NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
Organizational
Background
Viewbix
Inc. (formerly known as Virtual Crypto Technologies, Inc.) (the “Company””) was incorporated in the State of
Ohio in 1989 under a predecessor name, Zaxis International, Inc. (“Zaxis”). On August 25, 1995, Zaxis merged with
a subsidiary of The InFerGene Company, a Delaware corporation, which entity changed its name to Zaxis International, Inc. and
the Company was reincorporated in Delaware under the name of Zaxis International, Inc. On December 30, 2014, Zaxis entered into
an agreement with Emerald Medical Applications Ltd., a private limited liability company organized under the laws of the State
of Israel (“Emerald Israel”).
Emerald
Medical Applications Ltd.
On
March 16, 2015, Zaxis and Emerald Israel executed a share exchange agreement, which closed on July 14, 2015, and Emerald Israel
became the Company’s wholly-owned subsidiary. Emerald Israel was engaged in the business of developing Emerald Israel’s
DermaCompare technology and the development, sale and service of imaging solutions utilizing its DermaCompare software for use
in derma imaging and analytics for the detection of skin cancer. On January 29, 2018, the Company ceased the DermaCompare operations
of its former subsidiary.
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.
Virtual
Crypto Technologies Ltd.
On
January 17, 2018, the Company formed a new wholly-owned subsidiary under the laws of the State of Israel, Virtual Crypto Technologies
Ltd. (the “VCT Israel”), to develop and market software and hardware products facilitating, allowing and supporting
purchase and/or sale of cryptocurrencies through ATMs, tablets, personal computers (“PCs”) and/or mobile devices.
VCT
Israel ceased its business operation During the beginning of Q1 2020. On January 27, 2020, VCT Israel was sold to a third party
for NIS 50 ($14). The effective closing date of the transaction was February 12, 2020. The gain from the sale of the company was
$8.
Transaction
with Algomizer Ltd. (the “Recapitalization Transaction”)
On
February 7, 2019, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Algomizer
Ltd. (TASE:ALMO), a company organized under the laws of the State of Israel (“Algomizer”), pursuant to which on July
25, 2019 (the “Closing Date”), Algomizer assigned, transferred and delivered its 99.83% holdings in Viewbix Ltd. (“Viewbix
Israel”) to the Company in exchange for shares of restricted common stock of the Company, representing 65% of the issued
and outstanding share capital of the Company on a fully diluted basis as of the Closing Date following the conversion of certain
convertible notes of the Company and excluding certain warrants to purchase shares of the Common Stock expiring in 2020 and additional
warrants as further described below (the “Fully Diluted Share Capital”). In addition, upon the earlier of: (a) the
launch of a live video product to an American consumer in the United States by Viewbix Israel, or (b) the launch of an interactive
television product to an American consumer in the United States by Viewbix Israel, the Company will issue to Algomizer an additional
1,642,193 shares of restricted common stock of the Company representing 5% of the Fully Diluted Share Capital immediately following
the Closing Date.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
On
July 24, 2019, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of
Delaware reflecting its name change from Virtual Crypto Technologies, Inc. to Viewbix Inc. to reflect its new operations and business
focus and, effective on August 7, 2019, FINRA approved the Registrant’s name change and its trading symbol was changed from
“VRCP” to “VBIX” on the OTCQB.
On
the Closing Date, the Company (i) issued 20,281,085 shares of its common stock to Algomizer in exchange for consideration consisting
of consideration for its 99.83% holdings in Viewbix Israel, and (ii) 3,434,889 shares of its common stock to holders of convertible
notes, which were issued by the Company prior to the Reverse Recapitalization, and which were converted upon the Closing Date.
The shares of common stock were issued under Regulation S. The Company also issued a total of 7,298,636 warrants to Algomizer
to purchase the Company’s common stock, whereby (i) 3,649,318 of such warrants were issued with an exercise price of $0.48,
and (ii) 3,649,318 of such warrants were issued with an exercise price of $0.80.
As
a result of the Recapitalization Transaction, Viewbix Israel became a subsidiary of the Company. As the shareholders of Viewbix
Israel received the largest ownership interest in the Company, Viewbix Israel was determined to be the “accounting acquirer”
in the Recapitalization Transaction. As a result, the historical financial statements of the Company were replaced with the historical
financial statements of Viewbix Israel. The number of shares prior to the reverse recapitalization have been retroactively adjusted
based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction.
The
Company and its subsidiaries are collectively referred to as the “Company”. Viewbix Israel was incorporated on February
2006 in Israel. The Company has developed an interactive video platform based on Software as a Service (“SaaS”) business
model with interactive elements, and the ability to collect and analyze information about each interactive action performed during
the viewing of the video clip. The interactive elements and information gathered, allowing the advertiser to analyze user viewing
habits and optimize real-time throughout the campaign while increasing the effectiveness of online and live video advertising.
On
January 1, 2020, the Company announced certain cost reduction measures due the Company not achieving certain revenues goals.
Going
Concern
The
Company has incurred $174 in net loss for the period ended March 31, 2020, has $1,867 stockholders’ deficit as of March
31, 2020 and $1,863 in total stockholders’ deficit as of December 31, 2019 .Management expects the Company to continue to
generate substantial operating losses and to continue to fund its operations primarily through utilization of its current financial
resources and through additional raises of capital.
Such
conditions raise substantial doubts about the Company’s ability to continue as a going concern. Management’s plan
includes raising funds from outside potential investors. However, there is no assurance such funding will be available to the
Company or that it will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet
its objectives. These financial statements do not include any adjustments relating to the recoverability and classification of
assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to
continue as a going concern.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
2:
|
SIGNIFICANT
ACCOUNTING POLICIES
|
Basis
of Presentation and Principles of Consolidation:
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary
and were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
All
intercompany accounts and transactions have been eliminated in consolidation.
Unaudited
Interim Financial Information
The
Company’s unaudited condensed consolidated financial statements have been prepared in accordance with 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 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, 2019 and the notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 20,
2020 (the “2019 Annual Report”). The results for any interim period are not necessarily indicative of results for
any future period.
The
unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements.
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 three months ended March 31, 2020 are not necessarily indicative of the results
for the year ending December 31, 2020, or for any future period.
As
of March 31, 2020, there have been no material changes in the Company’s significant accounting policies from those that
were disclosed in the 2019 Annual Report.
NOTE
3:
|
OTHER
ACCOUNTS RECEIVABLES
|
Composition:
|
|
As of
March 31
|
|
|
As of
December 31
|
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|
|
|
|
|
|
|
Government authorities
|
|
|
37
|
|
|
|
118
|
|
Other
|
|
|
1
|
|
|
|
1
|
|
|
|
|
38
|
|
|
|
119
|
|
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
4:
|
PROPERTY
AND EQUIPMENT
|
Composition:
|
|
As of
March 31
|
|
|
As of
December 31
|
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
Computers and related equipment
|
|
|
34
|
|
|
|
34
|
|
Office furniture and equipment
|
|
|
9
|
|
|
|
9
|
|
|
|
|
43
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
43
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
-
|
|
|
|
5
|
|
NOTE
5:
|
OTHER
ACCOUNTS PAYABLES
|
Composition:
|
|
As of
March 31
|
|
|
As of
December 31
|
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|
|
|
|
|
|
|
Other payables and deferred revenues
|
|
|
86
|
|
|
|
91
|
|
Accrued liabilities
|
|
|
144
|
|
|
|
149
|
|
Other
|
|
|
1
|
|
|
|
6
|
|
|
|
|
231
|
|
|
|
246
|
|
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
6:
|
STOCKHOLDERS
DEFICT
|
Composition:
|
|
|
As of March 31
|
|
|
As of December 31
|
|
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|
|
|
Authorized
|
|
|
Issued and outstanding
|
|
|
Authorized
|
|
|
Issued and outstanding
|
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares
|
|
|
|
490,000,000
|
|
|
|
31,201,669
|
|
|
|
490,000,000
|
|
|
|
31,201,669
|
|
Ordinary
Shares:
Ordinary
shares confer the right to participate in the general meetings, to one vote per share for any purpose, to an equal part, on share
basis, in distribution of dividends and to equally participate, on share basis, in distribution of excess of assets and funds
from the Company and they shall 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.
Preferred
shares (relating to Viewbix Ltd prior to the Recapitalization Transaction):
Preferred
shares may have been converted into ordinary shares of Viewbix Ltd at any time. The preferred shares would have automatically
converted into ordinary shares if (a) the holders of at least (i) 67% (sixty seven percent) of the issued and outstanding Preferred
C/C-1 shares, (ii) a majority of the issued and outstanding Preferred B shares, and (iii) a majority of the issued and outstanding
Preferred A shares, so agree in writing; or (b) in the event of an IPO.
The
conversion price for any class or series of preferred would have been subject to adjustment, as follows: at any time, upon each
issuance or deemed issuance by the Company of any new securities at a price per share less than the applicable conversion price
in effect on the date of and immediately prior to the issuance of such new securities, the conversion price shall be reduced.
Preferred
shares had priority in the distribution of dividends and upon liquidation in accordance with the Company’s Articles of Association
(“AOA”). These rights may be changed if a meeting of the Company’s stockholders gather up and decides on a change
of regulations in this context.
The
preference mechanism for liquidation and the distribution of dividends gave priority to the most recent preferred stockholders.
The
preferred shares were convertible into 16,199,520 ordinary shares of the Company.
Redemption
The
Company’s AOA do not provide redemption rights to the holders of the preferred shares. In the event of a liquidation event,
all the funds and assets of the Company available for distribution among all the stockholders shall be distributed based on a
certain mechanism as described in the Company’s AOA. Although the preferred shares are not redeemable, in the event of certain
“deemed liquidation events” that are not solely within the Company’s control (including merger, acquisition,
or sale of all or substantially all of the Company’s assets), the holders of the preferred shares would be entitled to preference
amounts paid before distribution to other stockholders (as explained in the previous paragraph) and hence effectively redeeming
the preference amount. In accordance with ASR 268 and ASC 480 “Distinguishing Liabilities from Equity”, the Company’s
preferred shares are classified outside of stockholders’ deficit as a result of these in-substance contingent redemption
rights
As
of December 31, 209 the preferred shares were no longer outstanding
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
6:
|
STOCKHOLDERS
DEFICT (Cont.)
|
Share
Exchange
As
detailed in Note 1, as part of the Recapitalization Transaction in July 2019, the Company issued 20,281,085 shares of common stock
to Algomizer in exchange for its 99.83% holdings in Viewbix Israel. The number of shares prior to the reverse capitalization have
been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization
Transaction.As Part of the transaction all preferred shares were converted into ordinary shares
Warrants
The
following table summarizes information of outstanding warrants as of March 31, 2020:
|
|
Warrants
|
|
|
Warrant Term
|
|
Exercise Price
|
|
|
Exercisable
|
|
Class G Warrants
|
|
|
142,857
|
|
|
April 2020
|
|
$
|
4.20
|
|
|
|
142,857
|
|
Class J Warrants
|
|
|
3,649,318
|
|
|
July 2029
|
|
$
|
0.48
|
|
|
|
3,649,318
|
|
Class K Warrants
|
|
|
3,649,318
|
|
|
July 2029
|
|
$
|
0.80
|
|
|
|
3,649,318
|
|
Additionally
In connection with the Share Exchange Agreement, upon the earlier of: (a) the launch of a live video product to an American consumer
in the United States by Viewbix Israel, or (b) the launch of an interactive television product to an American consumer in the
United States by Viewbix Israel, the Company will issue to Algomizer an additional 1,642,193 shares of restricted common stock
of the Company.
All
of the Company’s warrants meet the US GAAP criteria for equity classification
During
January and March 2020, 50,000 class H warrants expired.
During
January 2020, 38,095 class I warrants expired.
NOTE
7:
|
COMMITMENTS
AND CONTINGENCIES
|
During
August 2019, a law suit was filed against the Company and, the parent company. Algomizer claiming that the applicants were entitled
to receive shares of the Company as part of the consideration in the Company’s acquisition by Algomizer. In the opinion
of the Company’s management, the applicants’ claims are based on incorrect assumptions and deals with the distribution
of the internal shares between the applicants and the other former shareholders of the Company before the acquisition transaction,
resulting in a consideration coming to the applicants following the acquisition transaction. The understanding of the Company
and its legal advisers is that the claim may not create financial exposure to the Company.
In
April 2017, a lawsuit was filed by a former CEO of the Company with the Tel Aviv District Court (the “Tel Aviv Court”)
against the Company claiming certain damages in the total amount of $100,000, under the assertion of wrongful termination by the
Company and Emerald Israel. The Company believes these claims to be unsubstantiated and wholly without merit and accordingly filed
its response with the Tel Aviv Court in October of 2017. The dispute was initially heard by the Tel Aviv Court on February 13,
2020 and a supplemental hearing has been set for March 19, which has subsequently been postponed to September 29, 2020.
As
of March 31, 2020, the company’s management, in consultation with its legal advisors, believes that their claim will be
successful and should the plaintiff be successful, they will be awarded an insignificant amount and therefore no amount has been
provided for in these financial statements.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
8:
|
FINANCIAL
EXPENSES (INCOME), NET
|
Composition:
|
|
For the three months ended March 31
|
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
Bank fees
|
|
|
2
|
|
|
|
2
|
|
Exchange rate differences
|
|
|
(49
|
)
|
|
|
22
|
|
Other
|
|
|
19
|
|
|
|
-
|
|
|
|
|
(28
|
)
|
|
|
24
|
|
|
A.
|
Tax
rates applicable to the income of the Company:
|
Viewbix
Israel are taxed according to Israeli tax laws. The Israeli corporate tax rate is 23% in the years2019 and onwards.
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.
|
B.
|
Deferred
income taxes:
|
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. Significant components of the Company’s deferred tax assets
are as follows:
|
|
As of March 31
|
|
|
As of December 31
|
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|
|
|
|
|
|
|
Deferred R&D expenses
|
|
|
59
|
|
|
|
239
|
|
Operating loss carryforward
|
|
|
31,627
|
|
|
|
32,443
|
|
|
|
|
31,686
|
|
|
|
32,682
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset before valuation allowance
|
|
|
6,931
|
|
|
|
7,149
|
|
Valuation allowance
|
|
|
(6,931
|
)
|
|
|
(7,149
|
)
|
Net deferred tax asset
|
|
|
-
|
|
|
|
-
|
|
As
of March 31, 2020, the Company has provided valuation allowances of $6,931 in respect of deferred tax assets resulting from tax
loss carryforward and other temporary differences. Management currently believes that because the Company has a history of losses,
it is more likely than not that the deferred tax regarding the loss carryforward and other temporary differences will not be realized
in the foreseeable future.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
9:
|
TAXES
ON INCOME (Cont.)
|
|
C.
|
Available
carryforward tax losses:
|
As
of March 31, 2020 Viewbix Israel incurred operating losses in Israel of approximately $13,237 which may be carried forward and
offset against taxable income in the future for an indefinite period.
As
of March 31, 2020 the Company generated net operating losses in the U.S. of approximately $18,390 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.
|
D.
|
Loss (income) from continuing operations, before taxes on income, consists of the following:
|
|
|
For the three months ended March 31
|
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|
|
|
|
|
|
|
USA
|
|
|
10
|
|
|
|
60
|
|
Israel
|
|
|
162
|
|
|
|
169
|
|
|
|
|
172
|
|
|
|
229
|
|
NOTE
10:
|
LOSS
PER SHARE-BASIC AND DILUTED
|
Composition:
|
|
For the three months ended March 31
|
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
Basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ordinary stockholders
|
|
|
174
|
|
|
|
249
|
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares
|
|
|
31,201,669
|
|
|
|
273,049
|
|
|
|
|
|
|
|
|
|
|
Loss per share-basic and diluted
|
|
|
0.006
|
|
|
|
0.91
|
|
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
11:
|
TRANSACTION
AND BALANCES WITH PARENT COMPANY
|
Balances:
|
|
As of March 31
|
|
|
As of December 31
|
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|
|
|
|
|
|
|
|
|
Payable to parent company
|
|
|
1,795
|
|
|
|
1,611
|
|
As
part of the agreement with Algomizer, the parties agreed to have the Company’s operations outsourced to Algomizer from the
agreement date and until the acquisition is consummated. The following term were included in the agreement pursuant to the above:
|
(a)
|
From
May 2018 all of the Company’s employees will become employees of Algomizer.
|
|
|
|
|
(b)
|
Between
the periods of May 2018 to October 2018, Algomizer will pay the full expenses of the employees (see A above) as well as other
related expenses.
|
|
|
|
|
(c)
|
From
the Closing Date, the employees transferred from the Company to Algomizer will dedicate half of their time to the Company’s
operations and correspondingly 50% of the costs to be incurred by Algomizer in respect of these employees are to be charged
to the Company.
|
No
amounts were paid by the Company to Algomizer during 2020 and 2019 in respect of the above, which resulted in a parent company
payable of $1,611 as of December 31, 2019 and $1,795 as of March 31, 2020.