QUANTUM X LABS INC. 10-Q

ITEM 1. LEGAL PROCEEDINGS We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations, except as set forth below. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company, threatened against or affecting the Company, our common stock, our officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect, other than as set forth below. On August 7, 2019, Viewbix Ltd. was named as a co-defendant in a civil lawsuit filed with the Jerusalem District Court (the “Jerusalem Court”) by three shareholders of Viewbix Ltd. (in this section, the “Shareholders”), alleging that they were entitled to receive certain preferred shares in Viewbix Ltd., pursuant to a certain 2007 loan agreement by and between Viewbix Ltd. and the petitioning Shareholders, following the sale of Viewbix Ltd. shares to Gix (the “Conversion”). The Shareholders sought declaratory recourse from the Jerusalem Court, pursuant to which the Shareholders demanded, inter alia , shares in Gix on a post-Conversion basis or in an alternative form of compensation. On February 27, 2020, the parties presented their respective arguments before the Jerusalem Court, and the Jerusalem Court determined that the Company is entitled to file a motion for dismissal of the claims by the Shareholders by March 31, 2020, which was subsequently postponed to August 9, 2020. On September 24, 2020, the parties submitted before the Jerusalem Court a settlement proposal, which was thereafter approved by the Jerusalem Court on the same date (the “Settlement”). The Settlement provided, inter alia , that in exchange for the voluntary waiver of claims held by the Shareholders, Gix instructed the trustee holding the instant shares of Gix, which were issued by Gix as part of the transaction where Gix acquired share capital of Viewbix in November 2018, to issue 63,350 Gix shares of Common Stock to the Shareholders, whereby the remaining shares in the trust account will be used to indemnify Gix for any expenses related to the instant litigation. Since the compensation was provided with Gix shares, the settlement has no effect on the Company’s financial statements. In June 2017, a lawsuit was filed with the Tel Aviv District Court (the “Tel Aviv Court”) against Emerald Israel, and other defendants, claiming certain damages in the total amount of approximately $100,000, under the assertion of wrongful termination by Emerald Israel. We believe these claims to be unsubstantiated and wholly without merit and accordingly filed our 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 was set for March 19, 2020, which was subsequently postponed twice, initially to September 29, 2020 and subsequently to February 12, 2021. 25