or in the Companies Law otherwise. Some investors
have standard anti-dilutive rights, registration rights, and information and representation rights.
B. Warrants:
The
following table summarizes information of outstanding warrants as of September 30, 2022:
SUMMARY OF OUTSTANDING WARRANTS
| | |
Warrants | | |
Warrant Term | | |
Exercise Price | | |
Exercisable | |
| | |
| | |
| | |
| | |
| |
| Class J Warrants | |
| 130,333 | | |
| July 2029 | | |
| 13.44 | | |
| 130,333 | |
| Class K Warrants | |
| 130,333 | | |
| July 2029 | | |
| 22.4 | | |
| 130,333 | |
All of the Company’s warrants meet the U.S. GAAP criteria for equity
classification.
C. Reverse Stock Split:
On
August 31, 2022, the
Company filed the Amended COI with the Secretary of State of Delaware to effect a 28 to 1 reverse stock split of the Company’s
outstanding shares of Common Stock. As a result of the reverse stock split, every 28 shares of the Company’s
outstanding Common Stock prior to the effect of the amended COI was combined and reclassified into one share of the Company’s
shares of Common Stock. The number of authorized share capital of the Company’s Common Stock and par value of the shares
remained unchanged. All share and stock options information related to the Company, was adjusted to reflect the reverse stock split
on a retroactive basis.
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
13: SHAREHOLDERS’ EQUITY (Cont.)
D. Share option plan:
After
the completion of Gix Media’s acquisition by the Parent Company, the Parent Company granted options to Gix Media’s employees.
These options entitle the employees to purchase ordinary shares of the Parent Company that its shares are traded on Tel-Aviv stock exchange.
A
summary of Gix Media’s employee share options activity and related information is as follows:
SCHEDULE
STOCK OPTION ACTIVITY
| | |
As of September 30, 2022 | | |
As of December 31, 2021 | |
| | |
Number of options | | |
Weighted average exercise price | | |
Number of options | | |
Weighted average exercise price | |
| | |
| | | |
$ | | |
| | | |
$ | |
| Options outstanding at beginning of the year | |
| 737,915 | | |
| 1.61 | | |
| 1,120,000 | | |
| 1.56 | |
| Changes during the period: | |
| | | |
| | | |
| | | |
| | |
| Granted | |
| - | | |
| - | | |
| - | | |
| - | |
| Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
| Expired or forfeited | |
| (577,915 | ) | |
| 1.41 | | |
| (382,085 | ) | |
| 1.61 | |
| | |
| | | |
| | | |
| | | |
| | |
| Outstanding at end of period | |
| 160,000 | | |
| 1.41 | | |
| 737,915 | | |
| 1.61 | |
| Options exercisable at end of period | |
| 157,086 | | |
| 1.41 | | |
| 504,585 | | |
| 1.61 | |
The
following tables summarize additional information regarding the Gix Media’s outstanding and exercisable options as of December 31,
2021:
SCHEDULE OF OPTION
OUTSTANDING AND EXERCISABLE
| | | |
Options outstanding | |
| | | |
As of September 30, 2022 | |
Range of
exercise price | | |
Number of
options | | |
Weighted average
exercise price | | |
Weighted
average remaining
contractual life (years) | |
| $ | | |
| | | |
| $ | | |
| | |
| | 1.41 | | |
| 160,000 | | |
| 1.41 | | |
| 5.85 | |
| | | |
Options Exercisable | |
| | | |
As of September 30, 2022 | |
Range of
exercise price | | |
Number of
options | | |
Weighted average
exercise price | | |
Weighted
average remaining
contractual life (years) | |
| | $ | | |
| | | |
| $ | | |
| | |
| | 1.41 | | |
| 157,086 | | |
| 1.41 | | |
| 5.82 | |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
13: SHAREHOLDERS’ EQUITY (Cont.)
The
Company recognized stock-based compensation expenses related to employee’s stock options in the statement of operations as follows:
SCHEDULE
OF STOCK BASED COMPENSATION EXPENSES
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
For the nine months ended
September 30 | | |
For the three months ended September 30 | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Research and development | |
| 31 | | |
| (37 | ) | |
| 29 | | |
| (3 | ) |
| Selling and marketing | |
| 11 | | |
| (6 | ) | |
| 3 | | |
| - | |
| General and administrative | |
| (2 | ) | |
| 5 | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
| 40 | | |
| (38 | ) | |
| 32 | | |
| (3 | ) |
E. Dividends:
During
the nine months ended September 30,2022, Cortex distributed a dividend in the amount of $1,195 to the non-controlling interests.
On
September 30, 2022, Gix Media declared a dividend in a total amount of $1,000. As of September 30, 2022, the dividend was not distributed (see note 9).
NOTE
14: ADDITIONAL INFORMATION REGARDING TO PROFIT AND LOSS ITEMS
Composition:
SCHEDULE OF INFORMATION REGARDING TO PROFIT AND LOSS
A.
Research and development expenses:
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
For
the nine months ended September 30 | | |
For
the three months ended September 30 | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Salaries and related expenses | |
| 1,633 | | |
| 1,124 | | |
| 519 | | |
| 327 | |
| Professional services and subcontractors | |
| 906 | | |
| 297 | | |
| 282 | | |
| 96 | |
| Share-based compensation | |
$ | 31 | | |
$ | (37 | ) | |
$ | 29 | | |
$ | (3 | ) |
| Others | |
| 387 | | |
| 146 | | |
| 157 | | |
| 51 | |
| Research and development
expenses | |
$ | 2,957 | | |
$ | 1,530 | | |
$ | 987 | | |
$ | 471 | |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
14: ADDITIONAL INFORMATION REGARDING TO PROFIT AND LOSS ITEMS (Cont.)
B. Sales and marketing expenses:
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
For the nine months ended September 30 | | |
For the three months ended September 30 | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Salaries and related expenses | |
$ | 1,401 | | |
$ | 482 | | |
$ | 476 | | |
$ | 179 | |
| Share-based compensation | |
| 11 | | |
| (6 | ) | |
| 3 | | |
| - | |
| Advertising and marketing expenses | |
| 363 | | |
| 17 | | |
| 124 | | |
| 7 | |
| Other | |
$ | 78 | | |
$ | 91 | | |
$ | 25 | | |
$ | 29 | |
| Sales and marketing expenses: | |
$ | 1,853 | | |
$ | 584 | | |
$ | 628 | | |
$ | 215 | |
C. General
and administrative expenses:
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
For
the nine months ended September 30 | | |
For
the three months ended September 30 | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Salaries and related expenses | |
| 691 | | |
| 545 | | |
| 243 | | |
| 183 | |
| Professional services | |
| 394 | | |
| 279 | | |
| 140 | | |
| 104 | |
| Share-based compensation | |
| (2 | ) | |
| 5 | | |
| - | | |
| - | |
| Other | |
$ | 243 | | |
$ | 78 | | |
$ | 67 | | |
$ | 26 | |
| General and administrative | |
$ | 1,326 | | |
$ | 907 | | |
$ | 450 | | |
$ | 313 | |
D. Financial expenses, net:
Financial
income:
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
For the nine months ended September 30 | | |
For the three months ended September 30 | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Exchange rate differences | |
$ | 124 | | |
$ | 45 | | |
$ | 55 | | |
$ | 103 | |
| Interest income from loan to related party | |
| 110 | | |
| 108 | | |
| 39 | | |
| 40 | |
| | |
| | | |
| | | |
| | | |
| | |
| Financial income | |
$ | 234 | | |
$ | 153 | | |
$ | 94 | | |
$ | 143 | |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
14: ADDITIONAL INFORMATION REGARDING TO PROFIT AND LOSS ITEMS (Cont.)
Financial
expenses:
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
For the nine months ended September 30 | | |
For the three months ended September 30 | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Bank interest and fees | |
$ | 115 | | |
$ | 20 | | |
$ | 58 | | |
$ | 10 | |
| Interest expense from loans | |
| 605 | | |
| 21 | | |
| 240 | | |
| 7 | |
| Exchange rate differences | |
| 846 | | |
| 2 | | |
| 86 | | |
| - | |
| Other | |
| 42 | | |
| 19 | | |
| 11 | | |
| 5 | |
| Financial expenses | |
$ | 1,608 | | |
$ | 62 | | |
$ | 395 | | |
$ | 22 | |
NOTE
15: LOANS - PARENT COMPANY
A.
Loan to Parent Company:
SCHEDULE
OF LOAN TO PARENT COMPANY
| | |
As of September 30 | | |
As of December 31 | |
| | |
2022 | | |
2021 | |
| | |
| | | |
| | |
| Loan to Parent Company | |
$ | 7,096 | | |
$ | 6,384 | |
The
balance with the Parent Company represents a balance of an intercompany loan under a loan agreement signed between Gix
Media and the Parent Company (the “Loan”) on March 22, 2020. The Loan bears interest at a rate to be determined from
time to time in accordance with Section 3(j) of the Income Tax Ordinance, new version, and the Income Tax Regulations (Determination
of Interest Rate for the purposes of Section 3(j), 1986) or according to a market interest rate decision as agreed between the
parties.
During
the nine months ended September 30, 2022, and 2021, Gix Media recognized interest income in respect of the Loan in the amount of $110
and $108
respectively.
B.
Loan from Parent Company:
SCHEDULE
OF LOAN TO PARENT COMPANY
| | |
As of September 30 | | |
As of December 31 | |
| | |
2022 | | |
2021 | |
| | |
| | | |
| | |
| Loan from Parent Company | |
$ | 2,527 | | |
$ | 2,116 | |
The
balance with the Parent Company represents certain expenses with respect to the Company’s ongoing operation (mainly salary expenses
and other general and administrative expenses) which were financed by the Parent Company (the “Intercompany Balance”).
The
Company entered into an agreement with the Parent Company, according to which, effective as of December 31, 2021, the Intercompany Balance
was modified into a loan, which may be increased from time to time, upon the written mutual consent between the Company and the Parent
Company. The Parent Company loan bears interest at a rate equivalent to the minimal interest rate recognized and attributed by the Israel
Tax Authority and will be repaid, together with the accrued interest, in one payment until December 31, 2022, unless extended upon mutual
consent of the Company and the Parent Company.
As
of September 30, 2022, no amounts were repaid by the Company to the Parent Company.
NOTE
16: MAJOR CUSTOMERS
The
following table sets forth the customers that represent 10% or more of the Group’s total revenues in each of the periods presented
below:
SCHEDULE
OF TOTAL REVENUES
| | |
For the nine months ended September 30 | | |
For the three months ended September 30 | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Customer A | |
| 26 | % | |
| 98 | % | |
| 19 | % | |
| 97 | % |
| | |
$ | 17,340 | | |
$ | 23,337 | | |
$ | 4,242 | | |
$ | 7,863 | |
| Customer B | |
| 18 | % | |
| - | | |
| 20 | % | |
| - | |
| | |
$ | 12,240 | | |
$ | - | | |
$ | 4,460 | | |
$ | - | |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
17: SEGMENT REPORTING
The
Group operates in two different segments in such a way that each company in the Group operates as a separate business segment.
Search
segment- the search segment develops a variety of technological software solutions, which perform automation, optimization
and monetization of internet campaigns, for the purposes of acquiring and routing internet user traffic to its customers.
Digital
content segment- the digital content segment is engaged in the creation and editing of content,
in different languages, for different target audiences, for the purposes of generating revenues from leading advertising platforms, including
Google, Facebook, Yahoo and Apple, by utilizing such content to obtain internet user traffic for its customers.
The
segments’ results include items that directly serve and/or are used by the segment’s business activity and are directly allocated
to the segment. As such they do not include depreciation and amortization expenses for intangible assets created at the time of the purchase
of those companies, financing expenses created for loans taken for the purpose of purchasing those companies, and therefore these items
are not allocated to the various segments.
Segments’s
assets and liabilities are not reviewed by the CODM and therefore were not reflected in the segment reporting.
A. Segments revenues and operating results:
SCHEDULE
OF SEGMENTS REVENUES AND OPERATING RESULTS
| | |
Search
segment | | |
Digital
content segment | | |
Adjustments (See
below) | | |
Nine
months ended September 30, 2022 | |
| Revenues from external customers | |
| 17,600 | | |
| 48,515 | | |
| - | | |
| 66,115 | |
| Depreciation and amortization | |
| - | | |
| - | | |
| 2,051 | | |
| 2,051 | |
| | |
| | | |
| | | |
| | | |
| | |
| Segment operating income | |
| 316 | | |
| 3,586 | | |
| (2,495 | ) | |
| 1,407 | |
| Financial expenses, net | |
| 99 | | |
| 1 | | |
| 1,274 | | |
| 1,374 | |
| Taxes on income | |
| (91 | ) | |
| 393 | | |
| (239 | ) | |
| 63 | |
| Segment net income (loss) | |
| 308 | | |
| 3,192 | | |
| (3,530 | ) | |
| (30 | ) |
VIEWBIX INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
17: SEGMENT REPOTING (Cont.)
| | |
Search segment | | |
Digital content segment | | |
Adjustments (See below) | | |
Three months ended September 30, 2022 | |
| Revenues from external customers | |
| 5,702 | | |
| 17,076 | | |
| - | | |
| 22,778 | |
| Depreciation and amortization | |
| - | | |
| - | | |
| 736 | | |
| 736 | |
| | |
| | | |
| | | |
| | | |
| | |
| Segment operating income | |
| 147 | | |
| 1,265 | | |
| (985 | ) | |
| 427 | |
| Financial expenses, net | |
| 32 | | |
| 27 | | |
| 242 | | |
| 301 | |
| Taxes on income | |
| 14 | | |
| 132 | | |
| (91 | ) | |
| 55 | |
| Segment net income (loss) | |
| 101 | | |
| 1,106 | | |
| (1,136 | ) | |
| 71 | |
B. Reconciliation between segments operating results to total operating results in financial statements:
SCHEDULE
OF RECONCILIATION BETWEEN SEGMENTS OPERATING RESULTS
| | |
Nine months ended
September 30 | | |
Three months ended
September 30 | |
| | |
2022 | | |
2022 | |
| | |
| | | |
| | |
| Segments total operating results | |
$ | 3,902 | | |
$ | 1,412 | |
| Depreciation and amortization expenses not attributable to segments (*) | |
$ | (2,051 | ) | |
$ | (736 | ) |
| General and administrative and other costs not attributable to the segments (**) | |
$ | (544 | ) | |
$ | (308 | ) |
| Finance expenses net, not attributable to the segments (***) | |
| (1,274 | ) | |
| 242 | |
| (*) | Mainly consist
of technology and customer relations amortization costs from business combinations (see note 7). |
| (**) | Mainly consist
of salary and related expenses, professional consulting expenses and other expenses in connection with the business combinations and the Reorganization Transaction. |
| (***) | Mainly consist
of financial expenses from the Financing Agreement of bank loans taken for business combinations (see note 10). |
NOTE
18: SUBSEQUENT EVENTS
In
October 2022, Cortex distributed a dividend in the amount of $127 to the non-controlling interests.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
Special
Note Regarding Forward-Looking Statements
The
following management’s discussion and analysis section should be read in conjunction with the Company’s unaudited
financial statements as of September 30, 2022 and 2021, and the related statements of statement operation, statement of changes in
shareholders’ equity and statements of cash flows for the nine and three months then ended, and the related notes thereto
contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”).
Forward-Looking
Statements
This
management discussion and analysis section contains forward-looking statements, such as statements of the Company’s plans, objectives,
expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the
words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,”
“expect” and the like, and/or future tense or conditional constructions “will,” “may,” “could,”
“should,” etc., or similar expressions, identify certain of these forward-looking statements. These forward-looking statements
are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied
by the forward-looking statements. Forward-looking statements are based on information we have when those statements are made or our
management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could
cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important
factors that could cause such differences include, but are not limited to:
| ● |
the short-term and long-term implications caused by
our recent cost reduction efforts, including, but not limited to, our growing inability to secure and maintain customers on the basis
of insufficient capital resources; |
| |
|
| ● |
sustained turnover of key management; |
| |
|
| ● |
our history of recurring losses and negative cash flows
from operating activities, significant future commitments and the uncertainty regarding the adequacy of our liquidity to pursue our
complete business objectives; |
| |
|
| ● |
our need to raise additional capital to meet our business
requirements in the future and such capital raising may be costly or difficult to obtain and could dilute out shareholders’
ownership interests; |
| |
|
| ● |
the impact of the COVID-19 pandemic on our business
plan and the global economy; |
| |
|
| ● |
our ability to adequately protect our intellectual
property; |
| |
|
| ● |
our ability to successfully
integrate the business of Gix Media Ltd.
(“Gix Media”), our wholly owned subsidiary; |
| |
|
| ● |
Subsidiaries’ future performance;
|
| |
|
| ● |
entry of new competitors and products and potential
technological obsolescence of our products. |
The
foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or
risk factors that we are faced with which may cause our actual results to differ from those anticipated in our forward-looking statements.
For a discussion of these and other risks that relate to our business and investing in our common stock, you should carefully review
the risks and uncertainties described in this Quarterly Report on Form 10-Q, and those contained in section captioned “Risk Factors”
of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the
“SEC”) on March 17, 2022 (the “Annual Report”). The Company’s actual results could differ materially from
those contemplated in these forward-looking statements as a result of these factors. The Company does not undertake any obligation to
update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.
Overview
and background
Viewbix
Inc. (f/k/a Virtual Crypto Technologies, Inc., f/k/a Emerald Medical Applications Corp.) (the “Registrant” or the “Company”)
and its subsidiaries (the “Group”) operate in the field of digital advertising in two main areas of activity: search and
digital content. The Group develops and markets a variety of technological software solutions that automate, optimize and monetize online
campaigns. The Group, through its subsidiary, Cortex Media Group Ltd. (“Cortex”), also creates, edits and markets content
in various languages to different target audiences for the purpose of generating advertising revenue on the content, based on the world’s
leading advertising platforms, such as Google, Facebook, Yahoo, Apple and more. The Group’s technological tools enable advertisers
and website owners to earn more from their advertising campaigns and generate additional profits from their sites.
The
Company was incorporated in the State of Delaware on August 16, 1985, under a predecessor name, The InFerGene Company (“InFerGene
Company”). On August 25, 1995, a wholly owned subsidiary of InFerGene Company merged with Zaxis International, Inc., an Ohio corporation,
which following such merger, the surviving entity, InFerGene Company, changed its name to Zaxis International, Inc (“Zaxis”).
On
March 16, 2015, Zaxis and Emerald Medical Applications Ltd., a private limited liability company (“Emerald Israel”)
executed a share exchange agreement, which closed on July 14, 2015, and Emerald Israel became the Company’s wholly-owned
subsidiary. Accordingly, on September 14, 2015, the Company changed its name to Emerald Medical Applications Corp. On May 2, 2018,
the District Court of Lod, Israel issued a winding-up order for Emerald Israel and appointed an Israeli attorney as special executor
for Emerald Israel.
On
January 17, 2018, the Company formed a new wholly-owned subsidiary under the laws of the State of Israel, Virtual Crypto Technologies
Ltd. (“VCT Israel”). On February 22, 2018, the Company’s name was changed from Emerald Medical Applications Corp. to
Virtual Crypto Technologies, Inc. to reflect its new operations and business focus. On January 27, 2020, VCT Israel was sold to a third
party for NIS 50,000 ($14,459).
On
February 7, 2019, the Company entered into a share exchange agreement (the “Recapitalization Transaction”) with Gix
Internet Ltd., an company organized under the laws of the State of Israel (“Gix” or “parent company”),
pursuant to which, Gix assigned, transferred and delivered 99.83% of its holdings in Viewbix Ltd., a company organized under the
laws of the State of Israel (“Viewbix Israel”), to the Company in exchange for shares of restricted common stock, par
value $0.0001 per share (“Common Stock”) of the Company, which resulted in Viewbix Israel becoming a subsidiary of the
Company. In connection with the Recapitalization Transaction, effective as of July 26, 2019, the Company’s name was changed
from Virtual Crypto Technologies, Inc. to Viewbix Inc.
On
September 19, 2022, the Company consummated the Reorganization Transaction (as further described below), which resulted in Gix Media
Ltd. (“Gix Media”) becoming a wholly owned subsidiary of the Company. Following the
closing of the Reorganization Transaction, the Company intends to incorporate Gix Media’s technology into its operations
while aiming to expand its growth potential in the search and content monetization space. Gix Media’s business operations include
both (i) the provision of services to the world’s leading search engines through the development, marketing and distribution of
free software to many Internet users, and (ii) editing and marketing of content in different languages to different target markets, for
the purpose of monetizing advertisements on digital marketing and advertising platforms.
Recent
Developments
Appointments
of Executive Officers and Director
On
September 19, 2022, in connection with the Reorganization Transaction, the Company’s board of directors appointed Mr. Eliyahu
Yoresh, Mr. Amitay Weiss and Mr. Liron Carmel as directors of the Company, as representatives of Gix Media.
On
June 28, 2022, Mr. Amihay Hadad, the Company’s current chief executive officer, tendered his resignation from his position as chief
financial officer, effective June 28, 2022, and concurrent therewith, the Company’s board of directors appointed Mr. Shahar Marom
to serve as the Company’s new chief financial officer, effective July 1, 2022.
On
June 13, 2022, the Company’s board of directors appointed Mr. Yoram Baumann as a director of the Company and as chairman of the
board of directors of the Company.
Reorganization
Transaction with Gix Media Ltd.
On
December 5, 2021, the Company entered into a certain Agreement and Plan of Merger (the “Reorganization Transaction”) with
Gix Media, an Israeli company and the majority-owned subsidiary of Gix, the parent company and Vmedia Merger Sub Ltd., an Israeli company
and wholly-owned subsidiary of the Company (“Merger Sub”), pursuant to which, following the Reorganization Transaction, and
upon satisfaction of additional closing conditions, Merger Sub will merge with and into Gix Media, with Gix Media being the surviving
entity and a wholly-owned subsidiary of the Company. Prior to the closing of the Reorganization Transaction, Gix Media was a majority-owned
subsidiary of Gix, which held approximately 58% of the Common Stock of the Company, on a fully diluted basis.
On
September 19, 2022, the Reorganization Transaction, was consummated (the “Closing”) and as a result, all outstanding ordinary
shares of Gix Media, having no par value (the “Gix Media Shares”) were exchanged for shares of the Company’s Common
Stock. Following the Reorganization Transaction, holders of the Gix Media Shares held 90% of the Company’s Common Stock on a fully
diluted basis, with Gix holding 76.67% of the Common Stock on a fully diluted basis.
The
following illustrates the corporate structure of the Company prior to and following the Reorganization Transaction.
Following
the Reorganization Transaction, the board of directors of the Company consists of six (6) directors, comprised of the three (3) new
directors appointed by Gix Media, Eliyahu Yoresh, Amitay Weiss and Liron Carmel, who joined the Company’s three currently
serving directors, Yoram Baumann, Amihay Hadad and Alon Dayan.
In
connection with the Closing, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware,
effective as of August 31, 2022, pursuant to which the Company, among other things, effected a reverse stock split of its Common Stock
at a ratio of 1-for-28. The foregoing description of the Amended and Restated Certificate of Incorporation does not purport to be completed
and is qualified in its entirety by reference to the full text of the Amended and Restated Certificate of Incorporation, of which was
filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 6, 2022 and is incorporated by
reference herein.
Additionally,
and in connection with the Closing, the Company adopted Amended and Restated Bylaws, a copy of which was filed as Exhibit 3.2 to the
Company’s Current Report on Form 8-K and is incorporated by reference herein.
Acquisition
of Cortex Media Group Ltd.
On
October 13, 2021, Gix Media acquired 70% (on a fully diluted basis) of the share capital of Cortex Media Group Ltd. (“Cortex”
and the “Cortex Acquisition”, respectively), a private company operating in the field of online media and advertising. In
consideration for the Cortex Acquisition, Gix Media paid NIS 35 million in cash (approximately $11 million), out of which an amount of
$0.5 million was deposited in trust for a period of 12 months from the closing date. The Cortex Acquisition also includes the obligation (and right)
of Gix Media to acquire 30% of Cortex’s share capital in three equal stages, each at the beginning of the years 2023, 2024 and
2025 (“Remaining Balance Shares”), such that following the completion of the acquisition of all the Remaining Balance
Shares, Gix Media will hold 100% of Cortex’s share capital on a fully diluted basis.
In
connection with the Cortex Acquisition, at the closing date, Gix Media entered into a financing agreement with Bank Leumi Le Israel Ltd
(“Leumi”), for the provision of a line of credit in the total amount of up to $3.5 million and a long-term loan totaling
$6 million, which Gix Media used to finance the Cortex Acquisition (the “Financing Agreement”).
Results
of Operations
Results
of Operations During the Nine Months Ended September 30, 2022 as Compared to the Nine Months Ended September 30, 2021
Our
revenues were $66,115 thousand for the nine months ended September 30, 2022, compared to $23,874 thousand during the same period in the
prior year. The reason for the increase in the nine months ended September 30, 2022, is due to the Cortex Acquisition on October 13, 2021,
therefore, the financial statements of the Company for the nine months ended September 30, 2022, include Cortex’s financial statements
as compared to the same period in the prior year which does not include Cortex’s financial statements.
Our
traffic-acquisition and related costs buy expenses were $56,400 thousand for the nine months ended September 30, 2022, as compared to
$19,582 thousand during the same period in the prior year. The reason for the increase in the nine months ended September 30, 2022, is
due to the inclusion of Cortex’s financial statements.
Our
research and development expenses were $2,957 thousand for the nine months ended September 30, 2022, and $1,530 for the nine months ended
September 30, 2021. The reason for the increase in the nine months ended September 30, 2022, is due to the inclusion of Cortex’s
financial statements.
Our
selling and marketing expenses were $1,853 thousand for the nine months ended September 30, 2022, as compared to $584 thousand during
the same period in the prior year. The reason for the increase in the nine months ended September 30, 2022 is due to the inclusion of
Cortex’s financial statements.
Our
general and administrative expenses were $1,326 thousand for the nine months ended September 30, 2022, as compared to $907 thousand during
the same period in the prior year. The reason for the increase in the nine months ended September 30, 2022, is due to the inclusion of
the Cortex’s financial statements.
Our
depreciation and amortization expenses increased to $2,051 thousand for the nine months ended September 30, 2022, as compared to $1,289
thousand during the same period in the prior year. The reason for the increase in the three months ended September 30, 2022, is that
the Company recorded depreciation and amortization expenses in connection with the Cortex Acquisition on October 13, 2021.
Our
other expenses were $121 thousand for the nine months ended September 30, 2022, compared to $26 thousand during the nine months ended
September 30, 2021. The reason for the increase during the nine months ended September 30, 2022, is an increase in the expenses in connection
with the Reorganization Transaction.
Our
net financial expenses were $1,374 thousand for the nine months ended September 30, 2022, compared to $91 thousand net financial income
during the same period in the prior year. The reason for the increase during the nine months ended September 30, 2022 is mainly due to:
(1) financial expenses in connection with the Financing Agreement as part of the Cortex Acquisition on October 13, 2021 and (2) the increase
of the USD to NIS exchange rate in the period ended September 30, 2022.
Our
tax expenses were $63 thousand for the nine months ended September 30, 2022, as compared to $41 thousand income tax during the
same period in the prior year. The reason for the increase during the nine months ended September 30, 2022 is due to the inclusion of
Cortex’s financial statements.
Results
of Operations During the Three Months Ended September 30, 2022 as Compared to the Three Months Ended September 30, 2021
Our
revenues were $22,778 thousand for the three months ended September 30, 2022, compared to $8,079 thousand during the same period in the
prior year.
Our
traffic-acquisition and related costs were $19,464 thousand for the three months ended September 30, 2022, as compared to
$6,738 thousand during the same period in the prior year. The reason for the increase in the three months ended September 30, 2022, is due to the inclusion of the Cortex’s financial statements.
Our
research and development expenses were $987 thousand for the three months ended September 30, 2022, as compared to $471 thousand during
the same period in the prior year. The reason for the increase in the three months ended September 30, 2022 is due to the inclusion of Cortex’s financial statements.
Our
selling and marketing expenses increase to $628 thousand for the three months ended September 30, 2022, as compared to $215 thousand during
the same period in the prior year. The reason for the increase in the three months ended September 30, 2022 is due to the inclusion of Cortex’s financial statements.
Our
general and administrative expenses increased to $450 thousand for the three months ended September 30, 2022, as compared to $313 thousand
during the same period in the prior year. The reason for the increase in the three months ended September 30, 2022, is due to the inclusion of Cortex’s financial statements.
Our
depreciation and amortization expenses increased to $736 thousand for the three months ended September 30, 2022, as compared to $427
thousand during the same period in the prior year. The reason for the increase in the three months ended September 30, 2022, is that
the Company recorded depreciation and amortization expenses in connection with the Cortex Acquisition on October 13,
2021.
Our
other expenses were $86 thousand for the three months ended September 30, 2022, compared to $26 thousand during the three months
ended September 30, 2021. The reason for the increase during the three months ended September 30, 2022, is the increase in the
expenses in connection with the Reorganization Transaction.
Our
net financial expenses were $301 thousand for the three months ended September 30, 2022, compared to $121 thousand net financial income
during the same period in the prior year. The reason for the increase during the three months ended September 30, 2022, is mainly due
to financial expenses in connection with the Financing Agreement as part of the Cortex Acquisition on October 13, 2021, and
the increase of the USD to NIS exchange rate in the three months ended September 30, 2022.
Our
tax expenses were $55 thousand for the three months ended September 30, 2022, as compared to $81 income tax thousand during the same
period in the prior year. The reason for the change in the three months ended September 30, 2022, is due to the inclusion of Cortex’s
financial statements.
Liquidity
and Capital Resources
As
of September 30, 2022, we had current assets of $28,140 thousand consisting of $3,609 thousand in cash and cash equivalents, $223
thousand restricted deposits, $16,398 thousand in accounts receivable, $814 thousand in other receivables and $7,096
thousand in loan to parent company.
As
of September 30, 2022, we had non-current assets of $34,334 thousand consisting of $73 thousand in severance pay funds, $62 thousand
in deferred taxes, $505 thousand in operating lease right-of-use assets, $317 thousand in property and
equipment net, $15,762 thousand in intangible assets, net and $17,615 thousand in goodwill.
As
of September 30, 2022, we had $27,126 thousand in current liabilities consisting of $16,144 thousand in accounts payable, $1,862 thousand
in other payables, $6,500 thousand in short term loan and current maturities of long-term loan, $93 thousand in operating lease
liabilities – short term and $2,527 thousand in loan from parent
company.
As
of September 30, 2022, we had $5,687 thousand in non-current liabilities consisting of $176 thousand in accrued severance pay, $3,225
thousand long-term loan, $433 thousand in operating lease liabilities - long term and $1,853 thousand in deferred taxes.
As
of December 31, 2021, we had current assets of $29,245 thousand consisting of $5,208 thousand in cash and cash equivalents, $16,415
thousand in accounts receivable, $1,004 thousand in other receivables and a $6,384 thousand in loan to the parent
company.
As
of December 31, 2021, we had non-current assets of $22,016 thousand consisting of $83 thousand in severance pay funds, $133 thousand
in deferred taxes, $569 thousand in operating lease right-of-use assets, $334 thousand in property and
equipment net, $8,414 thousand in intangible assets, net and $12,483 thousand in goodwill.
As
of December 31, 2021, we had $26,769 thousand in current liabilities consisting of $16,676 thousand in accounts payable, $1,386
thousand in other payables, $6,500 thousand in short term loan and current maturities of long-term loan, $91 thousand in operating
lease liabilities – short term and $2,116 thousand loan from parent company.
As
of December 31, 2021, we had $5,975 thousand in non-current liabilities consisting of $188 thousand in accrued severance pay, $4,270
thousand in long-term loan, $491 thousand in operating lease liabilities - long term and $1,026 thousand in deferred taxes.
We
had a positive working capital of $1,014 thousand and $2,476 thousand as of September 30, 2022 and December 31, 2021, respectively.
During
the nine months ended September 30, 2022, we had positive cash flow from operating activities of $2,175 thousand, which was mainly the
result of a $30 thousand in net loss, $2,855 thousand from positive adjustments to operating activities, offset by $650 negative changes
in assets and liabilities items.
During
the nine months ended September 30, 2021, we had positive cash flow from operating activities of $1,564 thousand, which was mainly the
result of $88 thousand in net income, $1,174 thousand from positive adjustments to operating activities and $302 thousand positive changes
in assets and liabilities items.
During
the three months ended September 30, 2022, we had positive cash flow from operating activities of $1,577 thousand, which
was mainly the result of $71 thousand in net income, $733 thousand from positive adjustments to operating
activities, and $773 thousands from positive changes in assets and liabilities items.
During
the three months ended September 30, 2021, we had positive cash flow from operating activities of $522 thousand, which was mainly the
result of $91 thousand in net income, $450 thousand from positive adjustments to operating activities offset by $19 negative changes
in assets and liabilities items.
There
are no limitations in the Company’s Amended and Restated Certificate of Incorporation on the Company’s ability to borrow
funds or raise funds through the issuance of shares of its common stock to affect a business combination.
As
of September 30, 2022, the Company has provided several liens under Gix Media’s Financing Agreement with Leumi in connection
with the Cortex Acquisition, as follows: (1) a guarantee to Bank Leumi of all of Gix Media’s obligations and undertakings to
Bank Leumi, unlimited in amount; (2) a subordination letter on behalf of the Company to Leumi Bank; (3) a first ranking asset charge
over all of the assets of the Company; and (4) a Deposit Account Control Agreement over the Company’s bank
accounts.
.
Gix
Media has provided several liens under the Financing Agreement with Leumi in connection with the Cortex Transaction, as follows: (1)
a floating lien on Gix Media’s assets; (2) a lien on Gix Media’s bank account in Leumi; (3) a lien on Gix Media’s rights
under the Cortex Transaction; (4) a fixed lien on Gix Media’s intellectual property; and (5) a lien on all of Gix Media’s
holdings in Cortex.
According to the Financing Agreement, Gix Media undertook to meet financial
covenants over the life of the loans as follows: (1) the ratio of debt to EBITDA, based on the Gix Media’s consolidated financial
statements in all 4 consecutive quarters, will not exceed 2.4 in the first two years and will not exceed 1.75 in the following two years.
As of September 30, 2022, Gix Media is in compliance with the financial covenants in connection with the Financing Agreement.