NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
|
A. |
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. In 2015 the Company changes 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.
VCT
Israel ceased its business operation prior to consummation of the Recapitalization Transaction. 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 “Share Exchange Agreement” or the “Recapitalization
Transaction”) with Gix Internet Ltd., an company organized under the laws of the State of Israel (“Gix”), 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 restricted common stock 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.
On
January 1, 2020, the Company announced certain cost reduction measures due the fact the Company not achieved certain revenues goals.
On
December 5, 2021, the Company entered into a certain Agreement and Plan of Merger (the “Merger Agreement” or the “Gix
Merger”) with Gix Media Ltd., an Israeli company and the majority-owned subsidiary of Gix (“Gix Media”) and Vmedia
Merger Sub Ltd., an Israeli company and wholly-owned subsidiary of the Company (“Merger Sub”) (see also note 1.D).
The
Company and its subsidiaries are collectively referred to as the “Company”. 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.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
|
B. |
Emerald
Medical Applications Ltd. |
Emerald
Medical Applications Ltd., the Company’s wholly-owned subsidiary (“Emerald Israel”) was engaged in the business of
developing 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.
|
C. |
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.
|
D. |
Merger
with Gix Media Ltd. |
On
December 5, 2021, the Company entered into the Merger Agreement with Gix Media and Merger Sub, pursuant to which, following the Gix Merger,
and upon satisfaction of additional closing conditions, Merger Sub will merge with and into Gix Media, with Gix Media being the surviving
entity and wholly-owned subsidiary of the Company. As of the March 31, 2022 (“Reporting Date”), the closing conditions of
the Merger Agreement have not been fulfilled yet (see note 11).
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
The
Company has incurred $169 in
net loss for the three months ended March 31, 2022 and $80
in net loss for the three months ended March
31, 2021. The Company has $2,449 stockholders’
deficit as of March 31, 2022 and $2,158
in stockholders’ deficit as of March 31, 2021 and $17
in negative cash flows from operations for the
three months ended March 31, 2022 and $14
in negative cash flows from operations for the
three months ended March 31, 2021. Since January 2020, the Company has significantly reduced its operations and expenses of Viewbix Israel.
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 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The
significant accounting policies used in the preparation of the financial statements are as follows:
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, 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, 2021 (the “2021 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, 2022 are not necessarily indicative of the results for the year ending December 31,
2021, or for any future period.
As
of March 31, 2022, 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
3: |
OTHER
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
Composition:
SCHEDULE OF OTHER ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| |
As of March 31 | | |
As of December 31 | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Other payables | |
| 47 | | |
| 47 | |
Accrued liabilities | |
| 192 | | |
| 195 | |
Total other accounts payables | |
| 239 | | |
| 242 | |
NOTE
4: |
PARENT
COMPANY LOAN |
Balances:
SCHEDULE
OF PAYABLE TO PARENT COMPANY
| |
As of March 31 | | |
As of December 31 | |
| |
2022 | | |
2021 | |
| |
| | | |
| | |
Gix – Company Loan | |
$ | 2,240 | | |
$ | 2,116 | |
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 of the expenses incurred by Gix that related to the Company will be charged to the Company.
No
amounts were paid by the Company to Gix during 2020 to the Reporting Date.
The
Company entered into an agreement with Gix, its parent company, pursuant to which, effective as of December 31, 2021, the parent company
payable was modified into a loan, which may be increased from time to time, upon the written mutual consent of the Company and Gix (the
“Gix Loan”).
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
4: |
PARENT
COMPANY LOAN (Cont.): |
The
Gix Loan bears interest at a rate (see also note 7) 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 Gix Internet.
The
Company accounted for the modification as an extinguishment of the parent company payable and the issuance of a new debt. At the Reporting
Date, the loan was recorded at its fair value of $2,172.
At the December 31, 2021 at a fair value of $2,116
as of the modification date, with the difference
of $184
between the fair value of the loan and the carrying
value of the payable to the Parent Company recorded in the Company’s Consolidated Statement of Changes in Stockholders’ Deficit
, as of the signing of the Gix Loan, as a deemed contribution to the Company by the Parent Company, with a corresponding discount on
the loan, to be amortized as finance expense in the Company’s Consolidated Statements of Comprehensive Loss over the term of the
loan.
On
December 18, 2020, the company entered into a Loan Agreement (the “Loan”) and Stock Subscription Agreement with certain Investors
as described in note 1c, pursuant to which the Investors lent an aggregate amount of $69
(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 $31
to the company as consideration for the issued
shares. In January 2022, the Investors under the Loan Agreement expressed their intention to convert the Principal Amount to the Company’s
shares of Common Stock, and accordingly, the Company agreed to extend the repayment date.
The
Company allocated the total proceeds in respect of the shares issued and the Loan was extended based on their_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:
SCHEDULE OF FAIR VALUE DISTRIBUTION OF LIABILITY AND EQUITY COMPONENTS
Instrument | |
Fair Value | | |
% of total fair | | |
Allocated amount | |
Loan | |
| 55,200 | | |
| 49.45 | | |
| 49,246 | |
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:
SCHEDULE OF COMPOSITION OF SHORT TERM LOAN
| |
| | |
Principal amount | |
| 69 | |
Discount on Short term loan | |
| (19 | ) |
Short term loan, Net | |
| 50 | |
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
6: |
STOCKHOLDERS’
DEFICIT |
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 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 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. For more details, please see note 1c.
Warrants
The
following table summarizes information of outstanding warrants as of December 31, 2021:
SUMMARY OF OUTSTANDING WARRANTS
| |
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 2020, 50,000 class H warrants, 38,095 class
I warrants and 142,857 Class G warrants expired.
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
7: |
FINANCIAL
EXPENSES, NET |
Composition:
SCHEDULE
OF FINANCIAL EXPENSES, NET
| |
For the three months ended
March 31 | |
| |
2022 | | |
2021 | |
| |
Unaudited | |
Exchange rate differences | |
| 6 | | |
| (1 | ) |
Interests on loans | |
| 69 | | |
| 4 | |
Other | |
| - | | |
| 4 | |
| |
| 75 | | |
| 7 | |
The
Company is subject to income taxes under the Israeli and U.S. tax laws
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 and Israeli subsidiaries
are taxed according to Israeli tax laws. The Israeli corporate tax rate is 23% in the years 2022, 2021, 2020 and onwards.
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:
SCHEDULE OF DEFERRED INCOME TAXES
| |
As of March 31 | | |
As of December 31 | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Deferred R&D expenses | |
$ | 164 | | |
$ | 167 | |
Operating loss carryforward | |
| 32,968 | | |
| 33,055 | |
Differences between tax basis and carrying values of loans (see note 4) | |
$ | (184 | ) | |
$ | (184 | ) |
Total | |
$ | 32,948 | | |
$ | 33,038 | |
| |
| | | |
| | |
Net deferred tax asset before valuation allowance | |
$ | 7,208 | | |
$ | 7,230 | |
Valuation allowance | |
| (7,208 | ) | |
| (7,230 | ) |
Net deferred tax asset | |
$ | - | | |
$ | - | |
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
8: |
TAXES
ON INCOME (Cont.) |
As
of March 31, 2022, the Company has provided valuation allowances of $7,208 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.
Available
carryforward tax losses:
As
of March 31, 2022, Viewbix Israel incurred operating losses in Israel of approximately $14,263 which may be carried forward and offset
against taxable income in the future for an indefinite period.
As
of March 31, 2022 the Company generated net operating losses in the U.S. of approximately $18,705 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.
Loss
from continuing operations, before taxes on income, consists of the following:
SCHEDULE OF LOSS (INCOME) FROM CONTINUING OPERATIONS, BEFORE TAXES ON INCOME
| |
For the three months | |
| |
ended March 31 | |
| |
2021 | | |
2022 | |
| |
| | |
| |
USA | |
$ | | |
$ | |
Israel | |
| | |
| |
| |
$ | | |
$ | |
VIEWBIX
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S.
dollars in thousands (except share data)
NOTE
9: |
LOSS
PER SHARE-BASIC AND DILUTED |
Composition:
SCHEDULE OF LOSS PER SHARE-BASIC AND DILUTED
| |
2022 | | |
2021 | |
| |
For the three months ended
March 31 | |
| |
2022 | | |
2021 | |
| |
Unaudited | |
| |
| | |
| |
Basic and diluted: | |
| | | |
| | |
| |
| | | |
| | |
Net loss attributable to ordinary stockholders | |
| 169 | | |
| 80 | |
| |
| | | |
| | |
Weighted-average ordinary shares | |
| 34,753,669 | | |
| 34,753,669 | |
| |
| | | |
| | |
Loss per share-basic and diluted | |
| 0.005 | | |
| 0.002 | |
NOTE
10: |
COVID-19
PANDEMIC IMPLICATIONS |
The
COVID-19 pandemic which originated in China in late 2019, has resulted in a widespread health crisis that has adversely affected businesses,
economies and financial markets worldwide, placed constraints on the operations of businesses, decreased consumer mobility and activity,
and caused significant economic volatility in the United States, Israel and international capital markets. The COVID-19 pandemic has
caused an economic recession, high unemployment rates and other disruptions, both in the United States, Israel and the rest of the world.
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. The COVID-19 pandemic has not yet currently adversely affected our business,
however, it is not possible at this time to estimate the full impact that the COVID-19 pandemic, 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.
NOTE
11: |
SUBSEQUENT
EVENTS |
Gix
Merger
On
December 5, 2021, the Company entered into the Merger Agreement with Gix Media and Merger Sub, pursuant to which, following the Gix Merger,
and upon satisfaction of additional closing conditions, Merger Sub will merge with and into Gix Media, with Gix Media being the surviving
entity and wholly-owned subsidiary of the Company. As of the March 31, 2022 (“Reporting Date”), the closing conditions of
the Merger Agreement have not been fulfilled yet.
Subject
to the terms and conditions of the Merger Agreement, at the Merger Effective Date (as defined in the Merger Agreement) all outstanding
ordinary shares of Gix Media, having no par value (the “Gix Media Shares”) will be converted into shares of Common Stock,
such that immediately following the Gix Merger, holders of Gix Media Shares will hold 90% of the Company’s capital stock on a fully
diluted basis. The Merger Agreement contains customary representations, warranties and covenants made by each of the Company, Gix Media
and Merger Sub.
On
December 21, 2021, the shareholders of each of Gix Media and Merger Sub approved the Merger Agreement. Consummation of the Gix Merger
is subject to certain additional closing conditions, including, among other things, (i) the Company filing an amendment to its certificate
of incorporation to change the Company’s name to “Gix Media, Inc.”, (ii) obtaining approval from certain third parties,
including the approval of Bank Leumi due to certain liens registered in its favor against ordinary shares of Gix Media; (iii) conversion
of the Company’s outstanding convertible instruments into restricted shares of Common Stock and (iv) obtaining a tax pre-ruling
from the Israeli Tax Authority relating to the Agreement.
Reverse
Stock Split
In
connection with the Gix Merger, on February 13, 2022, the requisite majority of the Company’s stockholders approved certain amendments
to the Company’s certificate of incorporation, including, but not limited to (i) a name change from “Viewbix Inc.”
to “Gix Media, Inc.”, (ii) a
reverse stock split of the Company’s common Stock at a ratio of 1-for-28 (the “Planned Reverse Split”),
(iii) a staggered board structure, and (iv) certain other provisions therein. Pursuant to the Planned Reverse Stock Split, each twenty-eight
(28) shares of the Company’s common stock will be automatically converted, without any further action by the stockholders, into
one share of the Company’s common stock. No fractional shares will be issued as the result of the reverse stock split. Instead,
each stockholder will be entitled to receive one share of common stock in lieu of the fractional share that would have resulted from
the reverse stock split.
The
Company intends to effect the foregoing amended and restated certificate of incorporation upon the closing of the Gix Merger, thus, as
of the Reporting Date the Planned Reverse Stock Split has not been effected.