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”).
On
June 6, 2020, Algomizer changed its name to Gix Internet Ltd., or Gix.
On
February 7, 2019, the Company entered into a share exchange agreement (the “Share Exchange On February 7, 2019, the Company
entered into a share exchange agreement (the “Share Exchange Agreement”) with Gix Internet Ltd. (TASE:ALMO), a company
organized under the laws of the State of Israel (“Gix”), pursuant to which on July 25, 2019 (the “Closing Date”),
Gix 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 Gix 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.
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 Gix 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 Gix 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.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
Organizational
Background (Cont.)
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.
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
` 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 prior to consummation of the Recapitalization Transaction. On January 27, 2020, Virtual Crypto
Israel was sold to a third party for NIS 50,000 ($14,459).
Stock
Subscription Agreement and Loan Agreement
On
December 18, 2020, the company entered into a Stock Subscription Agreement (the “Subscription”) with certain investors
(the “Investors”) in connection with the sale and issuance of an aggregate of 3,000,000 shares of Common Stock, at
a purchase price of $0.01 per share, and for an aggregate purchase price of $30,000. In addition, and on the same date, the company
entered into a Loan Agreement (the “Loan”) with the Investors, pursuant to which the Investors lent an aggregate of
$69,000 (the “Principal Amount”). In accordance with the terms of the Loan, the company repaid the interest on the
Principal Amount (8% compounded annually) to the Investors in the form of an issuance of an aggregate of 552,000 shares of Common
Stock, at a price per share of $0.01. The shares of Common Stock were issued to the Investors pursuant to Regulation S of the
Securities Act of 1933, as amended.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
Going
Concern
The
Company has incurred $80 in net loss for the three months ended March 31 2021 has $2,158 stockholders’ deficit as of March
31, 2021 and $2,078 in total stockholders’ deficit as of December 31, 2020 .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.
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, 2020 and the notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 16,
2021 (the “2020 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, 2021 are not necessarily indicative of the results
for the year ending December 31, 2021, or for any future period.
As
of March 31, 2021, there have been no material changes in the Company’s significant accounting policies from those that
were disclosed in the 2020 Annual Report.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
3:
|
OTHER
ACCOUNTS RECEIVABLES
|
Composition:
|
|
As of
March 31
|
|
|
As of
December 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Government authorities
|
|
|
14
|
|
|
|
20
|
|
|
|
|
14
|
|
|
|
20
|
|
NOTE
4:
|
OTHER
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
Composition:
|
|
As of
March 31
|
|
|
As of
December 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Other payables
|
|
|
48
|
|
|
|
47
|
|
Accrued liabilities
|
|
|
138
|
|
|
|
130
|
|
|
|
|
186
|
|
|
|
177
|
|
NOTE
5:
|
PAYABLE
TO PARENT COMPANY
|
Balances:
|
|
As of March 31
|
|
|
As of December 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Gix – Parent Company Payable
|
|
$
|
2,104
|
|
|
$
|
2,054
|
|
As
part of the agreement with Gix, the parties agreed to have the Company’s operations outsourced to Gix 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 Gix.
|
|
(b)
|
Between
the periods of May 2018 to October 2018, Gix will pay the full expenses of the employees as well as other related expenses.
|
|
(c)
|
From
November 2018 until to the Closing Date, the employees transferred from the Company to Gix will dedicate half of their time
to the Company’s operations and correspondingly 50% of the costs to be incurred by Gix in respect of these employees
are to be charged to the Company.
|
From the closing date, the actual expenses incurred by Gix related
to the Company will be charged to the Company.
No
amounts were paid by the Company to Gix during 2021 and 2020.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
On
December 18, 2020, the company entered into a Loan Agreement (the “Loan”) and Stock Subscription Agreement with certain
Investors as described in note 1e, pursuant to which the Investors lent an aggregate amount of $69,000 (the “Principal Amount”).
In accordance with the terms of the Loan, the company prepaid the interest on the Principal Amount of 8% compounded annually to
the Investors as an issuance of 552,000 shares of Common Stock, at a price per share of $0.01. Under the Stock Subscription Agreement,
the Investors transferred an amount of $ 30,587 to the company as consideration for the issued shares.
The
Company allocated the total proceeds in respect of the shares issued and the Loan extended based on its relative fair values.
As a result of the allocation, a discount of $19 was recorded on the loan. The discount is amortized over the term of the loan
as finance expense.
The
allocation of the proceeds to the fair value distribution of the liability and equity components on the transactions date was
as follows:
Instrument
|
|
Fair Value
|
|
|
% of total fair
|
|
|
Allocated amount
|
|
Short term loan and prepaid interest
|
|
|
55,200
|
|
|
|
49.45
|
|
|
|
49,246
|
|
Investment in the company’s shares
|
|
|
54,000
|
|
|
|
50.55
|
|
|
|
50,340
|
|
Total
|
|
|
109,200
|
|
|
|
100
|
|
|
|
99,586
|
|
The
composition of short term loan balance as of the transaction is as follows:
|
|
As
of
March
31
2021
|
|
|
As
of
December
31
2020
|
|
Short
term loan
|
|
|
69
|
|
|
|
69
|
|
Discount
on Short term loan
|
|
|
(15
|
)
|
|
|
(19
|
)
|
Short
term loan, Net
|
|
|
54
|
|
|
|
50
|
|
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
7:
|
STOCKHOLDERS’
DEFICIT
|
Stockholders’
deficit.
Composition:
|
|
As of March 31
|
|
|
As of December 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Authorized
|
|
|
Issued and outstanding
|
|
|
Authorized
|
|
|
Issued and outstanding
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares
|
|
|
490,000,000
|
|
|
|
34,753,669
|
|
|
|
490,000,000
|
|
|
|
34,753,669
|
|
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.
On
December 18, 2020, the company entered into a Stock Subscription Agreement (the “Subscription”) with certain investors
(the “Investors”) in connection with the sale and issuance of an aggregate of 3,000,000 shares of Common Stock, at
a purchase price of $0.01 per share, and for an aggregate purchase price of $30,000. In addition, and on the same date, the company
entered into a Loan Agreement (the “Loan”) with the Investors, pursuant to which the Investors lent an aggregate of
$69,000 (the “Principal Amount”). In accordance with the terms of the Loan, the company repaid the interest on the
Principal Amount 8% compounded annually to the Investors in the form of an issuance of an aggregate of 552,000 shares of Common
Stock, at a price per share of $0.01. The shares of Common Stock were issued to the Investors pursuant to Regulation S of the
Securities Act of 1933, as amended.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
7:
|
STOCKHOLDERS’
DEFICT (Cont.)
|
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.
Share
Exchange
As
detailed in Note 1, as part of the Recapitalization Transaction in July 2019, the Company issued 30,928,620 common shares in exchange
for 99.83% of the issued and outstanding ordinary shares and all the preferred shares of 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.
Warrants
The
following table summarizes information of outstanding warrants as of March 31, 2021:
|
|
Warrants
|
|
|
Warrant Term
|
|
Exercise Price
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Gix 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. During April 2020, 142,857 Class G warrants
expired.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
8:
|
COMMITMENTS
AND CONTINGENCIES
|
In June 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 $225, 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. In a supplemental
hearing on February 11, 2021 the former CEO provided data regarding his claims. On March 11, 2021 the former CEO filed his
summaries. The Company’s summaries will be filed until May 20, 2021. As of March 31, 2021, the company’s
management, in consultation with its legal advisors, believes that the former CEO’s claims will not be Successful.
NOTE
9:
|
FINANCIAL
(EXPENSES) INCOME, NET
|
Composition:
|
|
For the three months ended March 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
Bank fees
|
|
|
-
|
|
|
|
(2
|
)
|
Exchange rate differences
|
|
|
1
|
|
|
|
49
|
|
Other
|
|
|
(8
|
)
|
|
|
(19
|
)
|
|
|
|
(7
|
)
|
|
|
28
|
|
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
|
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 years 2019 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
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Deferred R&D expenses
|
|
|
16
|
|
|
|
114
|
|
Operating loss carryforward
|
|
|
31,945
|
|
|
|
32,256
|
|
|
|
|
31,961
|
|
|
|
32,370
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset before valuation allowance
|
|
|
6,981
|
|
|
|
7,076
|
|
Valuation allowance
|
|
|
(6,981
|
)
|
|
|
(7,076
|
)
|
Net deferred tax asset
|
|
|
-
|
|
|
|
-
|
|
As
of March 31, 2020, the Company has provided valuation allowances of $6,981 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.
|
C.
|
Available
carryforward tax losses:
|
As
of March 31, 2021 Viewbix Israel incurred operating losses in Israel of approximately $13,466 which may be carried forward and
offset against taxable income in the future for an indefinite period.
As
of March 31, 2021 the Company generated net operating losses in the U.S. of approximately $18,479 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.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
10:
|
TAXES
ON INCOME (Cont.)
|
|
D.
|
Loss
(income) from continuing operations, before taxes on income, consists of the following:
|
|
|
For the three months ended March 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
USA
|
|
|
27
|
|
|
|
10
|
|
Israel
|
|
|
53
|
|
|
|
162
|
|
|
|
|
80
|
|
|
|
172
|
|
NOTE
11:
|
LOSS
PER SHARE-BASIC AND DILUTED
|
Composition:
|
|
For
the three months ended March 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
Basic
and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to ordinary stockholders
|
|
|
80
|
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
ordinary shares
|
|
|
34,753,669
|
|
|
|
31,201,669
|
|
|
|
|
|
|
|
|
|
|
Loss
per share-basic and diluted
|
|
|
0.002
|
|
|
|
0.006
|
|
NOTE
12:
|
COVID-19
PANDEMIC IMPLICATIONS
|
The
COVID-19 pandemic, which originated in China in late 2019, has since spread across the globe and affected the economic condition
of most, if not all, countries, including the United States, Israel and many countries in Europe. On March 11, 2020, the World
Health Organization declared the outbreak a pandemic. While COVID-19 is still spreading and the final implications of the pandemic
are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population.
As of March 31, 2021, the pandemic has caused repeated states of emergency to be declared in various countries, ongoing and extended
travel restrictions have been imposed for several months, strict quarantines rules have been established and maintained for an
extended period of time in a plethora of jurisdictions and various institutions and companies have been closed and rendered bankrupt.
The Company is actively monitoring the pandemic and is taking any necessary measures to respond to the situation in cooperation
with the various stakeholders. Due to the uncertainty surrounding the COVID-19 pandemic, the Company will continue to assess the
situation, including government-imposed restrictions, market by market. It is not possible at this time to estimate the full impact
that the COVID-19 pandemic could have on the Company’s business, the continued spread of COVID-19, and any additional measures
taken by governments, health officials or by the Company in response to such spread, could have on the Company’s business,
results of operations and financial condition. The COVID-19 pandemic and mitigation measures have also negatively impacted global
economic conditions, which, in turn, could adversely affect the Company’s business, results of operations and financial
condition. The extent to which the COVID-19 outbreak continues to impact the Company’s financial condition will depend on
future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information
that may emerge concerning the severity, longevity and impact of the COVID-19 pandemic on economic activity.