QUANTUM X LABS INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS VIEWBIX INC. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2023 CONTENTS Page Interim Condensed Consolidated Balance Sheets (unaudited) 4 - 5 Interim Condensed Consolidated Statements of Operations (unaudited) 6 Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) 7 Interim Condensed Consolidated Statements of Cash Flows (unaudited) 8 - 9 Notes to the Interim Condensed Consolidated Financial Statements (unaudited) 10 - 22 - 3 - VIEWBIX INC. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) U.S. dollars in thousands (except share data) As of March 31 As of December 31 Note 2023 2022 ASSETS CURRENT ASSETS Cash and cash equivalents 1,771 4,196 Restricted deposits 184 185 Accounts receivable 15,559 20,945 Loan to parent company 3 3,635 3,542 Other current assets 822 973 Total current assets 21,971 29,841 NON-CURRENT ASSETS Severance pay funds 51 52 Deferred taxes 257 340 Property and equipment, net 284 302 Operating lease right-of-use asset 4 464 486 Intangible assets, net 5 14,599 15,313 Goodwill 5 17,361 17,361 Total non-current assets 33,016 33,854 Total assets 54,987 63,695 The accompanying notes are an integral part of these Interim Condensed Consolidated financial statements. - 4 - VIEWBIX INC. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Cont.) U.S. dollars in thousands (except share data) As of March 31 As of December 31 Note 2023 2022 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable 14,056 19,782 Short-term loans 6 4,822 5,069 Current maturities of long-term loans 6 1,879 1,500 Other payables 1,381 2,084 Operating lease liabilities - short term 4 85 87 Total current liabilities 22,223 28,522 NON-CURRENT LIABILITIES Accrued severance pay 148 152 Long-term loans, net of current maturities 6 3,585 2,881 Operating lease liabilities - long term 4 360 388 Deferred taxes 1,712 1,853 Total non-current liabilities 5,805 5,274 Commitments and Contingencies 7 - SHAREHOLDERS’ EQUITY 8 Common stock of $ 0.0001 par value - Authorized: 490,000,000 shares; Issued and outstanding: 14,783,964 shares as of March 31, 2023, and December 31, 2022 3 3 Additional paid-in capital 25,374 25,350 Accumulated deficit ( 3,735 ) ( 3,338 ) Equity attributed to shareholders of Viewbix Inc. 21,642 22,015 Non-controlling interests 5,317 7,884 Total equity 26,959 29,899 Total liabilities and shareholders’ equity 54,987 63,695 The accompanying notes are an integral part of these Interim Condensed Consolidated financial statements. - 5 - VIEWBIX INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) U.S. dollars in thousands (except share data) For the three months ended March 31, Note 2023 2022 Revenues 20,862 20,435 Costs and Expenses: Traffic-acquisition and related costs 17,981 17,615 Research and development 796 848 Selling and marketing 723 620 General and administrative 704 547 Depreciation and amortization 734 586 Operating income (loss) ( 76 ) 219 Financial expense, net 185 337 Loss before income taxes ( 261 ) ( 118 ) Income tax expense 84 31 Net loss ( 345 ) ( 149 ) Less: net income attributable to non-controlling interests 52 119 Net loss attributable to shareholders of Viewbix Inc. ( 397 ) ( 268 ) Net income per share – Basic attributed to shareholders: ( 0.03 ) ( 0.02 ) Net income per share – Diluted attributed to shareholders: ( 0.03 ) ( 0.02 ) Weighted average number of shares – Basic: 14,783,964 (*) 14,783,964 (*) Weighted average number of shares – Diluted: 15,044,630 (*) 15,044,630 (*) (*) Share and per share data in these financial statements have been retrospectively adjusted to reflect a number of shares that is equivalent to the number of shares of the Company post the Reorganization Transaction (see note 1.B). The accompanying notes are an integral part of these Interim Condensed Consolidated financial statements. - 6 - VIEWBIX INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) U.S. dollars in thousands (except share data) Number Amount capital Deficit Shareholders Interests Equity Common stock Additional paid-in Accumulated Total Attributed to the company’s Non- Controlling Total Number Amount capital Deficit Shareholders Interests Equity Balance as of January 1, 2023 14,783,964 3 25,350 ( 3,338 ) 22,015 7,884 29,899 Net income (loss) - - ( 397 ) ( 397 ) 52 ( 345 ) Share-based compensation - - 24 - 24 6 30 Transaction with the non-controlling interests (see note 1.C) - - - - - ( 2,625 ) ( 2,625 ) Transaction with the non-controlling interests - - - - - ( 2,625 ) ( 2,625 ) Balance as of March 31, 2023 14,783,964 3 25,374 ( 3,735 ) 21,642 5,317 26,959 (*) Common stock ( * ) Additional paid-in Accumulated Total Attributed to the company’s Non- Controlling Total Number Amount capital Deficit Shareholders Interests Equity Balance as of January 1, 2022 14,783,964 3 16,074 ( 2,366 ) 13,711 4,806 18,517 Balance 14,783,964 3 16,074 ( 2,366 ) 13,711 4,806 18,517 Net income (loss) - - - ( 268 ) ( 268 ) 119 ( 149 ) Share-based compensation - - 1 - 1 - 1 Adjustment to ultimate parent’s carrying values (see note 1.B) - - 9,227 - 9,227 4,101 13,328 Adjustment to ultimate parent’s carrying values - - 9,227 - 9,227 4,101 13,328 Dividend declared to non-controlling interests - - - - - ( 350 ) ( 350 ) Balance as of March 31, 2022 14,783,964 3 25,302 ( 2,634 ) 22,671 8,676 31,347 Balance 14,783,964 3 25,302 ( 2,634 ) 22,671 8,676 31,347 (*) Share and per share data in these financial statements have been retrospectively adjusted to reflect a number of shares that is equivalent to the number of shares of the Company post the Reorganization Transaction (see note 1.B). The accompanying notes are an integral part of these Interim Condensed Consolidated financial statements. - 7 - VIEWBIX INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) U.S. dollars in thousands (except share data) For the three months ended March 31, 2023 2022 Cash flows from Operating Activities Net income (loss) ( 345 ) ( 149 ) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortizations 734 586 Share-based compensation 30 1 Deferred taxes ( 58 ) ( 55 ) Accrued interest, net ( 27 ) ( 22 ) Exchange rate differences on loans - 184 Changes in assets and liabilities items: Decrease (increase) in accounts receivable 5,386 2,083 Decrease (increase) in other receivables 151 ( 497 ) Decrease in operating lease right-of-use assets 22 20 Increase (decrease) in severance pay, net ( 3 ) 19 Decrease in accounts payable ( 5,726 ) ( 4,019 ) Decrease in other payables ( 122 ) ( 137 ) Decrease in operating lease liabilities ( 30 ) ( 18 ) Increase in loan from parent company - 54 Net cash provided by (used in) operating activities 12 ( 1,950 ) The accompanying notes are an integral part of these Interim Condensed Consolidated financial statements. - 8 - VIEWBIX INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Cont.) U.S. dollars in thousands (except share data) For the three months ended March 31, 2023 2022 Cash flows from Investing Activities Purchase of property and equipment ( 2 ) ( 39 ) Cash paid to non-controlling interests (see note 1.C) ( 2,625 ) - Capitalization of software development costs - ( 16 ) Net cash used in investing activities ( 2,627 ) ( 55 ) Cash flows from Financing Activities Repayment of short-term loans ( 247 ) - Receipt of long-term bank loan 1,500 - Repayment of long-term bank loans ( 417 ) ( 349 ) Payment of dividend to non-controlling interests ( 445 ) ( 350 ) Payment of dividend to shareholders ( 130 ) - Increase in loan to parent company ( 72 ) ( 229 ) Net cash provided by (used in) financing activities 189 ( 928 ) Decrease in cash and cash equivalents and restricted cash ( 2,426 ) ( 2,933 ) Cash and cash equivalents and restricted cash at beginning of period 4,381 5,442 Cash and cash equivalents and restricted cash at end of period 1,955 2,509 Supplemental Disclosure of Cash Flow Activities: Cash paid during the period Taxes paid 185 326 Interest paid 197 103 382 429 The accompanying notes are an integral part of these Interim Condensed Consolidated financial statements. - 9 - VIEWBIX INC. NOTES TO INTERIM 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., subsequent to which the Company, through its subsidiarity, was engaged in the development of technology for use in detection of skin cancer. On January 29, 2018, the Company ceased its business operations in this field. 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. VCT Israel ceased its business operation in 2019 and prior to consummation of the Recapitalization Transaction. On January 27, 2020, VCT Israel was sold to a third party for NIS 50 thousand (approximately $ 13 ). 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. Reorganization Transaction On December 5, 2021, the Company entered into a certain Agreement and Plan of Merger with Gix Media Ltd. (“Gix Media”), an Israeli company and the majority-owned ( 77.92 %) 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 in exchange for the Company’s shares of common stock, par value $ 0.0001 per share (“Common Stock”). As a result of the Reorganization Transaction, the former holders of Gix Media Shares, who previously held approximately 68% of the Company’s Common Stock, hold approximately 97% of the Company’s Common Stock, and Gix Media became a wholly owned subsidiary of the Company. As the Company and Gix Media Ltd. were Interim Condensed Consolidated both by the Parent Company and Medigus Ltd. (the “Ultimate Parent”), before and after the Reorganization Transaction, the Reorganization Transaction was accounted for as a transaction between entities under common control. Accordingly, the 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 Parent Company, for all periods preceding March 1, 2022, the date the Ultimate Parent obtained a controlling interest in the Parent Company and as it is reflected in the consolidated financial statements of the Ultimate Parent for all periods subsequent to March 1, 2022. Share and per share data in these financial statements have been retrospectively adjusted, for the three months ended March 31, 2022, to reflect a number of shares that is equivalent to the number of shares of the Company post the Reorganization Transaction. - 10 - VIEWBIX INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited U.S. dollars in thousands (except share data) NOTE 1: GENERAL (Cont.) C. Business Overview The Company and its subsidiaries (the “Group”), Gix Media and Cortex Media Group Ltd. (“Cortex”), operate in the field of digital advertising. The Group has two main activities that are reported as separate operating 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 obtaining and routing internet user traffic to its customers. The search segment activity is conducted 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 and route internet user traffic for its customers. The digital content segment activity is conducted by Cortex. As of December 31, 2022, Gix Media holds 70 % of Cortex’s share capital. On January 23, 2023, Gix Media acquired an additional 10 % of the share capital Cortex, increasing its holdings to 80 % of the share capital of Cortex in consideration for $ 2,625 (the “Subsequent Purchase”). The Subsequent Purchase was financed by Gix Media’s existing cash balances and by a long-term bank loan received on January 17, 2023, in the amount of $ 1,500 . The Subsequent Purchase, was recorded as a transaction with non-controlling interests in the Company’s statement of changes in shareholders equity for the three month period ended March 31, 2023. D. 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 the three months ended March 31, 2023. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Unaudited Interim Financial Statements The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Group’s Annual Report on Form 10-K for the year ended December 31, 2022. B. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. - 11 - VIEWBIX INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited U.S. dollars in thousands (except share data) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) C. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, inventory impairment, stock-based compensation, as well as in estimates used in applying the revenue recognition policy. Actual results may differ from those estimates. D. Significant Accounting Policies The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements. E. Recent Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Group’s condensed consolidated financial statements. - 12 - VIEWBIX INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited U.S. dollars in thousands (except share data) NOTE 3: LOAN TO PARENT COMPANY SCHEDULE OF LOAN FROM TO PARENT COMPANY As of March 31 2023 As of December 31 2022 Loan to Parent Company $ 3,635 $ 3,542 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 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. On November 20, 2022, the Company, Gix Media and the Parent Company agreed to restructure loan agreements between the parties (see note 15 in the 2022 annual financial statements) such that the Company fully repaid the loan to the Parent Company by offsetting its amount from the loan owed by the Parent Company to Gix Media. As a result, as of March 31, 2023, and December 31, 2022, the Company has no further obligations under the loan agreement with the Parent Company. For the three months ended March 31, 2023, and the year ended 2022, Gix Media recognized interest income in the amount of $ 21 and $ 143 , respectively. NOTE 4: 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. Weighted-average remaining lease term and discount rate were as follows: SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES As of March 31 2023 Operating leases weighted average remaining lease term (in years) 4.92 Operating leases weighted average discount rate 3.10 % As of December 31 2022 Operating leases weighted average remaining lease term (in years) 5.17 Operating leases weighted average discount rate 3.10 % Operating lease expenses amounted to $ 26 and $ 25 for the three months ended March 31, 2023 and 2022, respectively. - 13 - VIEWBIX INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited U.S. dollars in thousands (except share data) NOTE 5: GOODWILL AND INTANGIBLE ASSETS, NET A. Composition: SCHEDULE OF GOODWILL AND INTANGIBLE ASSETS Internal-use Software ( * ) Customer Relations Technology Goodwill Total (*) Cost: Balance as of January 1, 2023 465 6,234 11,008 17,361 35,068 Additions - - - - - Balance as of March 31, 2023 465 6,234 11,008 17,361 35,068 Accumulated amortization: Balance as of January 1, 2023 122 741 1,531 - 2,394 Amortization recognized during the period 35 222 457 - 714 Balance as of March 31, 2023 157 963 1,988 - 3,108 Amortized cost: As of March 31, 2023 308 5,271 9,020 17,361 31,960 Internal-use Software ( * ) Customer Relations Technology Goodwill Total Cost: Balance as of January 1, 2022 449 7,753 7,757 12,483 28,442 Cost: beginning balance 449 7,753 7,757 12,483 28,442 Adjustments to Ultimate Parent company carrying values (see note 1.B) - ( 1,519 ) 3,251 4,878 6,610 Additions 16 - - - 16 Balance as of December 31, 2022 465 6,234 11,008 17,361 35,068 Cost: ending balance 465 6,234 11,008 17,361 35,068 Accumulated amortization: Balance as of January 1, 2022 - 4,261 3,284 - 7,545 Accumulated amortization: beginning balance - 4,261 3,284 - 7,545 Adjustments to Ultimate Parent company carrying values (see note 1.B) - ( 4,457 ) ( 3,413 ) - ( 7,870 ) Amortization recognized during the year 122 937 1,660 - 2,719 Balance as of December 31, 2022 122 741 1,531 - 2,394 Accumulated amortization: ending balance 122 741 1,531 - 2,394 Amortized cost: As of December 31, 2022 343 5,493 9,477 17,361 32,674 Amortized cost 343 5,493 9,477 17,361 32,674 (*) During 2020, Gix Media engaged with a subcontractor for the development of an internal-use software (the “Software”). Gix Media capitalized its developments costs until March 1, 2022 and from this date the Software became available for use. Accordingly, Gix Media recognized amortization expenses over the estimated useful life of the Software determined to be three years. For the three months ended March 31, 2023, and the period from March 1, 2022, until December 31, 2022, Gix Media recorded amortization expenses of $ 35 and $ 122 , respectively. - 14 - VIEWBIX INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited U.S. dollars in thousands (except share data) NOTE 6: LOANS A. Bank Financing for Cortex’s capital shares additional Purchase: On January 23, 2023, Gix Media acquired an additional 10% of Cortex’s capital shares (see note 1 .C ) which was financed by Gix Media’s existing cash balances and by a long-term bank loan received on January 17, 2023, in the amount of $ 1,500 to be repaid in 42 monthly payments at an annual interest rate of SOFR + 5.37% . B. Cortex’s Loan Agreement: On September 21, 2022, Cortex and Leumi entered into an addendum to an existing loan agreement between the parties, dated August 15, 2020. As part of the addendum to the loan agreement, Leumi provided Cortex with a monthly renewable credit line of $ 1,500 (the “Cortex Credit Line”) . The Cortex Credit Line was determined every month at the level of 70 % of Cortex’s customers’ balance. The amounts that are drawn from the Cortex 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). As of March 31, 2023 and December 31, 2022, the Cortex Credit Line was fully withdrawn (see also note 10). C. Composition of long-term loans, short-term loans, and credit lines 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 Interest rate ( * ) As of March 31, 2023 As of December 31, 2022 Short-term loan – the Company 8 % 22 69 Short-term bank loan – Gix Media LIBOR + 3.20 % 3,300 3,500 Short-term bank loan – Cortex SOFR + 3.52 % 1,500 1,500 Long-term bank loan, including current maturity – Gix Media (received on October 13, 2021) LIBOR + 4.12 % 4,036 4,381 Long-term bank loan, including current maturity – Gix Media (received on January 23, 2023) SOFR + 5.37 % 1,428 - Bank loan 10,286 9,450 (*) The LIBOR interest rate will continue to be published until June 2023 and then will be replaced by the Secured Overnight Financing Rate (“SOFR”). D. Short term loan: On December 18, 2020, the Company entered into a loan agreement and Stock Subscription Agreement with certain Investors, pursuant to which the Investors lent an aggregate amount of $ 69 at an annual interest rate of 8 % (the “Loan”). In January 2023, the Company reached an agreement with the investors that the Loan received will be repaid in 3 equal monthly payments . As of the date of approval of these financial statements, the Loan was fully repaid by the Company. - 15 - VIEWBIX INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited U.S. dollars in thousands (except share data) NOTE 7: COMMITMENTS AND CONTINGENCIES Liens: On September 19, 2022, as part of the Reorganization Transaction terms, 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 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. NOTE 8: SHAREHOLDERS’ EQUITY A. Shares of Common Stock: Shares of Common Stock confer the rights 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. B. Warrants: The following table summarizes information of outstanding warrants as of March 31, 2023 and December 31, 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 22.40 130,333 C. Reverse Stock Split: On August 31, 2022, the Company filed the Amended COI with the Secretary of State of Delaware to affect a 28 to 1 reverse stock split of the Company’s outstanding shares of Common Stock. All share and per share data in these financial statements have been retrospectively adjusted to reflect the reverse stock split. D. Share option plan : In 2017, 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 are traded on Tel-Aviv Stock Exchange. - 16 - VIEWBIX INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited U.S. dollars in thousands (except share data) NOTE 8: SHAREHOLDERS’ EQUITY (Cont.) D. Share option plan (Cont.) : On March 2, 2023, the Company’s Board of Directors (the “Board”) approved the adoption of the 2023 Stock Incentive Plan (the “2023 Plan”). The 2023 Plan permits the issuance of up to (i) 2,500,000 shares of Common Stock, plus (ii) an annual increase equal to the lesser of (A) 5 % of the Company’s outstanding capital stock on the last day of the immediately preceding calendar year; and (B) such smaller amount as determined by the Board, provided that no more than 2,500,000 shares of Common Stock may be issued upon the exercise of Incentive Stock Options. If any outstanding awards expire, are canceled or are forfeited, the underlying shares would be available for future grants under the 2023 Plan. As of the date of approval of the financial statements, the Company had reserved 2,500,000 shares of Common Stock for issuance under the 2023 Plan. The 2023 Plan provides for the grant of stock options, restricted stock, restricted stock units, stock or other stock-based awards, under various tax regimes, including, without limitation, in compliance with Section 102 and Section 3(i) of the Israeli Income Tax Ordinance (New Version) 5271-1961, and for awards granted to United States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 and Section 409A of the United States Internal Revenue Code of 1986. In connection with the adoption of the 2023 Plan, on March 7, 2023, the Company entered into certain intercompany reimbursement agreements with two of its subsidiaries, Viewbix Israel and Gix Media (the “Recharge Agreements”). The Recharge Agreements provide for the offer of awards under the 2023 Plan to service providers of Viewbix Israel and Gix Media (the “Affiliates”) under the 2023 Plan. Under the Recharge Agreements, the Affiliates will each bear the costs of awards granted to its service providers under the 2023 Plan and will reimburse the Company upon the issuance of shares of Common Stock pursuant to an award, for the costs of shares issued, but in any event not prior to the vesting of an award. The reimbursement amount shall be equal to the lower of (a) the book expense for such award as recorded on the financial statements of one of the respective Affiliates, determined and calculated according to U.S. GAAP, or any other financial reporting standard that may be applicable in the future, or (b) the fair value of the shares of Common Stock at the time of exercise of an option or at the time of vesting of an RSU, as applicable. As of the date of approval of these financial statements, no stock-based awards were granted by the Company under 2023 Plan. E. Dividends : 1. On September 14, 2022, Gix Media declared a dividend in the amount of $ 1,000 of which an amount of $ 83 was paid as tax to the Israeli Tax Authority. During 2022 Gix Media distributed an amount of $ 787 out of the remaining amount of $ 917 , which an amount of $ 714 that was distributed to the Parent Company, was offset from the loan to Parent Company (see also note 3). The remaining amount of $ 130 was distributed by Gix Media in January 2023. 2. On December 25, 2022, Cortex declared a dividend in the total amount of $ 445 to the non-controlling interests. The amount was distributed by Cortex to non-controlling interests in two payments of $ 219 and $ 226 in February and March 2023, respectively. - 17 - VIEWBIX INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited U.S. dollars in thousands (except share data) NOTE 9: 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 obtaining 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’ assets and liabilities are not reviewed by the CODM and therefore were not reflected in the segment reporting. Segments revenues and operating results: SCHEDULE OF SEGMENTS REVENUES AND OPERATING RESULTS Search segment Digital content segment Adjustments (See below) For the three months ended March 31, 2023 Revenues from external customers 5,110 15,752 - 20,862 Depreciation and amortization - - 734 734 Segment operating income (loss) 231 796 ( 1,103 ) ( 76 ) Financial (expenses) income, net ( 74 ) 37 ( 148 )(*) ( 185 ) Segment Income (loss), before income taxes 157 833 ( 1,251 ) ( 261 ) Search segment Digital content segment Adjustments (See below) For the three months ended March 31, 2022 Revenues from external customers 6,036 14,399 - 20,435 Depreciation and amortization - - 586 586 Segment operating income 72 830 ( 683 ) 219 Financial (expenses) income, net ( 66 ) ( 14 ) ( 257 )( * ) ( 337 ) Segment Income (loss), before income taxes 6 816 ( 940 ) ( 118 ) - 18 - VIEWBIX INC. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited U.S. dollars in thousands (except share data) NOTE 9: SEGMENT REPORTING (Cont.) The “adjustment” column for segment operating income includes unallocated selling, general, and administrative expenses and certain items which management excludes from segment results when evaluating segment performance, as follows: SCHEDULE OF RECONCILIATION BETWEEN SEGMENTS OPERATING RESULTS For the three months ended March 31, 2023 Depreciation and amortization expenses not attributable to segments (**) $ ( 734 ) General and administrative not attributable to the segments (***) $ ( 369 ) $ ( 1,103 ) For the three months ended March 31, 2022 Depreciation and amortization expenses not attributable to segments (**) $ ( 586 ) General and administrative not attributable to the segments (***) $ ( 97 ) $ ( 683 ) (*) Mainly consist of financial expenses from the Financing Agreement of bank loans taken for business combinations (see note 6). (**) Mainly consist of technology and customer relations amortization costs from business combinations. (***) Mainly consist of salary and related expenses, professional consulting expenses and other expenses in connection with the business combinations and the Reorganization Transaction. NOTE 10: SUBSEQUENT EVENTS On April 27, 2023, Leumi increased the Cortex Credit Line by $ 1,000 , which was fully withdrawn by Cortex. - 19 -